Cost overruns on arena project would be shared, CMLC says

The arm’s-length municipal agency charged with overseeing design and construction of a new arena says any cost overruns on the project will be shared between the city and the owners of the Calgary Flames.

Those reassurances emerged as the city decided Friday to give residents more time to submit feedback, part of its consultation process on the tentative arena deal.

A new 19,000-seat arena in Victoria Park is estimated to cost $550 million, with each party paying $275 million for a building that will be owned by the city and operated by the Flames.

“It would be the intention that any cost overruns are shared between the two parties — both cost overruns or savings are split 50-50 between Calgary Sport and Entertainment Corp. and the city,” said Clare LePan with the Calgary Municipal Land Corp.

“And in the event that there are requests associated with cost escalations associated with one party, then that’s 100 per cent to that party.”

One element of the project that could be dropped if cost escalations become a problem is the 3,000 to 5,000-seat community rink. The rink would be open for city use for 20 days per year, with community groups receiving “beneficial access” both “time-wise and fee-wise” to ice rentals over the 35-year term of the deal.

“The secondary facility would be delivered only if it’s within that $275-million (cap),” said LePan. “If there was a cost escalation associated with providing that facility, then that would impact the ability for that to be included.”

The land agency says that it is confident about its cost projections. Cost estimates have been reviewed by two construction firms and a cost consultant, LePan said.

Mayor Naheed Nenshi said this week steps can be taken to ensure the scope of the project fits within the budget.

An infographic released by the City of Calgary shows the breakdown of its estimated $400.3 million in projected returns from a proposed arena deal with the Calgary Flames. (City of Calgary)

“We will not see cost overruns on the arena — I hate making promises like that, I don’t want to sound like the mayor of Montreal back in 1974,” said Nenshi, alluding to the confident former mayor Jean Drapeau before the bills for the 1976 Olympics began to pile up. (Drapeau famously said: “The Olympics can no more run a deficit than a man can have a baby.”)

“Since I’ve been in this job, every single project has come in on time and on or under budget,” said Nenshi. “The reason the CMLC is going to be acting as the project manager on the construction of this arena is precisely because they are good at bringing things on time and on budget.”

One facet of the project that will wind up costing the city more money if cost overruns occur is the demolition of the Saddledome.

Saddledome demolition is currently slated to cost $12.4 million, though some previous city estimates have pegged the cost at closer to $25 million.

The city will pay 90 per cent of the cost of demolishing the 36-year-old building, with the Flames contributing $1.4 million.

If, however, the cost of demolishing the building escalates beyond the original estimate, the team’s share of the cost will remain capped.

After the overall tentative agreement was announced on Monday, it was revealed public submissions would only be accepted until Friday at noon.

But hours after the deadline had passed, the city said it would continue accepting public input until the end of the business day on Monday.

City council is expected to discuss the proposed deal and hold a ratification vote on Tuesday.

mpotkins@postmedia.com
Twitter: @mpotkins

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