It feels like it has been an eternity that the Calgary Flames and City of Calgary have been going back and forth on the negotiations for a new arena in the city. The Scotiabank Saddledome—an iconic part of the city’s skyline—is the oldest arena in the NHL that has not undergone a substantial rebuild, and both on the outside and the inside it is really starting to show.
Were it so easy for the city to wave a magic wand and grant the Flames a new arena, this would have been all but finished by now, but alas, like life, it’s much more complicated than this. In order to really understand the complexities around the arena negotiation, it is worth taking a look at who the various entities are on the Saddledome and how they all work together.
The City of Calgary
The City is one half of this whole arrangement. Not only do they own the land under which the Saddledome sits, but they also own the Saddledome as a structure. The arena was built for both the 1988 Olympics as well as for the Calgary Flames to use for their new home. With the Stampede Corral being deemed insufficient for an NHL team, the city and province moved to build a larger building to suit both purposes.
The City voted in 1981 to proceed with building the building in Victoria Park, much to the disappointment of the local neighbourhood who fought vehemently to have the arena built elsewhere due to fears of traffic congestion. The location beat out the east side of downtown, the west side of downtown, and a late bid to have the arena built much further north in Airdrie.
The project was expected to cost around 60 million dollars, which was split between the municipal and provincial governments, but ended up costing just under 98 million dollars. This caused a major uproar and resulted in an inquiry which found the project management to be severely lacking. Both sides ended up paying the difference in cost.
The Saddledome Foundation
Just before the arena was completed, the City of Calgary entered into an agreement to manage the arena with a body called the Saddledome Foundation. The agreement is in the form of a lease between both parties for 50 years from June 1, 1983 to May 31, 2033 with an option to renew for a further 50 years until 2083. The rental rate is $1.00 per year and the City agrees to charge no municipal taxes on the Foundation. This is a very standard arrangement for leases of this variety.
The Foundation then operates the Saddledome as a revenue generating entity and is responsible for two major items. First, it is to operate and maintain the Saddledome as a sports arena to “provide entertainment for and to enhance the athletic achievement of, the people of Southern Alberta.” This means that the foundation must maintain both an operating fund to run the arena but also a capital reserve fund to cover the cost of maintaining the facility.
There are specific amounts that must be kept aside for specific purposes. All revenue earned must go into the general operating account. That needs to have a minimum balance of $50,000 to cover regular expenses. From there, the Foundation must maintain a Major Improvements Fund of 4 million dollars (factored for inflation) then a subsequent Operating Reserve Fund of 2 million dollars to cover operating losses (years where expenses are greater than revenue).
From there we get to the Foundation’s second responsibility which is that it has is to provide funding to further athletic development in Calgary. The rest of the money that the Saddledome Foundation receives above the cost to maintain the building must be split evenly between the Calgary Olympic Development Association (CODA), better known as WinSport, Hockey Canada, and an entity that builds an maintains sports facilities in the city.
The Calgary Sports and Entertainment Corporation (CSEC)
While the Saddledome Foundation has a lease with the City to rent the Saddledome, it does not operate the facility itself. It has an agreement from 1994 with the Calgary Flames Limited Partnership, now known as the Calgary Sports and Entertainment Corporation, to actually run the day-to-day operations of the building.
CSEC pays the Saddledome Foundation an inflation adjusted fee of $750,000 to be able to run the Saddledome plus they cover the reasonable operating costs of the Foundation annually. The Foundation also gets a meeting room for their meetings, parking spots, and a box suite at the Saddledome.
As part of the agreement, CSEC is responsible for all maintenance and upkeep of the Saddledome, both capital improvements as well as regular upkeep and any improvements they want to make. Any improvements that they make, including new icemakers, improvements to the suites etc., become part of the building and the property of the Foundation when the agreement ends.
The only time that CSEC is not responsible is if there is major structural failure not caused by poor maintenance, like a flood or fire and for any structural replacements like the roof, foundation, or columns. Most recently and notably, the 2013 Alberta floods would be one such case.
This agreement has been extended to 2033, but if CSEC moves the team out of Calgary or stops using the Saddledome as their main facility, they will be in violation of the contract and the Foundation can terminate the agreement. There is termination pay if CSEC does this which amounts to a fixed 7.1 million dollars plus an inflation adjusted 5.1 million dollars. They will also pay the Foundation 2 million dollars after the end of the extended term. Simply put, it is not cheap to break this agreement.
What this all means for the Flames
There is a lot more to Flames’ arena saga than to just build the new facility. There are multiple stakeholders to consult, each with their own objectives and concerns around the new arena as well as around their role in the operations and upkeep of the facility. The arena may have cost just under 100 million dollars to build but the cost to maintain it since then has clearly surpassed that amount.
The three parties on this agreement will form the bedrock of any new agreement on a new arena, and it’s very likely that when the new arena is finally built, the agreement between the three parties will be very similar with many parallels.