Now that the dust has settled on the Calgary Flames’ new arena, the financial implications are starting to emerge. As we approach the end of the calendar year, the City of Calgary has announced an increase in property taxes to the tune of around 7.8% for next year. a large increase from last year’s 3.4% increase. While this increase is relative to your home’s value, the average home will see an increase of about $16 per month. The city has said that the increase is to fund programs such as mental health, public transit , public safety measures and more, but make no mistake, there is a clear link between increased taxes and the new arena deal.
Understanding the Calgary Flames’ new arena deal
The Calgary Flames are going to finally get a new arena. The $1.22 billion deal includes not just the new arena, but also a community rink, plazas, parking, and much more.
Cost wise, the deal sees the Province of Alberta putting up $330 million, largely in infrastructure developments in the Rivers District as well as the cost of demolition of the existing Saddledeome. They will not be funding the actual arena development.
Calgary Sports and Entertainment Corporation (CSEC) which owns the team will pay $356 million, much of which will come in the form of rent payments of approximately $17 million per year for the next 35 years. They will front about $40 million to get the project going.
The City will front much of the cost of the deal, estimated to be around $853 million, but after accounting for the lease agreement, the city will end up paying around $537 million at the end of the day. There has not been a breakdown of any revenue sharing agreement between the city and team at this point.
I thought the city said there would be no tax increase for the arena
The city has been very clear that they have no plans to raise taxes as a result of this new arena deal, pulling money out of the city’s reserves. Counsellor Sonya Sharp went so far as to say that even if they cancelled the deal and had to outlay none of the money for the arena, the taxes would not increase. She cited the difference between operating funds and reserve funds as the difference.
She is broadly not wrong – it’s very difficult to use reserve money for operating costs. Many of the city’s reserve accounts have restrictions on their use, being put in place to fund specific projects or specific types of projects alone. Even from a personal finance angle, this makes sense. You wouldn’t want to use your rainy day fund to pay for a slice of pizza.
Unlike your personal budget, these constraints are arbitrary. The city could use some funds to minimize the increase in taxes, moving around budget line items to help soften this blow. Further, as the city uses up these funds in reserve, they will need to replenish those savings in order to fund other capital projects. This is a growing city that requires new roads, schools, hospitals, and transportation projects in order to keep it operating at the level we all expect. Building a new arena is absolutely one of those projects to make this city better, but do not kid yourself, this is a part of why taxes are increasing this year and will likely continue to increase.
What does it all mean?
Whether you think the city should pay for the arena or not is broadly academic, as is whether you feel that having a new arena will enhance the city, financially, reputationally, or otherwise. The arena agreement has been signed and your tax dollars are going to fund a good chunk of it. However, do not think that those costs will only be coming from taxes paid in the past and allocated as part of the city’s reserves. This is likely to be just the first of a few tax increases as the arena project gets off the ground.
