Arena funding debate: A play that always unfolds over several acts

By now you've heard all the arguments for why Calgary needs a new hockey arena: the Saddledome is old, the roof sucks, the concourse is too small, Bruno Mars won't play there, whatever.

The City of Calgary seems to agree, at least enough to put forth a proposal on how to fund such a project. The Calgary Sports and Entertainment Corporation — the Flames ownership group — has its own counter proposal. But those two are not talking — for now.

Sports economist Moshe Lander likens the breakdown of communication to the intermission of a set-piece play that always unfolds over several acts.

"The intermission — if you want to use that analogy — is we have a mayoral election," says Lander, who underneath all his skepticism remains a loyal Calgary Flames fan.

• FULL COVERAGE FROM CBC CALGARY | Calgary election 2017
• Calgary election 2017: Where to vote, who the candidates are and everything else you need to know

"It's not really an issue of which candidate wins. Someone's going to have a mandate to be mayor of Calgary, and they're going to have to decide on their priorities — where do the Flames, the Saddledome and the Stampede grounds fall on that list?"

With half a billion dollars or more at stake, let's take a closer look at the two "non-deal" deals: how they stack up against the original 1980s deal that gave us the Saddledome.

Saddledome was fully funded by public money

People have always debated over who should pay for stadiums and arenas. But it was never out of bounds for taxpayers to share a large portion of the cost, if not the entire bill.

Such was the case with the Saddledome in 1982, when the City of Calgary incorporated the Saddledome Foundation — a non-profit private company to oversee the operations and management of the then-new sports complex.

The Saddledome was built for the 1988 Winter Olympics. Because it was considered public infrastructure, the cost was split three ways: between the City of Calgary, the Province of Alberta, and the Government of Canada.

Each committed $27.5 million. In return, the city says the Flames organization agreed to donate approximately $1.7 million annually to charity — to be divided among Winsport Canada, Hockey Canada and Parks Foundation Calgary.

Arena costs have skyrocketed in past decades

The final tab for the Saddledome came in at $98 million — one of the most expensive of the 10 North American arenas that opened in the 1980s.

When adjusted to inflation, it's equivalent to $218 million in today's money.

You don't have to be a math whiz to see that $218 million is less than half of the $500 to $550 million being floated around for the new arena that would replace the Saddledome.

But the rising cost of sports facilities is hardly unique to Calgary. From the 1950s to the 2000s, the average cost of NHL arenas rose 500 per cent in real dollars adjusted to inflation!

Is the new arena 'public infrastructure'?

Thirty-four years after the Saddledome opened, Calgarians are once again tossed in a debate over who should pay for a new arena, and what amount of public funding is fair.

Unlike its predecessor, the new arena would not be built for the Olympics, even as the City of Calgary mulls over a potential bid for 2026.

The city and the Flames ownership group differ over how much the Flames should contribute, and how much could be allotted to the ticket surcharge. But those differences are relatively small (in the tens of millions as opposed to hundreds of millions), and likely not substantial enough to break off talks.

The big fight — and the real big difference — between the two proposed plans actually boils down to taxation in the publicly funded portion.

• Calgary Flames reveal $275M offer, but say they've scrapped pursuit of new arena
• Calgary Flames CEO says city's arena proposal would leave team footing full bill

In the city's plan, the arena would belong to the Flames group — a deviation from the Saddledome tradition. And because the Flames owners would own the new building, they would have to pay property taxes.

Flames owners don't want to pay property taxes.

Under their plan, the arena would belong the City of Calgary — just like the Saddledome. It would be public, therefore taxpayers in the area would pay a so-called "community revitalization levy." (Side note: people in Victoria Park/East Village already pay such a levy, but that's another story).

"They're actually complex gambles," says sports writer Kent Wilson.

"So what happens is the city will take out a loan to revitalize a section of the city," he explains. "They'll draw a border around it and for years and for the next 20 years they will take any incremental property tax revenue that comes from the revitalization and put it back towards repaying the loan."

The community revitalization levy is essentially a sort of property tax — tax that the Flames owners wouldn't be on the hook for under their plan.

And this is why the city and Flames group are caught in a bizarre fight over who should own the new building. Each side is willing to spend millions on the project, but neither wants to take ownership. Before negotiations resume in the next act — should they ever resume — we have to ask: is it public infrastructure?

Because the answer will determine who pays the future taxes.

Our podcast also compares the Flames' deal with the Rogers Place deal. Listen to it here.