City reveals it has $818 million in working capital to help pay for new downtown arena
Scott Dippel | CBC News | Posted: April 25, 2024 12:00 PM | Last Updated: April 27
Greater transparency cited as reason for pulling back curtain on previously undisclosed cash
A year after city council approved a new arena deal, the City of Calgary has revealed it can tap into an $818 million fund to help pay for the new facility.
When the deal for the $926.4 million arena in Victoria Park was announced by council in April 2023, the city said it had $537 million in cash ready for the project.
Officials have been asked repeatedly since that time how the project could be built without the full amount of money available.
The only answer provided, until now, was that something called working capital could be utilized, meaning the city wouldn't need to raise property taxes or take on debt.
However, no details were provided on just how much working capital the city has available.
The city's chief financial officer, Carla Male, said she decided to include information on the working capital account in the city's 2023 annual financial report for the first time.
"We've always had working capital. We just haven't had that disclosure," said Male. "I think it's just the evolution of continuous improvement in reporting and getting better and better. There's certain other disclosures that change from time to time as we continue to mature transparency with the public."
The Calgary Sports and Entertainment Corporation (CSEC), which owns the NHL's Calgary Flames and other local professional sports franchises, will contribute $40 million toward the new arena, while the government of Alberta will pledge $30 million.
In total, the city has agreed to contribute $850.3 million toward the project.
Money coming from several pots
In her time as the city's CFO, Male said the available working capital tends to fluctuate between $600 million and $1 billion.
But the amount that's available at any point in time varies every day.
The city has provided these working capital figures for the past four years: $818 million (2023), $837 million (2022), $598 million (2021), and $735 million (2020).
Male said the city often spends working capital on capital projects. Later on, it can make recoveries on those projects in grants or other fees. In addition to those funds, the city also has immediate access to $600 million in short term borrowing.
Besides accessing working capital, the city will use money from its major projects reserve fund and the fiscal stability reserve to pay for the arena.
The chair of city council's event centre advisory committee, Coun. Sonya Sharp, said elected officials were aware that funds for the project would partially come from working capital accounts.
Sharp praised administration for letting Calgarians know how much working capital is available.
"To be able to front-end the project with our own money, on our own project, is really critical. Also we have a lot of control over that."
Council unanimously approved the arena agreement last year. The deal will keep the Calgary Flames in town for 35 years, playing in the city-owned building.
City will pay lions share
A former city councillor, Jeromy Farkas, is critical of council's decision to use the city's working capital in this way.
"The fact is if you have a big bag of cash, you can use that for essentially whatever you want," said Farkas. "I think at the end of the day, they're going to have to justify why this money has to go straight into the pockets of a privately owned sports team rather than to other needed priorities."
Farkas said the City of Calgary is going to end up paying more than 90 per cent of the costs for the new arena.
While CSEC has agreed to pay the City of Calgary $17 million annually, with a one per cent annual escalation over the term of a 35 year agreement, Farkas said that money is actually coming from people who go to the arena.
Arena agreements specify that CSEC can use the revenue from a city ticket tax that will be tacked onto the price of every ticket sold in the new building.
Besides recovering money through the ticket tax, the city expects to gain revenue from the sales of several properties in the entertainment district, as well as from property taxes.
Preparations for construction of the new building are underway in Victoria Park. A design is expected to be unveiled soon, and the city expects construction on the arena will start later this year. Once the new facility opens in 2026 or 2027, the Saddledome will be demolished.