The Sprawl is investigating how Calgary's city council prioritized an NHL arena over the Green Line, assisting the UCP in jeopardizing the biggest public transit project in Calgary's history. This is Part 1. A full transcript of the episode is below.

This Sprawlcast also marks the beginning of S10: The Budget Blues Edition. We'll take a close look at city council's record as we approach budget deliberations in late November, and will keep following the Alberta budget fallout.

MAYOR NAHEED NENSHI: I don't see how we move forward without delaying the start and end of construction on [the Green Line].

COUNCILLOR DIANE COLLEY-URQUHART: I 100% support the direction the province is taking.

COUNCILLOR EVAN WOOLLEY: While I appreciate that the provincial government has said it remains committed to this project, talk is talk—and money walks.

JEREMY KLASZUS (HOST): That was Calgary Mayor Naheed Nenshi and city councillors Diane Colley-Urquhart and Evan Woolley. They were speaking at city council on October 28th, and once again, we are talking Green Line. How many times are we going to talk about this? I feel like I've done this a bunch lately, but it's time to do it again, because once again, this project is under attack.

As you've probably heard, the provincial budget is bad news for the Green Line. The provincial funding for the first four years has been cut over 80%, from over $500 million to $75 million. The funding that was supposed to all be in place by 2023 isn't supposed to arrive until 2028 under this budget.

On top of that, the UCP's Bill 20 has a clause that would let the province pull out of the Green Line with just three months' notice.

Here's NDP leader Rachel Notley in question period, October 28th.

RACHEL NOTLEY: What the premier did was promise Calgary a Green Line. And he has now put in a 90-day cancellation clause for no reason into a piece of legislation that is causing huge anxiety in the city of Calgary. Why, if he wasn't planning on using that clause, is that in his legislation now? Come clean, Premier.

VOICE: Good question. [applause]

VOICE: The Honourable the Premier.

PREMIER JASON KENNEY: Mr. Speaker, I can tell you what's causing huge anxiety for Calgarians: a jobs crisis created by their tax hikes, by their driving tens of billions of dollars of investment out of this prominence, and a fiscal disaster …

JEREMY: Premier Jason Kenney goes on like that for a bit, and then he repeats something about the NDP that he's been saying for a while now.

PREMIER KENNEY: They cut the Green Line in half. Half as many people serve for the same amount of money, Mr. Speaker. Not only do they hammer us with higher taxes, they cut our Green Line in half, Mr. Speaker.

VOICE: Hear, hear.

JEREMY: As I said on a previous Sprawlcast, this is not true. The NDP did not cut the Green Line in half. What they did do is they did take a while to announce their share of the funding for the Green Line. In 2015, the Harper government announced $1.5 billion for the Green Line. Jason Kenney was actually the minister who made the announcement. And the NDP didn't announce their contribution until 2017.

But the reason phase one of the Green Line got shorter was due to the cost of tunneling under downtown and the Bow River. These are things the city is now looking at and reevaluating, looking if they can do it a cheaper way.

But now, the whole project is in limbo.

There's a group of councillors (namely Jyoti Gondek, Joe Magliocca and Sean Chu) that have come out and said, we shouldn't even do rail. Let's just make this a bus rapid transit line, and maybe down the road it can be converted to rail, but for now let's just go with buses. And then we can actually take some city money out of the Green Line and redirect it elsewhere. That's what Councillor Jyoti Gondek is suggesting.

Here she is on 770 CHQR on November 4th.

GONDEK: We have been so focused on the centre city for a very good reason. We have to do things well down there. But if we can't find a reasonable cost-effective solution down there, right now, then let's focus on the north. Let's get a BRT into downtown and let's do downtown right, in time, when the technology changes and when we have more money.

JEREMY: When we have more money. Well, that brings us to what we're going to dig into today.

This is the story of how Calgary's city council prioritized an NHL arena over the biggest public transit project in the city's history. They knowingly put themselves in this position. They were warned.

But they didn't listen.

JEREMY: There's no question that the UCP budget hits cities hard. The city charters are being torn up, and not only have they deferred Green Line funding, the province also eliminated the Alberta Community Transportation fund. Here's what city admin told council about that on October 28th.

VOICE: The elimination of this program will increase costs and delay replacement of CTrain cars and buses—with associated capacity issues.

JEREMY: This is happening after city council already cut its own transit operating budget this past summer as a way of offering tax relief to business owners on their property tax bills. Now the tax situation is a whole other episode. That's a whole 'nother issue to get into. But for right now, let's stick with the provincial budget.

Over the next year, nearly $500 million has been allocated for the Calgary ring road, and Deerfoot Trail is also slated for upgrades.

COUNCILLOR DRUH FARRELL: So hundreds of millions of dollars were invested in the ring roads and other major road projects, and yet public transport has been cut. To me, that's 1980s thinking. Have we shared with the province of Alberta our contemporary thinking around moving people about our city in the future? What makes a city resilient is robust public transport system. That's a world trend. We're bucking it, I guess.

COUNCILLOR WARD SUTHERLAND: I need to say something, and with all due respect, Councillor Farrell, is, ring roads are not the '80s. I've been to so many meetings with transportation experts. Ninety percent of all goods are moved through ring roads. Ninety percent. Without ring roads, this chair you're sitting on, you'd be standing right now. We wouldn't even have this building.

(Fact check: we do, in fact, have this building. The Calgary Municipal Building opened in 1985—long before Calgary had a ring road.)

JEREMY: Councillor Sutherland referenced Calgary's role as an inland port – in other words, a transportation and logistics hub where goods are moved by rail and road.

COUNCILLOR SUTHERLAND: And the inland port does not exist without a ring road. So I don't like saying that, like … When the province is concentrating on the ring road, it is the right thing to do.

JEREMY: In addition to the cuts that I've already mentioned, the province has also cut MSI funding to the city of Calgary by almost 10%. This is funding that's used for infrastructure projects, and the long and short of all this is that city council finds itself in a real bind right now.

MAYOR NAHEED NENSHI: We're going to have to figure out how to recast our capital plans, it is absolutely the case that we will end up having to defer, delay, or cancel capital projects in the capital plan going forward. We absolutely will have to.

JEREMY: But which projects are up for reconsideration, and which ones are to be left untouched?

MAYOR NENSHI: Council has made it clear that they want the two projects that have sort of commenced, out of the four – the BMO Centre and the event centre – as major priorities. It does mean that if council is still of that view – I imagine they will be – that we'll have to look at recasting some other capital.

JEREMY: Nenshi reiterated this in his media scrum outside council chambers. He said that the four capital projects that council approved earlier this year, including the arena and the BMO Centre, don't rely on traditional provincial government funding, and therefore, those projects should mostly be left untouched. And once again, he strongly suggested that council won't revisit those projects.

MAYOR NENSHI: So in reality, the provincial budget shouldn't really impact those four projects. The issue is that if there's other stuff that we were planning on having funded by the government that is now not being funded by the provincial government in this manner, does that mean maybe that's a higher priority than these four projects? My in-, I guess council's not going to go that way …

JEREMY: But does City Hall even have the leeway to back out of these projects, including the arena, should it choose to? Councillor Jeromy Farkas asked City Solicitor Glenda Cole about this.

COUNCILLOR JEROMY FARKAS: And what is the nature of the commitments that we've made? Is it on the table to revise the scope or cancel any one of these projects we've agreed to to date?

GLENDA COLE: Your Worship, we would have to look at the implications from a legal perspective of changing any position we've taken on any of the major projects, or any other capital project commitments, to date.

JEREMY: So what does this mean for the Green Line?

Well, part of the issue is that the federal $1.5 billion commitment to the Green Line is tied to the provincial commitment of the same amount, and it's unclear how that'll play out with the provincial funding being deferred.

NENSHI: In my analysis, which is very shallow, is that if cash flow from the province is pushed out, then you have to up-front it some way. If federal money can up-front it, that can solve the financial problem. But what Councillor Woolley highlighted earlier, which is can you trust the province to make good at the back end? It's a very serious concern.

On October 31st, Mayor Nenshi was asked, how much money does the city have to work with for the Green Line? His answer: not enough. He was asked, can you go ahead and start the project?

MAYOR NENSHI: I wouldn't, because I think that's too much interest; it's too much borrowing. So ultimately, if the federal government's timeline doesn't shift and the province stays on their timeline, then one of the options before us is we just delay, and actually match our expenditures to when the money comes in.

JEREMY: To understand what's happening now and why city council is in this position, we have to go back to March 4th. That's when city council approved the funding strategy for the four capital projects, including the BMO Centre and the arena.

They were warned about this exact situation, but it was dismissed as fearmongering.

COUNCILLOR JEFF DAVISON: This shows we have a vision; this shows we have leadership; and this shows that we have a plan to create value for each and every Calgarian.

COUNCILLOR JEROMY FARKAS: Frankly, I find that it's reckless to proceed in this way – to overextend ourselves in such a way.

JEREMY: You just heard councillors Jeff Davison and Jeromy Farkas speaking on March 4th. Here's Councillor Shane Keating.

COUNCILLOR SHANE KEATING: The four projects discussed today are all quite different, and all four have great benefit to the city. I will repeat that all four have great benefit, individually, to the city: Arts Commons, fieldhouse, BMO expansion, and event centre.

JEREMY: You're going to hear a lot about the four projects, on this Sprawlcast and elsewhere. When we talk about the four projects, we're talking mostly about the arena and the BMO Centre in terms of where city money is going. The Arts Commons upgrade project and the fieldhouse are getting relatively small amounts in this arrangement compared to the other two projects.

And you've got to feel for the poor, neglected fieldhouse – always tacked on, always neglected, always promised but never delivered.

COUNCILLOR KEATING: The fieldhouse has been a priority since 1957. This multipurpose facility would give our children, families, and seniors a place to create community through sports, while enhancing health and well-being.

JEREMY: 1957? That's a long time ago. Now I'd suggest that if the fieldhouse has been a priority for that long and it hasn't been built yet, it's not really a city priority. And that's what this episode is about: What's really a priority in this city – not just on paper, but in practice?

Right now, the city has nearly $670 million tied up in these four projects, and over 90% of that is for the arena and the BMO Centre. And here's a little known fact: The city actually has more tied up in the BMO Centre than it does in the arena.

COUNCILLOR KEATING: The BMO expansion, which the funding of one-third from the City of Calgary, province, and the federal government, will transform the BMO Centre into a tier 1 convention centre, generating an estimated of $276 million each year to the Calgary economy.

JEREMY: The BMO Centre and the arena are seen as two key pieces of the Rivers District, and that's the area that's being redeveloped by the same city-owned corporation, CMLC, that redeveloped East Village.

City Hall is paying more than its share for the BMO Centre – double its share, in fact – because it's also covering the provincial portion. The city has basically made a long-term loan, and that money is supposed to come back to the city in the form of a community revitalization levy, or CRL.

Here's how Mayor Nenshi described the BMO situation in July.

MAYOR NENSHI: On the BMO Centre, for example, just so people understand that deal, it's ostensibly a one-third, one-third, one-third deal for a $500 million project, so $167 million each.

The challenge with that one is that the province's contribution isn't really a contribution. The province's contribution is, we're going to extend the community revitalization levy for another 20 years, and feel free to use that money for the BMO Centre. So in reality, the city's contribution is two-thirds of the BMO Centre – so call it $350 million – plus financing. So it's actually very large.

JEREMY: And the city isn't expecting to see most of that money back for a long while – until 2028 and beyond.

At the March 4th meeting, council was looking at funding these projects through a bunch of different funding sources, including its rainy day fund: the fiscal stability reserve, or FSR. Let's listen now to some of the debate that happened.

COUNCILLOR GIAN-CARLO CARRA: And so we've been able to bring a strategy to bear that does this effectively without raising taxes, and, you know, we can argue that pulling investment out of here or there, but the fact is that, you know, this is a big, well-run organization; these are four absolutely essential projects to the best future for our city; and all things being equal, it is within our capacity to pursue them, and pursue them diligently.

COUNCILLOR GEORGE CHAHAL: This is a strategy over probably a decade of various projects with various partners, and if the deal is not right on each one of those projects, I'll vote against it. We should cancel them. I mean, but I don't think not taking a look at them and pursuing the opportunities to grow the pie, to grow what this city is and what each of these projects can mean to the fabric of our community, I think that's a disservice.

COUNCILLOR JYOTI GONDEK: The decision that's before us right now is to show that we believe in our city's future. Each project could be an indicator that our city is looking forward and not lamenting our current state. The decision is ours to make, council: Do we have faith in ourselves, as we expect others to have in us?

JEREMY: A bunch of this city council meeting happened behind closed doors, and in that closed-door meeting, the city's Chief Financial Officer, Carla Male, gave council members some key advice about funding these four projects.

Now initially that advice was going to be kept confidential, but after councillors Jeromy Farkas and Evan Woolley pushed for it to be made public, the city's CFO shared it openly. And she warned about the very situation city council now finds itself in.

COUNCILLOR WOOLLEY: As our chief financial officer, would you recommend that we undertake all of these projects?

CARLA MALE: At this time, I would be comfortable moving forward with one project.

COUNCILLOR WOOLLEY: Thank you. Why is that?

MALE: Through Your Worship to Councillor Woolley, there are a number of issues within our financial complexity that we're taking a look at right now. So, we know that we are taking a look at the Green Line project, and we are moving through various stages of analysis and various stages of strategy, and we'll have more and more clarity as we come to financial close here late in 2020.

We have a political environment where governments may be changing, and we have a lot of capital dollars related to government announcements. We just went through our One Calgary budget, and we know that our capital situation isn't as much as we had before. And so for a couple of reasons, that would be my comfort level at this time.

COUNCILLOR WOOLLEY: Okay. Why is liquidity important to any company, but frankly, why is liquidity so important to the city of Calgary?

MALE: It allows us to remain flexible and resilient and have cash on hand and available in urgent and unexpected circumstances.

JEREMY: It was very clear on March 4th that this would be a huge decision. By choosing these four projects, you're choosing not to do others.

MAYOR NENSHI: It is undeniably true that if council approves what's before you today – Councillor Keating's motion – it will restrict your future flexibility on many things.

COUNCILLOR WOOLLEY: For many years.

JEREMY: As the discussion unfolded, a number of councillors specifically raised concerns about how this could compromise the Green Line project down the road.

COUNCILLOR FARRELL: We're entertaining the most expensive, largest project in our history. It comes with a certain amount of risk.

JEREMY: Going ahead with the four projects would mean drawing the city's rainy day fund, the FSR, down to its minimum.

CARLA MALE: Within this financial strategy we have maintained, the council directed minimum of a 5% of tax-supported growth expenditures to be maintained as for unexpected items and contingencies within our fiscal stability reserve.

COUNCILLOR FARKAS: Thank you, Your Worship. I will be not able to support this. I believe that proceeding with this strategy on these terms would severely compromise our financial capacity to respond to the property tax shift; prepare for a natural disaster, such as another flood as severe or worse than 2013; as well as many unknowns related to the Green Line LRT project.

COUNCILLOR FARRELL: Thank you, council. I've been thinking about this a lot. I think if the conversation in camera would have gone a little differently, I might have been able to get on board with this, but I think it's premature.

I'm very worried about the risk that we would be taking on, and we would really have no access to uncommitted funds. I know that if I don't support this, there'll likely be repercussions, but I've thought about whether I can, and I – it just appears too risky from my support, so I'm going to vote against this at this time. Thank you.

JEREMY: Meanwhile, Councillor Peter Demong flagged a number of issues, including turnover in key roles at City Hall. City Manager Jeff Fielding had resigned a couple months earlier to take a job in Toronto.

COUNCILLOR PETER DEMONG: We've got a management team who although are spectacular and splendid and I wouldn't trade them in for anybody, we've got a couple of gaps in there. We're still looking for a city manager. We're still looking for two or three full-time general managers. We are in a position, at the City of Calgary, we are in a – hmm, what's the word I'm looking for?

VOICE: Crisis.

COUNCILLOR DEMONG: [laughs] In a transition position right now. And in a transition – somebody mentioned businesses earlier – generally speaking, businesses, when they're in transitions, do not invest a huge amount of dollars in any project until they have certainty.

JEREMY: Councillor Demong also warned about the problems that City Hall is facing as we speak.

COUNCILLOR DEMONG: In the next nine months, we will be seeing three huge events that will have massive financial implications to the city and this council, that being the provincial election, the provincial requisition for education tax, and the federal election. We don't really know which direction those implicated financials will take us. Could be good; could be bad.

DEMONG: It behooves me to mention that we're jumping ahead of the gun here. Why wouldn't we wait the nine months, find out exactly what our true financial footing is, figure out the PTP [Non-Residential Phased Tax Program] portion of this, and then go forward with these projects?

These projects aren't going to disappear. Can we turn around in nine months and say no to these four? Of course we could, but the whole point is why would we go forward on it with all of this stuff hanging over our heads like Damocles' sword? I just don't quite understand.

When we talk about megaprojects, the Green Line that we're in the process of putting forward is a megaproject head and shoulders above the others – two to three times the size of what we're talking about here. And that deserves our full-time attention.

JEREMY: Now as I mentioned before, at the time, city council had the tax shift hanging over their heads. Business owners were about to get hit by exorbitant property tax increases, due mostly to the cratering of the downtown office market.

They put off balancing the tax burden onto residential property taxes, which is how they're going to have to deal with it sooner or later, but at this March 4th meeting, part of the issue being discussed was, instead of putting this money towards these four capital projects, maybe we should use it for tax relief for businesses instead. Not all of it, of course, but some of it.

Now as you'll recall, City Hall did offer relief to business owners in the form of a rebate. They took it partially out of their reserves, but they also took it out of their operating budget – $60 million in cuts, including to transit, and these cuts also triggered announcements of pool closures in the Beltline and Inglewood, and all of this happened at the same time they pushed through the arena deal.

When that was happening, city council tried to save face by saying one couldn't solve the other: You couldn't take the arena money and stave off service cuts, because the arena money is from capital budget and the service cuts are from your operating budget.

But the truth is, they had options – they just chose not to take them.

We'll get to all that later on in more detail, but for right now, let's go back to March 4th and Councillor Evan Woolley.

COUNCILLOR WOOLLEY: I really want to do all these projects, too. But we cannot, in a fiscally responsible way, undertake these, and our chief financial officer has told us that. There are deep concerns about our liquidity; our credit rating; our ability to support, writ large, the business community through tax relief; and a number of other citizen priorities in the next two and a half years.

And we are using up all of that fiscal capacity and liquidity for projects that will not be tapped for many years to come. I cannot stress how worried I am about this.

JEREMY: Now we're going to hear from councillors Ward Sutherland, Gian-Carlo Carra, and Jeff Davison.

COUNCILLOR SUTHERLAND: To say it's reckless, in my opinion, is a very myopic perspective and a lack of business acumen. For example, many projects that are here have significant funds that are going to be leveraged, like the student program. So to say we shouldn't do something and use money, well, in business, if you can use two dollars to get four dollars, that's actually a smart thing to do, because it pays a lot more than interest does.

Mrs. Male, our CFO's responsibility is to present a zero-risk option. That's what she has done. She has done her job, and thank you for doing your job. It's our job as council to manage risk, and we've all had numerous discussions on how zero risk gets us absolutely nowhere.

COUNCILLOR SUTHERLAND: Some of the statements tonight might be interpreted as scare tactics. Yes, times are challenging. Yes, there are unknowns. We as a council need to consider risk on behalf of Calgarians. It is now time to stop fearmongering and move towards a can-do attitude that used to be in this city. We have a vision. Calgarians are waiting. It's time to make a decision and build some confidence in our city and in our council.

COUNCILLOR CARRA: We know that if we cannot land any of these projects within the worst-case scenario that this model presents us, we're out. We also know that if things substantially change and the landscape shifts, we can also be out. Right? So this does not commit us to a suicide mission; this commits us to a mission that if things go bad, we can pull out.

COUNCILLOR DAVISON: I am in support of this and wholeheartedly agree with my colleagues as to what's been said here. I think this is about priorities; it's about managing risk; and it's about a portfolio of assets that I have extreme faith in this council that we can manage.

I think some of the things here that we've seen is that we know we can provide rigour and structure to achieve all four. I agree with Councillor Gondek: This is not committing a blank check to any of these. And I agree with Councillor Chahal: There's many offramps and structures in place to ensure that the timing, the planning, the financial partners, and the right structures are all there in order to move these forward.

But I think to kill these today would be extremely shortsighted. I think that when Calgarians are struggling, we need to show leadership. Part of leadership is putting the tools to work that we have in front of us. It makes no sense today to wait for a rainy day. The rainy day is upon us, and to kill this today is extremely shortsighted.

JEREMY: The councillors that were concerned about approving this were doubly worried because to back out of these projects would mean you would need a reconsideration motion, and that means instead of a council majority of eight votes, you need 10 votes, so it's harder to turn back.

COUNCILLOR EVAN WOOLLEY: And it is knee-capping our capacity to respond quickly and immediately, because it will take 10 votes for reconsideration to projects that come up that we can actually get capital working for us now.

JEREMY: On March 4th, city council voted 11-4 to approve the funding strategy for these four projects. The councillors who voted against were councillors Demong, Farkas, Farrell, and Woolley.

And that brings us to today, where a group of city councillors who all voted for these four projects despite the warnings are now saying, "Hmm, maybe we shouldn't make the Green Line rail. Let's just make it a bus line, and then maybe we can take that city money and put it somewhere else where it's needed more." Remember, that's what Councillor Gondek has suggested.

The message from city council is clear: Hands off the arena. But the Green Line, that can be cut; that can be delayed.

We're going to hear some final voices here from the October 28th council meeting in response to the provincial budget: Councillor Farrell, followed by Councillor Jeromy Farkas.

COUNCILLOR FARRELL: Considering we've already started on the Green Line, we started with trust with our other orders of government, and it's a partnership, so I just don't know what this does to relationship with the province. It completely erodes trust.

COUNCILLOR FARKAS: This council needs to realize that it was Albertans who voted for this, and it was Calgarians in particular who overwhelmingly endorsed this vision set out by the UCP government by electing 23 out of 26 seats for this government. I personally don't think that the budget that they've presented goes nearly far enough.

JEREMY: Farkas basically said city council needs to get with the UCP program.

COUNCILLOR FARKAS: At the end of the day, we have so strongly limited our ability to be able to navigate these uncertain times, that it leaves us holding the bag, really questioning what happens next.... So in any event, council, I'd argue on this matter we've really become the architects of our own misfortune.

JEREMY: All of this works out very nicely for Jason Kenney, who obviously wants to delay the Green Line, and council members are stuck trying to justify the decisions they've made that have helped create this mess.

Here's Mayor Nenshi responding to Councillor Farkas.

MAYOR NENSHI: And I think that it is exceptionally disingenuous to say these are decisions coming home to roost. What these were were decisions as a result of very prudent fiscal management over many years that allowed us the capacity and the ability to do different things. Our debt has gone down by $600 million since I've been in this chair, and that debt capacity is what allows us to be able to build those four capital projects; it's what allows us to be able to move forward on the Green Line.

I challenge you to find a government at any level anywhere that operates its finances as well as this government does.

JEREMY: We're going to leave it there, but this is just part one. In the next Sprawlcast, we're going to take a closer look at what happened in July 2019, before city council's summer break, when they rammed through the arena deal. We'll look at what was behind that decision, what led up to it, and why council insisted that the arena deal had to happen right now and couldn't wait.

COUNCILLOR DAVISON: You should know that if this passes, this deal is done tonight, and you will forever be known as the council that likely lost the Calgary Flames.

Stay tuned for Part 2.

Jeremy Klaszus is editor-in-chief of The Sprawl.