Claim: The Kingsway Entertainment District will be a “small-town, single-pad hockey arena” that will cost area taxpayers at least $222 million.
This, according to Ward 3 Coun. Gerry Montpellier and Our Towns Our City Institute member Tom Price, who both spoke during a public meeting at the Northbury Hotel on Thursday night.
A couple dozen people attended the meeting and more than 750 people have viewed a livestream of the event, which Montpellier billed in a paid Facebook advertisement as a means of clarifying “years of BS, smoke and mirrors, internet false identities and misinformation.”
The main thrust of Montpellier’s argument was that the KED – which he refuses to call the KED because he doesn’t believe it will be a “district” – will be “a standalone, small-town hockey arena destined to be the most expensive ever built on the frickin’ planet.”
The ring road around the site will cost $12 million and will also serve as access to area property owner Dario Zulich’s land, Montpellier said. Zulich is also the developer partner for the KED.
“I object to the taxpayers paying to develop that,” Montpellier said, reiterating his point that there are no partners in this project and that the city will be on the hook for the entire cost to develop the land.
The $12-million figure is an extrapolation of the site preparation cost of $9.73 million projected last year and includes room for a 20-per-cent cost overrun Montpellier anticipates due to escalating costs.
As it stands and as approved by city council in late September, the $9.73-million site preparation cost is being split up between the project’s partners, which includes a city commitment of $5.9 million, a Gateway Casinos & Entertainment cost of $2.2 million, a hotel share of $1.1 million and a developer’s share of $530,000. The total expense includes $330,000 toward retaining an engineering consultant to provide contract administration and inspection services.
The site preparation work includes “blasting, grading, intersection improvements, new road construction, sanitary sewer, water, and stormwater management,” according to the city, and will also include lot grading and work on the city parking lot.
The notion that the city will be alone in tackling the KED comes from the fact that there is no legally-binding build agreement among the project’s partners and that Gateway Casinos has put their financial contributions toward the project on pause, which delayed the site preparation work originally scheduled to begin at the end of November.
So while true, the notion ignores the fact the city is working with the project’s partners to sign a project completion agreement in the early third quarter of this year that would legally commit the city, hotel and casino partner to follow through with their projects to completion within a certain timeline. Site preparation work would follow the signing of this agreement in conjunction with city council approving a design-build tender and final budget for the project. City messaging has consistently centred on everyone moving forward with the project together.
During Thursday’s meeting, Montpellier said, “Let’s spend $700,000 and maybe we can convince these guys to sign something,” in describing a recent city expense.
“Now it’s full steam ahead – $700,000 is going to be spent in the hope of convincing somebody to come along here. If not, taxpayers are going to be on the hook for the whole damned thing.”
It’s unclear how Montpellier is interpreting the $700,000 expenditure, or why he states vaguely that the money is being spent to convince someone of something, but the money in question has actually been earmarked for the design-build request for proposals component of the project and includes a compliance team that will have third-party expertise assisting with the procurement process as well as a fairness monitor in place.
This expense also includes a $150,000 honorarium for each of the two unsuccessful proponents of the design-build procurement process.
Although the arena is slated to be “single-pad,” Montpellier’s assertion the arena will be of a “small-town” scale is questionable. The project outlined in RFP documents includes seating for 5,800 people and a concourse with 35 permanent points of sale, among other amenities intended to accommodate big-name concerts and events.
Verdict: It’s possible but unlikely the city will be in this project alone given pending legislation to ensure each project partner lives up to their commitment.
Claim: The final cost of the KED to taxpayers will be $222M
The Our Towns Our City Institute has estimated that the final cost of the Kingsway Entertainment District to taxpayers will be $222,584,750.
This is a conservative estimate, member Tom Price said while providing a rundown of his numbers for those who attended Thursday night’s KED Question & Information event at the Northbury Hotel.
Inaccurate numbers and extrapolated figures cloud Price’s calculations, beginning with a claim that PricewaterhouseCoopers estimated the construction cost at $80 million in June 2021, when the report actually states it is “between $87 million and $92.8 million” excluding site development costs. Their 2018 estimate was $80 million.
On top of this, Price factors in a cost inflation of 13.6 per cent. This was the non-residential construction cost jump estimated to have taken place during the third quarter of 2021, according to city executive director of finance, assets and fleet Ed Stankiewicz, who shared the figure with city council during the second evening of 2022 budget deliberations in late November.
Price ascribes this cost inflation estimate of 13.6 per cent to the inaccurate $80-million construction cost twice, which results in his $103,239,680 estimate for 2022. Price also assigns this third-quarter 2021 cost inflation estimate to a $20-million site development cost twice, which brings it to $25.8 million and an overall project cost of approximately $129 million.
Price places this entire expense on the back of debt paid over 30 years at an interest rate of 2.416 per cent, which, according to him, would cost city taxpayers a total interest of $93,535,150. This brings his total taxpayer-funded cost estimate for the KED to $222,584,750.
As it stands, the project’s total budget remains $100 million and it would require city council approval to exceed this figure. This cost includes $90 million budgeted through debt and $10 million in fundraising, still within the PricewaterhouseCoopers estimate.
The current request for proposals for the arena’s design-build, excluding HST, have been budgeted at $92 million and any proposals that exceed this amount will be disqualified.
The city secured the $90 million in debt alongside another $110 million for other projects in 2020 to be paid back over the course of 30 years at an interest rate of 2.416 per cent. The total amount of interest applicable to the KED portion when all is said and done will be $65,232,000, according to the city, $30 million less than Price’s estimate.
As such, the total taxpayer-funded portion of the KED currently stands at $155,232,000.
Verdict: As Tom Price’s claim of a $222-million price tag appears to be based on an inaccurate interpretation of available data, his conclusions should be treated with a high degree of skepticism.
Fact Check Friday has been created as part of an ongoing effort by Sudbury.com to clarify information being shared with the public. Topics for future Fact Check Fridays can be emailed to reporter Tyler Clarke at [email protected] with “Fact Check Friday” as the subject.
Tyler Clarke covers city hall and political affairs for Sudbury.com.
