Financing for the Kingsway Entertainment District has become a hot topic during the municipal election campaign, so it's a good time to take a look at the project and detail what we know at this point.
*Last June, city council voted against building the 5,800-seat arena downtown by a tied vote of 6-6. Tie votes are considered defeated. They then voted 10-2 on a separate motion to build it on the Kingsway, on land owned by Dario Zulich and business partner Perry Dellelce.
Zulich originally proposed in 2015 the arena be built as a public/private partnership, similar to the $60 million Biosolids Plant on Kelly Lake Road. Under that arrangement, Zulich's group would have built and operated the arena for 30 years, in exchange for loan guarantees needed to finance the project. The city would have taken on the risk if anything went wrong, but no upfront tax money would have been required.
But city council voted to keep control of the new arena and finance the project using public money. So the arena, wherever it is built, will be publicly owned. A consultant's report estimated the project would cost $100 million, whether it was built downtown or the Kingsway.
A report prepared for the June 2017 city council meeting said the $100-million debt would be financed with an interest rate of about 3.6 per cent, with debt repayments at $5.5 million a year over 30 years. Repayment would begin in 2021, the original timeline for when the events centre was to open.
That timeline is in doubt, however, because of appeals to the Local Planning Appeals Tribunal opposing zoning changes and an Official Plan amendment needed to build the arena, casino and parking lot on the site. The LPAT has scheduled a first conference in November, and must make a decision by June 2019.
Options to pay for the arena range from putting the full amount on property taxes, to using internal funding sources so no tax increase would be required. The options are detailed in this report.
Putting the entire bill on property taxes would require adding 0.7 per cent – or about $1.8 million – to tax bills for three years, which would raise the $5.5 million by 2021.
However, there are other options on the table. For one, the city's commitment to help fund construction of the city's medical research centre and school of architecture ends in 2020, making $1.1 million available to be directed to the arena. And this year, council approved a new hotel tax, half of which must be directed to tourism, leaving $800,000 potentially to go toward the arena.
There will also be a significant amount available in 2023, when city will retire some long-term debt, saving $2.3 million a year. Plus council already approved close to $800,000 for the project in last year's budget.
Together, those options total about $5 million a year in potential financing on the $5.5-million annual mortgage. City proposals also call for a fundraising campaign to raise $10 million, which, if successful, would reduce the annual payment to $5.2 million.
There's another fund the city could draw from, at least indirectly. The Ontario Community Infrastructure Fund (OCIF), which the province provides to cities to pay for infrastructure repair, is forecast to rise to $9.3 million a year in 2019. The city could redirect tax money spent on roads and other infrastructure to the arena, and replenish it with funds from OCIF.
However, a staff report recommends against doing that, considering the extensive infrastructure needs in Greater Sudbury.
So the preferred options to pay for the arena/event centre mortgage range from fully footing the bill on the tax levy, or using a combination of the funds mentioned above to reduce the impact to as little as $500,000, depending on the success of the fundraising campaign.
The Kingsway Entertainment District is separate from the Junction, the $109-million project proposed to be built on the Elgin Street location where the current Sudbury Arena sits. It includes a new art gallery and library ($46 million), as well as a convention centre ($63 million). Financing plans for that project have not been finalized, but unlike the arena, they're eligible for funding from the province and federal governments, which could reduce the cost.
Final decisions on that project, however, will wait until a new city council is elected Oct. 22.
* An earlier version of this story incorrectly stated the initial arena vote was lost 7-6, when it was actually 6-6. Ward 3 Coun. Gerry Montpellier declared a conflict and didn't vote. Sudbury.com apologizes for the error.
