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Cash flow model of KED project by Sudbury man not far off the mark

Local professional engineer Ian Berdusco drafted a preliminary cash flow model for the Kingsway Entertainment District, which projects an annual municipal deficit exceeding $6 million. The city’s estimate, which factors in the municipal arena alone, is $4.9 million
KED sign
A billboard advertising the Kingsway Entertainment District located near the site of the project. (

There’s some debate regarding certain numbers he uses, but Ian Berdusco doesn’t appear too far off the mark in his cash flow model for the Kingsway Entertainment District. 

This, despite social media (where his report found its legs in the community) proving a fertile breeding ground for KED-related disinformation.

Berdusco is a local professional engineer with an MBA specializing in finance, and he drafted the model during evenings and weekends for the past few months. It concludes that the municipal impact of the KED will include a net municipal cost of $6.2 million in its first year of operations and a total of $61.5 million during its first decade. 

An established critic of the KED, Berdusco said the cash flow project was partially inspired by his recent purchase of a home in Greater Sudbury.

“I’m that next generation of homeowners and taxpayers in Sudbury, and I want to see councillors and staff be careful with our money and follow best practices,” he said.

Although city staff have taken issue with some of the numbers and assumptions he used in his report, Berdusco said he was never under any illusions that they wouldn’t, which is why he was careful to use the word “preliminary” in describing his model, which he intends as a starting point.

This, he said, is also why he ran a sensitivity analysis that accounted for a 40-per-cent discrepancy in his calculations, which still indicates a municipal subsidization of at least $30 million during the KED’s first decade. 

“That gave me some comfort in my conclusion that this arena is not going to pay for itself,” he said – a claim city staff have not made but which has been swirling around social media and local reporting in recent years.

Last week, requested comment from city staff on the accuracy of Berdusco’s report, which prompted a review by three key administrators: Finance Assets and Fleet executive director Ed Stankiewicz, Engineering Services director David Shelsted and Financial Planning and Budgeting manager Steve Facey. 

The trio connected with earlier this week to share their collective take on Berdusco’s reporting. 

The city’s current total estimated municipal cost for the project in Year 1 is $4,907,672.

This includes annual debt repayment of $4,251,972 toward the $90-million loan the city took on for the project, which they will pay for 30 years. It also includes an annual operating deficit beginning at $655,700 in Year 1, which was reported in last year’s updated PricewaterhouseCoopers report on the project.

The city’s estimate is limited to the municipal arena whereas Berdusco’s cash flow model incorporates the entire KED impact to the municipality, including the Genesis Hospitalities hotel and the Gateway Casinos centre.

Although the city’s approved budget for the project is $100 million, including the $90 million in debt and $10 million in fundraising, last year’s updated cost estimate bumped it to $113.8 million. 

This, Shelsted said, “would be the value if you bring that out basically the three to four years for inflationary measures and cost escalations.”

Both the $100-million estimate and updated $113.8-million estimate include not only the arena building but also “all-in” expenses such as roadwork and stormwater management ponds. 

That clarified, the project’s true cost won’t be fully understood until the third quarter of this year, when city council is expected to approve a final budget alongside a design-build tender.

This is relevant to Berdusco’s report due to his document citing an outstanding financing of $40.5 million, which brings the project’s total financing to $130.5 million when only $90 million has been approved thus far.

Further, Berdusco’s report assumes an interest rate of 4.5 per cent when the city has acquired an interest rate of 2.416 per cent over 30 years for the initial $90-million loan. 

There are a few other points of disagreement. Berdusco’s report cites the city’s highest-assessed hotel as being $12.4 million when the highest-assessed hotel in the city is the Hampton Inn and Homewood Suites, which is in excess of $20 million. 

City staff also believe Berdusco’s estimate that the future assessed value of the casino is low at $12 million. They didn’t hazard an estimate, but pointed to this recent story, which cites a $60-million casino, which is the same estimate presented in 2017.

Related to their disagreement regarding assessed value is a debate about how much tax revenue the KED would bring in. Berdusco’s report estimates a total of $651,305 in Year 1 for the hotel and casino. The PricewaterhouseCoopers report cites an estimated tax revenue of $4.264 million. However, this estimate anticipates a total assessed value of $160 million and the realization of “a new casino, hotel, conference centre, new retail / commercial uses and a new film and television studio.”

Even city staff call to question the PricewaterhouseCoopers tax revenue estimate. 

The $4.264-million estimate depends, “if in fact it’s $160 million in assessed value,” Stankiewicz said, adding that construction value does not necessarily translate into assessed value. 

As it stands, Gateway Casinos and Genesis Hospitality have been the only partners to go on the record saying they are committed to building their respective enterprises at the KED site, although some area business owners have also expressed interest in expanding in the area.

Despite a viable debate regarding some of these figures, Shelsted said much is still up in the air as it relates to the KED, with past estimates becoming outdated and the final budget and costing expected later this year.

“We’re trying to do our best to keep both council and the public aware of where cost estimates sit,” Stankiewicz said. “When you delay the project four years, there’s obviously an escalation in costs. … We’ve seen some higher than normal inflation the last number of years, and it tends to be bigger numbers.”

While Berdusco said he disagrees with some of the city’s points of contention and concedes that some of his numbers are off due to outdated information or incorrect assumptions, he hopes to see the city undertake a similar exercise to hash out data that everyone can get behind.

Having evaluated $10 billion in capital projects in his professional career, he said that he “can’t recall any of those projects ever getting approved without a cash flow evaluation being attached to it.”

This cash flow model, he said, “needs to be done by somebody who’s a third party, independent from the city.”

A note on operating deficits

The degree to which the city should subsidize the Kingsway Entertainment District’s municipal arena underpins much of the debate regarding its finances. 

Pages 73 to 75 of the city’s proposed 2022 budget document highlight various areas of municipal expenditure, including an annual subsidization of approximately $4 million toward the city’s 14 municipal arenas, which have 16 ice pads and seven community halls. 

In emailed correspondence to, a city spokesperson clarified that the average net municipal cost of the Sudbury Community Arena was calculated at $541,482 in 2017. 

Figures vary year to year based on events booked and attendance at live events, with the pandemic-era years finding its operating costs and revenues impacted significantly. 

The PricewaterhouseCoopers report cites the Year 1 operational deficit for the KED arena at $655,700, which excludes the annual capital financing cost of $4,251,972 which the city is scheduled to pay for 30 years. 

Tyler Clarke covers city hall and political affairs for