Saskatoon lays out proposed payment plan for new $1.22B downtown arena district

Saskatoon city council will have a major decision to discuss at its upcoming council meeting: whether to agree to cityadministration'sproposed funding plan for the city's new downtown 15,900-seat arena and the associated entertainment district.

It's a monumental step toward constructing the proposed Downtown Event and Entertainment District, which carries an estimated price tag of$1.22 billion, not adjusted for inflation. If approved, the city would be able to put the finishing touches on the financial blueprints to have the project "shelf-ready" if provincial and federal money becomes available.

The city highlighted that the proposed plan would come with no direct property tax increases for residents.

"Council has the power to make whatever decision they determine, but I would say if the funding plan is seeing the revenuesthat it is expected to, that should be a non-issue," said Dan Willems, Saskatoon's director of technical services, transportation and construction.

The city said it will not begin planning construction until the project is fully funded. If it is, the city expects construction totake about five to six years.

On Wednesday, the city provided a breakdown of the proposed costs, the most major being:

• Event centre/arena $632 million.
• TCU Place convention centre renovation and expansion $221 million.
• SidBuckwold Theatre renovation $52 million.
• Initial infrastructure improvements, parkade and land assembly $254 million.

"The estimated costs are felt to be conservative and further work will be done to attempt to reduce the capital costs," Willems said.

Saskatoon city council will meet to vote on the project on Aug. 28.

How will Saskatoon fund the project?

The city's plan is to fund about 27.5 to 33 per cent of the project itself, with a 30-year debt repayment plan, and depend on the federal and provincial governments to pay for the rest.

According to documents, that type of split isn't uncommon for projects under the federal Investing in Canada Infrastructure Program (40 per cent federally funded, 33.33 per cent provincially and 26.67 per cent municipally) or the previous Building Canada Fund (split evenly three ways). City administration pointed to other projects like the Bus Rapid Transit design, which is being funded by all three levels of government.

The city is expecting to pay about $354 million to $424 million in current dollars, without inflation, if the downtown arena project moves ahead.

"We've been relatively conservative in our assumptions, knowing that we don't want to be over optimistic at this point and then run into a significant financial challenge 20 or 30 years down the road," said Clae Hack, the city's chief financial officer.

The city outlined seven funding streams estimated to bring in about $602 million to $777 million over 33 years:

• Private partner contributions - a one-time $20 million injection and approximately $150 million over 25 years from revenue sharing.
• Accommodation funding contributions - $5.7 million per year.
• Amusement tax - $1.4 million per year at existing facilities and $1.8 million in the first five years of the new facility.
• Parking revenues - $572,000 each year until the new facility is open, then an estimated $1.26 million per year in the first five years following its opening and more as time goes on.
• Tax incremental financing (TIF) -$66.6 million to $241.4 million over 30 years.
• Property realized reserve contribution - $30 million one-time funding.
• SaskTel Centre reserve contributions - $5 million one-time funding and estimated $500,000 annual funding for the first six years.

Private partner contributions

The city is working on an agreement with OVG360, a venue management company that specializes in sports, live entertainment and hospitality, according to its website.

According to city documents, there is a risk that the OVG360 could choose to pull out of the agreement if the project's construction does not happen in a reasonable time.

Accommodations contributions

Some hotels in Saskatoon already voluntarily provide a three per cent room surcharge to Discover Saskatoon to promote tourism in the region.

One option is to make the surcharge mandatory and bump it to 5.9 per cent, among the highest in Canada, with 3.65 per cent going toward the entertainment district and the remainder toward Discover Saskatoon.

"The industry has expressed that they feel they are being asked to pay a disproportionate amount of contribution and note that other industries which will directly benefit from construction of the Downtown Event and Entertainment District (DEED) project should be participating financially as well," one document reads.

Another option is to create a sub-class of property tax for hotels, motels and hostels, though the industry has "made it clear" it does not support that option.

Amusement tax

An amusement tax, or facility fee, is also on the table. If approved without amendments, the funding plan would lead to a 9.5 per cent amusement tax rate on all TCU Place, SaskTel Centre, event centre and arena tickets.

The risk is that adding an amusement taxalongside the existing six per cent provincial services tax (PST) could push ticket prices higher than in other jurisdictions.

Tax incremental financing

While the city's funding plan does not propose an increase to property tax, it does propose redistributing some property taxes around the district to fund it using what's called tax incremental financing.

To fully implement that form of financing, Saskatoon would need legislated changes or an agreement with the Saskatchewan government to capture incremental education taxes.

If it does not provide as much revenue as expected, it could extend the financing timeline beyond its expected 30 years or take from other funds, like the community building or neighbourhood land development funds.