The City as financial victim

In my previous lengthy and complex posting, I outlined my understanding of the financial arrangements in the Lansdowne proposal. I have many questions and objections about such a deal.

First off, there is no value attributed to the land or the existing physical plant, both of which are being turned over to OSEG under a long-term lease. The land is definitely worth something and it is being made available for the construction of commercial buildings. There is no indication that the owner of the land receives any rent. In addition the existing stadium and civic centre may need to be rehabilitated, but they do have value. Again no rent is being paid.

I cannot understand why the City’s equity in the partnership is deemed to represent only 20 million dollars. This is an remarkable understatement of what the City brings to the partnership proposal. Not only is the City providing the use of the land and the current physical plant, it is also investing 129.3 million dollars in the rehabilitation of the stadium & civic centre plus construction of parking facilities.

By ridiculously understating the value of what the City brings to the table, the partnership arrangement represents a significant transfer of wealth to the private sector partner at the expense of Ottawa taxpayers.

I fail to see any reason that net revenues should be distributed to OSEG (both return on and return of equity), prior to payment to the City. Why should the lesser investor be given preference over the greater investor?

In any event, OSEG is covering the cost of financing the retail element of the project prior to turning over any money to the "closed system". By contrast the City is on the hook for financing costs for 116.9 million dollars (and I will argue even more), prior to receiving anything.

Of course the first action of the new Municipal Services Corporation is to award the contract for the rehabilitation of the stadium and civic centre to OSEG. There is no question of competitive bidding so there is no reason to believe that the MSC will get good value for the 129.3 million dollars it proposes to spend.

Promoters of the Lansdowne partnership campaign (such as OSEG and various members of Council) have made much of the fact that OSEG is willing to take on the project (without competition) on a fixed-price basis. Somehow that does not seem very impressive. Does the City not normally seek definitive price quotes when it buys goods and services?

The proposal to establish a Municipal Services Corporation needs to be carefully examined. What exactly will be the role and responsibility of the corporation? How will the directors of the corporation be appointed?

The CFL football team is to pay annual rent of $300,000 for use of the stadium and the OHL hockey team is to pay $100,000 for civic centre. This money goes into the "closed system" so potentially much of this comes back to OSEG. Is this a stream of rental income that can justify $110 million investment by the City in rehabilitation?

All of these comments come directly from the documents presented to Council, but I have many more concerns. Those concerns spring from mistaken assumptions or from issues deftly sidestepped in the documents released to date.