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.

A true football project

There are people, many people, who would like to see CFL football return to Ottawa. For many football fans, it is difficult to see why others are raising objections to the Lansdowne Live proposal. After all, this is a plan which has been promoted as a means of bringing back football.

But it is worth noting that even if everything goes ahead full steam, there will be no football team on the field until 2013 or 2014. Why is it taking so long?

One reason for the delay is that the Lansdowne Live proposal involves much more than football. For some reason, you cannot have a football team until you have a supermarket, a shopping centre, a multi-screen movie theatre and VIP boxes in the stadium.

If you wanted to establish a football team, would you build a supermarket as your first step?

No, probably the first step would be to look into temporary stands for fans in the existing stadium. It would be nice to replace the seats in the stands, but need that be the first concern?

Similarly, if the idea is to bring professional soccer to Lansdowne, what really needs to be done?

All this is to say that, if football (or soccer) is the objective, there are quicker and surer ways of restoring football than the complexity of the Lansdowne Live proposal.