Read your own paper!

Life is complex and it is difficult to keep up. However this is no excuse for the apparent muddled thinking of the Ottawa Citizen editorial board. Apparently the people who write the editorials do not read the news stories carried in their own paper.

On Wednesday April 21, the newspaper carried an editorial with the title "Rush to judgement". The position taken in the editorial was that the Glebe Business Improvement Area was too hasty in criticizing plans for the commercial development at Lansdowne Park which had come to their attention.

But the editorial contained two "howlers" that call into question the capability of the authors to make any statement about the Lansdowne project.

First the editorial said "Planner George Dark and his colleagues’ proposal for Lansdowne Park isn’t expected to be unveiled until May 10". In fact it is not George Dark and his team, but rather the five design teams working on the Lansdowne Park "front lawn" -- really the backyard -- whose designs are to be received and released to the public.

It is not clear that the "master plan" which is to bring together the various separate designs, and which is Dark’s mandate, will ever be made public. As far as anyone knows, Dark’s comments on the "unique" retail experience proposed for Lansdowne are not for public consumption. Maybe George Dark and his two colleagues will whisper a few remarks in the ear of the Mayor, or may slip some information to Roger Greenberg, but there is no stated intention of telling the public what those three highly-qualified team members think.

Later in the editorial appears the comment that "It’s too bad the city didn’t conduct a study of the business effects of the new Lansdowne on Bank Street...". My understanding is that, as a participant in the Lansdowne "partnership", the city funded a study that conveniently concluded that plunking a major shopping centre in Lansdowne was just fine and would have no negative consequences for existing businesses. In addition, the city provided support for the study undertaken for the Glebe BIA which concluded that the capacity of the Glebe and Ottawa South to absorb new retailing was much more modest than that proposed by the promoters of Lansdowne Live. So to try to reconcile the irreconcilable, the city is now paying for a report which would try to bring these two studies to a common conclusion. In addition, your taxes are also supporting a further study to attempt to specify the unique nature of the shopping proposed at Lansdowne.

All these studies have been reported in the pages of the Ottawa Citizen. What is really too bad is that the Citizen editorial board has not learned of their existence.

Readers might wonder why it is necessary to define the unique nature of shopping at Lansdowne. After all, many of the shops at St. Laurent are the same as those at Bayshore and this does not seem to bother anyone. This drive to make Lansdowne unique is to justify the extraordinary financial arrangements proposed in an attempt to justify the Lansdowne Live boondoggle.

It has been suggested (sometimes with a straight face) that the property taxes on the retail component at Lansdowne will pay for the debt incurred for the stadium/arena renovation and for other city costs associated with the proposed project. This dubious idea is founded on the assumption that the retail operation at Lansdowne, built on city land offered rent-free, would never have been contemplated elsewhere in Ottawa. Moreover the retail at Lansdowne is assumed to make so few demands on city services that 75% of the taxes paid is not needed to fund services and can be diverted to the stadium/arena redevelopment.

This idea that the retail at Lansdowne is special is one of the most curious parts of the whole confidence game now underway. It is exactly the suspicion that Lansdowne will be just another mall or "power-centre" that has likely stimulated the Glebe BIA to make its concerns known. Apparently the plans indicate that the promoters of Lansdowne Live believe that a grocery store facing on Bank Street would be something new and exciting for Ottawa. Please excuse my yawn.

While I nap, perhaps the members of the Citizen editorial board would like to read some back issues of their own paper.

Councillor Chiarelli and innovative accounting

In todays "Metro" Councillor Rick Chiarelli is quoted as saying that Ottawa has three possible choices with respect to the redevelopment of Lansdowne Park. He defines the choices as:
1. buy into the Lansdowne Live proposal by OSEG
2. let the stadium rot and spend $4 million per year for the arena and salons
3. tear down the stadium and civic centre and install a lawn for $40 million with the option to build a stadium elsewhere for $200 million.

The Councillor then argues that going with the OSEG proposal will cost nothing because the debt will be paid by a portion of the city's revenue from the commercial development in the proposed partnership.

In fact there are many other possibilities than those suggested by the Councillor. Moreover the way that the financial arrangements have been described is simply incorrect.

First consider other possibilities.

Instead of maximizing the investment in the stadium, exposing the greatest investment to a risky proposition, it would be possible to address the real safety issues of the stadium and civic centre for a smaller amount of money, do appropriate minor renovations and get a team on the field quickly. With less investment at stake, it would be possible to see whether pro football succeeds, and if the transport and other problems associated with the use of the stadium can be resolved. Assuming football is a success and the transportation issues are overcome, we could then go on to undertake a series of upgrades of the stadium (and civic centre).

Another possibility would be that we do the minimal work on the stadium to get a team on the field and we discover that the transportation issues really are serious. Because we have not invested such a great sum in Lansdowne, it would then be possible to consider a stadium at another location.

Obviously there are many other alternative ways of redeveloping Lansdowne Park, including selling part of the property, rather than engaging in the complex lease arrangement for 30-50-70 years.

Turning to the discussion of financing, it is here that we discover that Councillor Chiarelli is totally out of his depth.

Even if you accept the dubious proposition of dedicating property tax revenue from the commercial development to carry the cost of the debt incurred in upgrading the stadium and civic centre, the Councillor still does not have it right.

We are told that the proposal involves the City taking on debt to be retired over a 40 year amortization. The annual cost of that debt is said to be $7.1 million. The principal source of funds for the $7.1 million is not from the shopping centre's property taxes but rather the $3.8 million in maintenance which the City would need to spend to continue the present programme activity at Lansdowne. This is the $4 million to which the Councillor refers in the article. Yes we have never adequately maintained Lansdowne in the past but it is argued that we will in the future and we are so sincere in our dedication that we can count on saving $3.8 million forever.

So the property taxes to be designated to pay down the debt load borne by the City will only cover a minority of the annual debt servicing cost of the proposal. And here we enter into the whole question of designating property tax revenues. If it can be done for the redevelopment of Lansdowne Park, I would suggest it can be done for anything. I might like marble sidewalks in front of my house -- this will cost nothing because my property taxes can be designated to pay for it. And what does everyone else want to do with their property taxes???

The fact is that Mr. Chiarelli, for reasons that escape me, has become prime cheerleader for the Lansdowne Live proposal from OSEG. He doesn't let reason or logic stand in the way of his advocacy. This is a pity; we expected more from him.

Distractions and perplexities

So what is the deal for Lansdowne that is up for discussion anyway?

The media is carrying stories indicating that Councillors are actively working to restructure the great Lansdowne Partnership which was proclaimed with such ballyhoo on September 2. It is surprising that some Councillors who rushed to praise the proposal on the moment of its release (and, in one case, lauded the arrangement prior to seeing it!) are now working to shore up the plan and patch its weak points.

To be fair to OSEG, the private sector players in the deal, they have been consistent in affirming that there is some flexibility to their proposal. However today, Mr. Greenberg, as spokeman for OSEG, indicated that he is coming to the end of his patience. He wants Council to sign on the dotted line in early November, commiting the City to the arrangement.

I suspect that much of the activity by Councillors is in reaction to the possibility that OSEG will walk away. No doubt some Councillors are so closely associated with this plan that they will offer further concessions to OSEG to keep them in the game.

The principals of OSEG say that their interest is in bringing football back to Ottawa. Put aside all the discussion about other matters and talk about what they claim is their objective.

Unfortunately the entire discussion is obscured by the notion of "revenue neutrality". In order to generate tax revenues to pay for the stadium and civic centre renovations, some Councillors are convinced that they need to grant land for a shopping centre, offices, a hotel and residences.

Mr. Greenberg is right when he says that if the shopping centre is reduced in size, tax revenues would be diminished and (using the crackpot accounting favoured by some) the delicate balance of "revenue neutrality" would be disturbed. Mr. Greenberg goes on to say that with a reduced shopping centre, the "gap" in tax revenue could be made up by authorizing offices, a hotel and residential development.

All this discussion is akin to the medieval issue of how many angels could dance on the tip of a pin. The concept of "revenue neutrality" is simply invalid. We should stop talking about a nonsense topic.

The real question which Councillors should be considering is whether they are willing to commit 129.3 million dollars. Any Councillor who votes to support that should explain why that is the most important investment for the City to make -- in particular, why it trumps fixing the sewer system or improving transit. He/she should also explain why such a large investment is required.

If the purpose is to extend the use of the civic centre, they should ask exactly what that would cost. They should eliminate the frills and invest in the basics, if they want to do anything at all. Then they should look at the stadium. If they really want to have a working football/soccer stadium, determine how little could be spent to make it workable. Invest that minimal amount and see if football/soccer is viable. From the revenue generated from the civic centre and stadium make further investments as appropriate.

But this discussion about restoring the civic centre and stadium should be divorced entirely from the concept of "revenue neutrality".

There is no reason to size the commercial development on the site to generate a specific amount of property tax. If there is a market for the commercial enterprises proposed, they will be built somewhere and taxes will be paid.

Truth squad let loose

What a pleasure it is to see Roger Greenberg writing in today's Citizen under the headline "Here's the truth about the Lansdowne plan". I guess I should commit to electrons some of my thoughts as I read his article.

Mr. Greenberg begins by writing about the public consultations which he describes as "disrupted (some say hijacked) by an orchestrated campaign of misinformation". I would suggest that the disruption was not affecting a public consultation; it was a brief interjection into a concerted sales campaign. Surely Mr. Greenberg is referring to the use of the megaphone at the event on September 29, a sales pitch for the partnership which was disturbed by calls for members of the crowd to express their views.

He then complains about the "dance of deception" and the "hoedown of hokum" at subsequent events. (This leads me to inquire if Mr. Greenberg has fallen under the evil influence of the ghost writer for the late and unlamented Vice President of the United States, Spiro Agnew, who spoke of the "nattering nabobs of negativism".)

He says some Glebe residents would like to defeat the Lansdowne Live approach in order to see the sports facilities levelled and a real park created in its place. He is right. There are such people in the Glebe. There are also people in the Glebe who want football and who see the complex proposal for the Lansdowne Partnership as unnecessarily delaying and putting into jeopardy the restoration of the stadium and civic centre. Those people are also speaking out and causing angst among the supporters of the OSEG approach.

He says that businesses in the neighbourhood fear competition and want to eliminate the threat. Yes, that is true. There are many who consider that subsidized competition is indeed a threat. The merchants who feel threatened own or rent the land under their shop; they don't get it free under a sweetheart deal. They pay property taxes on the land and on the building that houses their shop. They don't sit on city land which is exempt from tax. Their taxes go into keeping the city running not into subsidizing their landlord's other business interests. Yes, for all those reasons they fear the competition.

And probably the merchants are also a little fearful when they see that a massive rezoning of their neighbourhood is about to take place which will completely change the uses that can be placed on the land. Their fear is that the rezoning is not going to be handled according to normal and proper procedures. Why? Well, nothing else about the Lansdowne project has followed the established procedures, so there is no reason to imagine that due process will prevail in the future.

Then Mr. Greenberg is proud to announce that a mere 13.8 percent of the total surface area of Lansdowne is to be occupied by new commercial development. Of course the figure would change if we removed from the calculation the stadium and civic centre which is to be handed over to OSEG rent-free for 30 years. (Oh sorry, tiny little rents are to be paid by the football and hockey team.) We should also rule out the Aberdeen Pavilion which is to become restaurants -- somehow that is not commercial (but it is again rent-free).

If we are to do comparisons, I wonder what the ratio of buildings to total site is for a power centre like South Keys. I doubt that the buildings cover more than 40% of the total surface area (and do you include the O-Train stations or the bus facilities as part of the site?).

Mr. Greenberg acknowledges that a food store would compete with other stores selling food. I find it hard to see how this admission squares with the argument that the new retail at Lansdowne is unique. I thought the new food store would specialize in the exotic and foods not available elsewhere in Ottawa. Fresh durian and sweetsop was the sort of thing I expected.

The one aspect in which I really do agree with Mr. Greenberg (and this is truly a no-sarcasm break) is that some activity along Bank Street (small shops, cafes etc.) between Holmwood and the bridge over the canal would be desirable. It is boooooooooring to walk along that expanse of Bank Street now.

On parking Mr. Greenberg notes that there is proposed to be ample parking for the customers at the retail shops. He is right. There is also parking for the residents on site, for the office building and the hotel. Oh! We forgot there are also the restaurants in the Aberdeen Pavilion. Oh? We forgot there are also the hockey fans in the civic centre. Oh! We forgot there are also the fans in the football/soccer stadium. Too bad we made no provision for any of them to park.

The City zoning by-law contains provisions for parking. I personally think these aspects of the zoning by-law are useless, but our Council and our City planning experts do not agree. The by-law says you are to have one parking space for each four seats in a stadium and the same for an arena. With 24,000 seats in the stadium and 10,000 seats in the arena , this would indicate that 8,500 parking spaces should be available for these uses.

The Delcan report prepared for OSEG indicates that all of those parking spaces (plus any for the Aberdeen Pavilion or the Horticultural Building) are "grandfathered". I hope your grandfather lives close to Lansdowne so you can park at his house.

Mr. Greenberg indicates that the city has "developed a comprehensive transportation plan" to cope with access to the redeveloped Lansdowne Park. That sweeping statement is hard to reconcile with the much more cautious statements by the City Manager about the need for a real transportation plan to support the Partnership proposal.

But Mr. Greenberg notes that the removal of the Exhibition and the banishment of the trade and consumer show industry will eliminate all sorts of traffic. OK, point taken. But does the elimination of these demands for vehicular access justify cutting the parking on site by half while adding multiple uses which will stimulate demand for parking? (This is a debating point, I really do not want to encourage the expansion of parking, but I question the validity of Mr. Greenberg's argument.)

In the article Mr. Greenberg emphasizes that the City will continue to retain ownership of the land. He says that after 30 years the City's debenture will be largely paid off. This raises an interesting question for me. If a real estate developer has a lease for 30 years (even a lease that produces no rent), is it common to amortize the underlying financing over 40 years? After 30 years, if and when the commercial buildings revert to the City, the City is still paying down the debt for fixing up the stadium & civic centre and building the parking.

But then Mr. Greenberg (maybe inadvertently) hits us with the whopper. He says "the debenture is to be paid back from the annual funds currently allocated for maintenance at Lansdowne ($3.8 million) to continue current programming, supplemented by 75 percent of the municipal tax revenues generated by the new retail development ($3.2 million)."

Surely Mr. Greenberg you don't expect us to fall for that. Council has never adequately funded maintenance of Lansdowne. You cannot sensibly assume that they would fund it in the future -- the $3.8 million does not exist.

Anyway, what is current programming at Lansdowne? Unless this is defined, we do not know what it costs to continue it. Obviously we can let the stadium deteriorate because there is no current programming there. (You do not need thousands of seats to look down on an inflated dome in February.)

As for the idea of dedicating property tax, this is not done and should not be done. If you want to allocate property tax, why don't you reallocate the property tax on the St. Laurent shopping centre to pay down the City's debt? The tax paid will be greater and we don't have to wait for years to start getting the cash.

And I don't care if Mr. Greenberg is tired of Councillor Doucet's complaints about the cancellation of the design/develop competition. Why should the principals of OSEG care? They stated clearly that, if there was to be a competition, they would refuse to compete. I don't think that Councillor Doucet should desist; I think it is up to OSEG to explain why they ran and continue to run away from the idea of competition.

In conclusion, Mr. Greenberg protests "the bogus feedback from the meetings' hijackers". My own view is that it is Mr. Greenberg that "doth protest too much".

Risks and rewards

It's hard, even for a conscientious journalist, to get the whole story.

In today's Ottawa Citizen, Patrick Dare makes a valiant attempt at explaining the complex Lansdowne Partnership proposal. He makes excellent points, in particular his statement "...it is highly unusual for a city to dedicate property taxes to a specific expense, as is proposed in this project -- in this case, using the taxes from the retail buildings to cover the debt needed to fix up the stadium and arena for the sports teams to use."

But putting aside my objections to dedicating any of the property tax revenue to the calculation, please look at Mr. Dare's statement: "To pay most of the estimated $7.1 million in annual servicing costs for the city's debt for the construction project, the city is counting on a separate revenue stream: three-quarters of the property taxes from the new retail buildings ($2.8 million per year) and the savings that result from no longer paying for the operations and urgently needed renovations in the existing buildings (estimated at $3.8 million)."

Maybe arithmetic has changed since I left elementary school, but 3.8 plus 2.8 used to equal 6.6. Even with all the questionable assumptions, we are half a million short, every year.

And all the assumptions are questionable.

If the amount the city should be paying for the the renovations of the buildings is $3.8 million, why is OSEG on the hook to only put a minimum of $1.5 million into the lifecycle fund? (Answer: Because the city has invested $110 million into addresssing all the deficiencies of the past.) So can you really credit the $3.8 million in saving, since we have never, ever, spent $3.8 million on this?

And the idea that we can credit 3/4 of the property taxes from the retail buildings to pay, not the principal, but just the carrying costs of the city's investment in the rehabilitation of the stadium and civic centre, is, not just "highly unusual" as Mr. Dare would have it, but rather creative accounting on steroids.

But I don't want to criticize Mr. Dare. In fact he has obtained some new information and I am grateful for it. He reports "The city would issue a $117 million debenture to cover its share, That half of the Lansdowne project would be put to public tender." The idea that there would be a public tender for the city's portion of the project is completely new -- maybe it is confusion on Mr. Dare's part.

Earlier in his article, Mr. Dare writes "The City would rebuild Frank Clair Stadium (for football and soccer teams) and the Civic Centre (for the hockey team), but have the businessmen manage the construction and operate the facilities, as well as the rest of the site." I find this statement impossible to reconcile with the comment about a public tender.

I never expected to see Mr. Greenberg installing drywall or Mr. Ruddy painting washrooms in the the new updated Stadium. Of course they hire other people to do the specific work. Moreover they are smart business people who try to get the best value for money in the subcontracts they sign. But the overall contract is with OSEG. OSEG is to get the contract management fees. The less they pay the sub-contractors, the more money is left for them.

This is not competitive bidding in the usual sense of government procurement.

Even worse, it appears that OSEG are the ones who are deciding what should be done. They are the ones who want to replace the seats in the stadium. They are the ones who say that VIP suites are needed. They are the ones who are specifying what is needed in the stadium and in the civic centre.

So let's consider this from the outset. OSEG determines what is needed. The City agrees to pay for whatever OSEG wants. The City hands over cash to OSEG to buy whatever it wants. OSEG goes and gets whatever it thinks it needs at the lowest possible price and pockets the balance as a management fee.

Am I the only person who thinks this might not be the smartest arrangement for the City?

I pay property tax too!

In today's Citizen, Roger Greenberg (CEO of Minto Group and principal participant in OSEG) writes that "Municipal realty taxes and the $3.8 million-per-year savings that the city would otherwise lose on Lansdowne Park ranks ahead of our financing".

As I have noted in previous postings, the City has consistently failed to adequately provide for the maintenance of Lansdowne Park in the past. There is no reason to believe future City budgets would provide significant money for the park. Thus the expenditure-avoided argument is invalid. It would be similar to arguing that if I sold my yacht, I could buy a new car. Since I have no yacht, the argument makes no sense.

The claim that the City enjoys some sort of windfall in property taxes from the proposed project at Lansdowne Park needs to be carefully considered.

Unless it is a special exemption (a church for example), every privately owned piece of real estate is subject to property taxes. If Mr. Greenberg's company built a commercial building anywhere in Ottawa, it would be subject to property taxes.

But if Minto built its building in Barrhaven (just as an example) it would be subject to full property taxes and there would be no discussion about the revenue to the City being used to pay off any specific capital investment by the City. It would be assumed the Barrhaven Minto building (as an example) would be bearing the tax burden as its share for services delivered by the City. For instance, if there were a fire in the building, firemen would come to rescue the occupants and extinguish the fire. Stated simply, property taxes are to pay for City services.

My property taxes on my humble residence, and taxes paid directly or indirectly by others, go into the pool of funds which pays for the services we all receive. The tax revenues are not earmarked to pay for specific investments by the City.

So what is so special about the proposed commercial developments on the Lansdowne Park land?

Now some might argue that additional private investment (such as building shops at Lansdowne) generates additional revenue for the City. That is correct and that is one reason the City encourages investment.

But commercial investment responds to a perceived demand. If we expect demand for consumer goods to grow, the market will respond and new retail outlets will be established, not necessarily on Lansdowne Park, but anywhere. Wherever that retail investment occurs, tax revenue will be generated for the City.

I cannot imagine that Mr. Greenberg and his partners really want taxes paid on development at Lansdowne to be dedicated to paying off city investment in the stadium and civic centre. That would only be possible if city services were not delivered to the shops, offices, hotel etc. proposed for Lansdowne. Under such a plan firemen would stand by and let occupants be burned to a crisp in the new Lansdowne hotel. This is unimaginable.

My position is that property tax revenue generated by commercial activity at Lansdowne would be generated by other commercial investment if the Lansdowne development does not go ahead. People will spend their money somewhere else and taxes will be paid.

The assertion that the City's investment in redevelopment of Lansdowne is carried or repaid through property taxes on the property should be dismissed from the discussion.

But there is an interesting question about taxes and commercial development at Lansdowne. Property taxes are calculated on the basis of an assessment by MPAC (Municipal Property Assessment Corporation). The assessment takes into account the value of the land and of the building. But the proposal for Lansdowne seems to have the City providing land rent-free for the commercial development on the site. This might mean that the assessments for Lansdowne commercial development are artificially low because no land value is considered.

In other words, there is a possibility that commercial development on the Lansdowne site is doubly subsidized -- no payment of rent for the land and artificially reduced property taxes. Both of those subsidies would be unfair. It would be unfair to businesses trying to compete against a subsidized competitor. It would be unfair to all taxpayers who have to pay more tax to make up for those who benefit from paying less than their fair share.

I should also make one final point about the quotation from Mr. Greenberg. He uses the expression "ranks ahead of our financing". Indeed that is the nature of taxes. Tax collectors don't fool around. Of course taxes take precedence over repayment of the private group's investment. Just try not paying your income taxes in order to reduce what you owe on your credit card.

But Mr. Greenberg raises the question of the ranking in which investors are paid in the Lansdowne proposal. That is exactly my point -- OSEG gets its money first and the City is left with whatever is left.

Bizarre assumptions and legerdemain

In my previous posting, I indicated that I could not understand why the City of Ottawa and its taxpayers are to be treated so shabbily in the proposed Lansdowne Partnership. To conceal the imbalance in the financial arrangements, residents are treated to blue-ribbon sleight of hand.


--- Understate the cost to the City
The first light-fingered move is minimize the City's gross contribution to the project. Here are the methods I have detected so far.


The City's assets (land, buildings and other physical assets such as utility connections) are assigned no value whatever but are turned over to the partnership for 30 -50- 70 years. The cost of moving the SuperEx from Lansdowne to Albion Road is considered only in passing (I seem to recall an estimate of 7 million dollars in cost to the City). Then there is the cost associated with moving the trade fair exhibition space out of Lansdowne; does this involve a cost to the City?


--- Questionable sources of funds
In addition to borrowing 116.9 million dollars to put into the project, the City proposes to dip into "parking reserves" for 4 million dollars. How were these reserves accumulated? If merchants have paid cash-in-lieu of parking into this fund, they may resent having paid for a parking garage for the retail competitors.

But one of the most audacious claims is that 8.4 million dollars in costs to the City will be avoided between 2010 and 2012. City budgets have not included generous provision for maintenance of Lansdowne Park, so there is no validity to the claim that the money will be saved by approving the proposed partnership agreement.

The fact is that the proposed partnership calls for the City to hand Lansdowne Park to OSEG on a silver platter. That platter consists of 129.3 million dollars in cash, plus asssuming unidentified costs for the SuperEx and for trade show facilities.

--- Overstate revenue for the City
To make the deal look better, it is suggested that the City will receive property tax and avoid ongoing costs. These are described as positive cash flows over the period of the partnership.


The costs to the City which are supposedly avoided are bogus. The City has not spent such money in the past and there is no reason to imagine such sums would be spent in the future.


But the big distortion is the idea that property taxes paid on the development at Lansdowne pay off the significant investment the City is expected to make in the project. This is such a distortion of logic that it warrants a detailed explanation in my next posting.

To summarize, the partnership proposal as presented understates the cost to the taxpayers and overstates the anticipated flow of funds to the City.