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.
Wednesday, October 14, 2009
Wednesday, October 7, 2009
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".
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".
Sunday, October 4, 2009
Around and around - a subsidy...
We seem to be lost in a circular debate. Could we all agree that leaving Lansdowne Park in its present state is unacceptable?
If we all agree, the issue is - where do we go from here.
One possibility is to simply buy into the single proposal we are being offered. Put in a deluxe stadium at taxpayers' expense, give away acres of land and hope for the best.
Another approach would be to ask what the people of Ottawa want. Canada 411 indicates that there are 619 shops in Ottawa associated with "sports", only nine associated with "football" and thirty-seven associated with "soccer". Does this mean that there is a severe shortage of shops to cater to the fans of a new CFL team? Is that shortage so severe that the City needs to come to the rescue and address the needs of those consumers by providing rent-free land for such retailers?
I suspect that there are many people who would like to see pro football return to Ottawa. Probably this is less than a majority, but they are numerous. Should they be denied? No, I don't think so. But to what degree should the rest of us, who are not so passionate about football, subsidize the football fans?
There are all sorts of interests in our community. Some people are keen on chamber music; some are partial to capoeira (Brazilian martial arts); others are oenophiles. To my mind, all of these interests, are just as worthy of support as CFL football. All are probably of interest to only a minority.
But no one has suggested that the wine show take over Lansdowne year round to satisfy the oenophiles. For 129 million dollars we could build a world-class collection of wine. Strangely enough, there is no proposal for an Ottawa City wine cellar at Lansdowne Park.
But there is a proposal to take remarkable measures in support of football.
Would the supporters of football be prepared to line up with the rest of the recipients of city subsidies for the yearly begging process at budget time? Why not?
I would like to see the CFL football team appearing with the Barrhaven Highland Dancing Society asking for its annual grant from the city.
Does this solve the question of what to do with Lansdowne Park?
No it does not, but it is a beginning to analyse one small aspect of the debate.
If we all agree, the issue is - where do we go from here.
One possibility is to simply buy into the single proposal we are being offered. Put in a deluxe stadium at taxpayers' expense, give away acres of land and hope for the best.
Another approach would be to ask what the people of Ottawa want. Canada 411 indicates that there are 619 shops in Ottawa associated with "sports", only nine associated with "football" and thirty-seven associated with "soccer". Does this mean that there is a severe shortage of shops to cater to the fans of a new CFL team? Is that shortage so severe that the City needs to come to the rescue and address the needs of those consumers by providing rent-free land for such retailers?
I suspect that there are many people who would like to see pro football return to Ottawa. Probably this is less than a majority, but they are numerous. Should they be denied? No, I don't think so. But to what degree should the rest of us, who are not so passionate about football, subsidize the football fans?
There are all sorts of interests in our community. Some people are keen on chamber music; some are partial to capoeira (Brazilian martial arts); others are oenophiles. To my mind, all of these interests, are just as worthy of support as CFL football. All are probably of interest to only a minority.
But no one has suggested that the wine show take over Lansdowne year round to satisfy the oenophiles. For 129 million dollars we could build a world-class collection of wine. Strangely enough, there is no proposal for an Ottawa City wine cellar at Lansdowne Park.
But there is a proposal to take remarkable measures in support of football.
Would the supporters of football be prepared to line up with the rest of the recipients of city subsidies for the yearly begging process at budget time? Why not?
I would like to see the CFL football team appearing with the Barrhaven Highland Dancing Society asking for its annual grant from the city.
Does this solve the question of what to do with Lansdowne Park?
No it does not, but it is a beginning to analyse one small aspect of the debate.
Wednesday, September 30, 2009
Definition is a problem
Maybe I am dazed and confused by attending too many consulations on Lansdowne but there seem to be some obvious loose ends. We need better understanding of two questions of definition in the Lansdowne redevelopment proposal.
The first is defining what is needed to upgrade the stadium and civic centre. It seems that OSEG, the project proponents, are defining what is to be done. Just how crucial are VIP suites to the success of football? How important is it to install wider seats in the stadium?
The reason for my concern is that OSEG decides what is done; OSEG gets the contract to do it and the city pays for whatever OSEG defines as required. We do not seem to be challenging the extensive nature of the renovation. If we look at some other apparently successful CFL football teams and OHL hockey teams, we might rethink what needs to be done.
My second concern about definition centres around the phrase "net cashflow". The panels on display at the public consultations say "The proposed partnership agreement would see the net cashflow of the stadium, retail and parking operations shared between the City (MSC) and the OSEG according to a formula." The formula is of course the famous waterfall which provides for the City to be paid last.
But maybe being paid last does not matter if there is no "net cashflow". Depending on how we define "net cashflow", it would be easy for OSEG to charge management and like fees to such an extent that no "net cashflow" is ever generated. My examination of the documents released to date give no indication that terms and conditions for establishing "net cashflow" will be established. Failure to do so could be the equivalent of signing a blank cheque.
Clearer definition is needed.
The first is defining what is needed to upgrade the stadium and civic centre. It seems that OSEG, the project proponents, are defining what is to be done. Just how crucial are VIP suites to the success of football? How important is it to install wider seats in the stadium?
The reason for my concern is that OSEG decides what is done; OSEG gets the contract to do it and the city pays for whatever OSEG defines as required. We do not seem to be challenging the extensive nature of the renovation. If we look at some other apparently successful CFL football teams and OHL hockey teams, we might rethink what needs to be done.
My second concern about definition centres around the phrase "net cashflow". The panels on display at the public consultations say "The proposed partnership agreement would see the net cashflow of the stadium, retail and parking operations shared between the City (MSC) and the OSEG according to a formula." The formula is of course the famous waterfall which provides for the City to be paid last.
But maybe being paid last does not matter if there is no "net cashflow". Depending on how we define "net cashflow", it would be easy for OSEG to charge management and like fees to such an extent that no "net cashflow" is ever generated. My examination of the documents released to date give no indication that terms and conditions for establishing "net cashflow" will be established. Failure to do so could be the equivalent of signing a blank cheque.
Clearer definition is needed.
Monday, September 28, 2009
Greening or getting the green
Planting one blade of grass in the acres of asphalt at Lansdowne would constitute greening (and an improvement in my mind) but it is not certain how green Lansdowne will become. Nor is it clear who will get the green (i.e. the money) for any greening initiative.
In today's Citizen, Kate Jaimet writes under the title "Green theme for Lansdowne" that there is controversy over the plans for the proposed "front lawn". This is described by Graham Bird, a consultant to the City, who has emerged as one of the most enthusiastic salesmen for the proposal, as an open grassy area only used for parking on rare occasions .
People who are less enamoured of the proposal question whether the "front lawn" can be used for much other than parking.
One of our problems is that it is not certain what is actually proposed for the "front lawn". There has been talk of concrete blocks with small holes through which grass could grow. Another possibility cited in the article is a system of plastic rings below the surface of the soil giving a more lawn-like appearance.
Until we understand what exactly the proponents have in mind, and until they can point to an installation in Ottawa we can visit, it is hard to know what the "front lawn" will be like.
But in today's article there was one aspect which I found curious. In discussing the possible use of the "front lawn" for concerts, festival activities etc. the article says "The city and the NCC would decide on the programming while the Ottawa Sports and Entertainment Group would manage the events for a fee. The city would reap any profits and absorb any losses from the events."
I am not sure that this passage gives a correct interpretation of the business arrangement as proposed. If an event, the Tulip Festival for example, wants to use the front lawn, it would contract with OSEG to use the space and pay a rental fee. That fee would go to OSEG. Only after OSEG has covered all its costs, including any administrative charges and profit, would any funds be transferred to the mysterious "closed system" and then funds would be run through the "waterfall". Only after payments are made to the lifecycle reserve fund, to OSEG as return on its investment, and to OSEG to pay off its investment, would the City receive anything. At least that is my understanding.
I am in favour of greening in the sense of removing some of the acres of empty asphalt but I think we need to know what exactly is proposed. Moreover we need to know how the money is moving.
In today's Citizen, Kate Jaimet writes under the title "Green theme for Lansdowne" that there is controversy over the plans for the proposed "front lawn". This is described by Graham Bird, a consultant to the City, who has emerged as one of the most enthusiastic salesmen for the proposal, as an open grassy area only used for parking on rare occasions .
People who are less enamoured of the proposal question whether the "front lawn" can be used for much other than parking.
One of our problems is that it is not certain what is actually proposed for the "front lawn". There has been talk of concrete blocks with small holes through which grass could grow. Another possibility cited in the article is a system of plastic rings below the surface of the soil giving a more lawn-like appearance.
Until we understand what exactly the proponents have in mind, and until they can point to an installation in Ottawa we can visit, it is hard to know what the "front lawn" will be like.
But in today's article there was one aspect which I found curious. In discussing the possible use of the "front lawn" for concerts, festival activities etc. the article says "The city and the NCC would decide on the programming while the Ottawa Sports and Entertainment Group would manage the events for a fee. The city would reap any profits and absorb any losses from the events."
I am not sure that this passage gives a correct interpretation of the business arrangement as proposed. If an event, the Tulip Festival for example, wants to use the front lawn, it would contract with OSEG to use the space and pay a rental fee. That fee would go to OSEG. Only after OSEG has covered all its costs, including any administrative charges and profit, would any funds be transferred to the mysterious "closed system" and then funds would be run through the "waterfall". Only after payments are made to the lifecycle reserve fund, to OSEG as return on its investment, and to OSEG to pay off its investment, would the City receive anything. At least that is my understanding.
I am in favour of greening in the sense of removing some of the acres of empty asphalt but I think we need to know what exactly is proposed. Moreover we need to know how the money is moving.
Sunday, September 27, 2009
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?
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?
Wednesday, September 23, 2009
Sweeping statements
There is too much salesmanship masquerading as analysis around the Lansdowne project.
I have been re-reading the staff report to Council on the Lansdowne partnership proposal and am irritated that what purports to be analysis is in fact a sales brochure.
In my earlier posting "Contradiction and confusion" I noted that the staff report claimed that housing would only be built in phase 2, an optional second stage of the project. This is contradicted by the Memorandum of Understanding.
I also noted that the infamous waterfall of revenue is misdescribed in the staff report. The report suggests that the City is in first and fourth position to receive revenue. In fact the first revenues simply go into a reserve fund. The City is dead last to get anything out of the project.
But on re-reading there are other statements that leap out as unsubstantiated claims. For example, it is maintained that "enhancing trade show and consumer show space on the site would have jeopardized... ...a transformation plan that respects the intention of Council's motion, the unique characteristics of Lansdowne Park, and the financial viability and long-term sustainability of the site." I have seen no evidence to support such a claim.
On the financial front, the staff report says "Compared with historical operations of Lansdowne, the project is expected to generate positive cash flow to the City over the life of the proposed agreement with OSEG". What does such a sales pitch mean? Does is mean that a positive cash flow will be received over the life of the project? Or maybe it means that the negative position of the City will be less than in the "historical operations of Lansdowne"? What is taken into account in coming up with such a statement? How would the cash flow compare if a different sort of arrangement were struck (selling an asset, or receiving rent for example)?
And the most laughable of all is the statement "The financial due diligence carried out by the City and its consultants on the OSEG proposal has demonstrated, among other things, that the City would be receiving fair value under the Plan." For suspicious outsiders, the failure to release any of the meaningful analysis backing this statement looks strange. Moreover, the fact that the City is proposing to strike this deal with the consortium that refused from the outset to contemplate entering into any sort of competition, raises no end of red flags.
Now the really dedicated reader will have noted that there is a document prepared by Pricewaterhouse Coopers among the many documents issued in respect of this proposal. Some might be lulled into believing that a large and highly regarded firm has blessed this project and declared its finances above reproach. No, the Pricewaterhouse Coopers document has an interesting disclaimer at the end. Translated into layman's language is says - 'we were hired to prepare some Power Point slides and here they are'.
Frankly the staff report, thrust under the Councillors' noses at the last minute on September 2 is a disappointment. It is not surprising that the Councillors adopted a flurry of motions to try to get answers to questions which the the staff report failed to address.
Redevelopment of Lansdowne is an important issue for Ottawa. It should be the subject of sensible debate and analysis. Sweeping statements of assurance are to be expected from a salesman. What we need is real analysis.
I have been re-reading the staff report to Council on the Lansdowne partnership proposal and am irritated that what purports to be analysis is in fact a sales brochure.
In my earlier posting "Contradiction and confusion" I noted that the staff report claimed that housing would only be built in phase 2, an optional second stage of the project. This is contradicted by the Memorandum of Understanding.
I also noted that the infamous waterfall of revenue is misdescribed in the staff report. The report suggests that the City is in first and fourth position to receive revenue. In fact the first revenues simply go into a reserve fund. The City is dead last to get anything out of the project.
But on re-reading there are other statements that leap out as unsubstantiated claims. For example, it is maintained that "enhancing trade show and consumer show space on the site would have jeopardized... ...a transformation plan that respects the intention of Council's motion, the unique characteristics of Lansdowne Park, and the financial viability and long-term sustainability of the site." I have seen no evidence to support such a claim.
On the financial front, the staff report says "Compared with historical operations of Lansdowne, the project is expected to generate positive cash flow to the City over the life of the proposed agreement with OSEG". What does such a sales pitch mean? Does is mean that a positive cash flow will be received over the life of the project? Or maybe it means that the negative position of the City will be less than in the "historical operations of Lansdowne"? What is taken into account in coming up with such a statement? How would the cash flow compare if a different sort of arrangement were struck (selling an asset, or receiving rent for example)?
And the most laughable of all is the statement "The financial due diligence carried out by the City and its consultants on the OSEG proposal has demonstrated, among other things, that the City would be receiving fair value under the Plan." For suspicious outsiders, the failure to release any of the meaningful analysis backing this statement looks strange. Moreover, the fact that the City is proposing to strike this deal with the consortium that refused from the outset to contemplate entering into any sort of competition, raises no end of red flags.
Now the really dedicated reader will have noted that there is a document prepared by Pricewaterhouse Coopers among the many documents issued in respect of this proposal. Some might be lulled into believing that a large and highly regarded firm has blessed this project and declared its finances above reproach. No, the Pricewaterhouse Coopers document has an interesting disclaimer at the end. Translated into layman's language is says - 'we were hired to prepare some Power Point slides and here they are'.
Frankly the staff report, thrust under the Councillors' noses at the last minute on September 2 is a disappointment. It is not surprising that the Councillors adopted a flurry of motions to try to get answers to questions which the the staff report failed to address.
Redevelopment of Lansdowne is an important issue for Ottawa. It should be the subject of sensible debate and analysis. Sweeping statements of assurance are to be expected from a salesman. What we need is real analysis.
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