Lansdowne 2.0 financial report drops today. Has Ottawa learned its lesson?
$332-million plan to add new arena, towers aims to be cost-neutral
Mayor Mark Sutcliffe wants you to forget the naysayers and look at the revitalized Lansdowne Park with fresh eyes.
He and other local politicians are quick to remind residents that before the city partnered with the for-profit Ottawa Sports and Entertainment Group (OSEG), Lansdowne was little more than a gated parking lot.
Now, it's a bustling space to shop and play. At least on game nights.
"I think it's been an enormous success," he said. "Millions and millions of people from all over the city are using Lansdowne Park. Tourists are coming to Lansdowne Park. It's a great gathering point for our community."
Last weekend, Sutcliffe says he visited the park twice: once to see the RedBlacks play, and then again to enjoy the farmers' market and its family-friendly atmosphere.
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Yet, Lansdowne Park has also been a lightning rod for criticism, from lawsuits and public surveys to revised financial outlooks and multiple audits — including an agile audit of this second phase that was confirmed just last week.
Sutcliffe both acknowledged public concerns and promised they will be addressed on Friday, when an update on the public-private partnership and its financials is released.
But given this project will almost certainly cost more than anything else council debates this term and regularly falls short of projections, critics won't believe it until they see it.
How far will $332M go?
The next phase of Lansdowne's revitalization comes with a hefty pricetag: $332 million, at last count.
For that, the city would get a brand new arena that — unlike the aging and dilapidated home of the Ottawa 67's hockey team — will be suitable to host major sporting events and blockbuster concerts.
Once that's built, the leaky, mouldy north-side stands at TD Place would be rebuilt, alongside three highrise towers.
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Those towers are key to ensuring this latest phase is more affordable than the last — which has not seen a single dollar returned to the city in profits.
Updated projections released in April revealed that the current version of the Lansdowne redevelopment is expected to generate $326 million over the 40-year agreement, a nearly $220 million drop from previous projections.
And, yes, the site is attracting four million visitors a year.
But it needs five million to be profitable.
Selling the "air rights" to the new residential towers and gaining the new property taxes should allow the city to cover the substantial debt it's incurred and ensure the project is revenue neutral.
Transparency, commercial competition at odds
The Lansdowne Park redevelopment has been financed and managed through a public-private partnership, between the city and OSEG, through a sole-sourced deal that sparked a failed legal challenge by the Friends of Lansdowne group.
It's a business strategy that has allowed governments to move forward with projects they cannot otherwise afford.
"What it is meant to do is to ultimately provide value for money for taxpayers by virtue of transferring risk to the private sector at a price to the public sector," said Tim Murphy, a Toronto-based lawyer who wrote the book Public-Private Partnerships in Canada.
Cities must look at whether involving the private sector will be "more efficient, more effective, create more innovation, and ultimately cost less to the taxpayer," he said.
The companies, he explained, need to make money.
But balancing the needs of both sides of the partnership is much more complicated in practice, especially when it comes to monitoring compliance and ensuring the public is well-informed.
"If I'm a private sector company bringing innovation and ideas that I am using in a competitive environment in a private sector context, I don't necessarily want those spread across the reports to the city or the front pages of the paper," Murphy said.
The city needs to be on top of things.
Oversight will absolutely need to be improved in the project's next phase, given that previous municipal audits pointed to issues keeping track of a complex web of contracts and ensuring parties complied with them.
Luckily for the city, points out Murphy, is that the relationship with OSEG — a company that owns the RedBlacks football franchise and the 67's — appears strong and healthy in contrast to the relationship between the city and LRT management.
Throwing 'good money after bad'
Provided the city has improved its oversight, Murphy doesn't see any obvious red flags — including the complicated "waterfall" financial structure that has so far seen all the money that's come out of the project pool in OSEG's tranche.
Ian Lee, an associate professor with Carleton University's Sprott School of Business who was involved with the Friends of Lansdowne case, feels differently.
"I understand P3s, believe me. And I understand the logic and I think they can be very useful," he said, adding that companies must compromise when it comes to secrecy surrounding contracts and finances.
"There was insufficient transparency, which led to insufficient scrutiny in my judgment and that led to the subsequent problems."
The need to fix the north-side stands and make the project profitable is a smokescreen, he said, which distracts from the central question the city should be asking: Is this the best use of public funds, given pressing issues with transportation, homelessness and the struggling downtown economy?
"I know it's going to take a lot of courage to walk away," he said. "They can get caught up in all the beautiful projections and pretty pictures, and the doom and gloom if they don't [provide this] money."
Lee's advice to councillors is simple: don't act like a gambler that wants to get out of the hole, especially when you don't have a winning hand.
Coun. Shawn Menard, who represents the central ward where Lansdowne Park is located, is similarly concerned that the city could be throwing "good money after bad."
Walking away is an option
It's too easy to label Lansdowne Park a success by comparing it to what it was before, said Menard.
"If you're going to spend hundreds of millions of dollars, you better hope something is better than what it was," he laughed. "The concern is that we're doing the same type of financial deal which the auditor general has pointed out made Lansdowne 1.0 not a success."
But his concerns — and those of residents his office surveyed — go beyond that to a lack of transportation, too little affordable housing, and an emphasis on commercial properties rather than improving public spaces.
"You're going to hear from certain people that the cost of doing nothing is greater than the cost of spending hundreds of millions of dollars on a refurbished stadium," said Menard. "I don't buy that."
If those improvements don't materialize, he has a message for his colleagues around the council table: you have the power to say no.
Councillors will vote on moving forward with the project next month.
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