Lansdowne: A Project Doomed To Fail For Taxpayers

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After going through some details of the Lansdowne partnership, your agent kept asking himself … where is the city’s profit centre in this deal?

In fact, there isn’t one.

After pouring in a massive $211 million from taxpayers to this project, shouldn’t the City of Ottawa and the residents of this community receive revenue for their investment?

Where does the money come from? The waterfall. The complicated waterfall. But after the confusion trying to understand the waterfall, the results of this game of feints and dodges is how much revenue do taxpayers get back for rebuilding the arena and stadium at Lansdowne or the enormous park?

How much? About $1.43 million in each of three years. Let’s say you put your $211 million out to work through lending at two per cent for one year. You get $4.2 million. Over three years the city has earned through the waterfall about $4.3 million. At two per cent on that money, the city would have received $12.6 million or roughly three times the money it has received from the waterfall.

And that’s no-risk money when you lend it out. Throw it into a bank and watch the compounding interest grow.

So at least over the first three years of Lansdowne, it has been a financial failure for the municipality.

But there’s more to it than that.

The city is renting out some of the most valuable property in Ottawa to its Lansdowne partner at a nominal fee for 30 years plus two 10-year options. Why didn’t the city just sell the land or rent it out at market rates? Hard to say. That’s a lot of lost taxpayer money.

But this is the capper. The Lansdowne deal actually doesn’t produce any revenue for the city. That trickle of waterfall money of which we speak goes to refurbishing city properties at Lansdowne. It doesn’t buy a lump or two of coal for the light-rail system or a couple of buckets of cement to fill sinkholes on the line.

So the city renovates a stadium primarily for the use of three Ottawa Sports and Entertainment Group teams or concerts and the like, yet derives but a trickle of cash that goes into maintaining the city property that the private sports group uses. Taxpayers, having footed the bill for the new stadium, then get the privilege of buying tickets to the facility they paid to create. What a deal.

And valuable city property rented for almost nothing? What a deal again. The city is not working with a charity at OSEG but instead with some of the richest people in town. And now we know the smarts they have to get that rich.

Credit where credit is due. OSEG sure saw the city coming from a long way off. One has to admire their ability to swing such a deal past city staff, former mayor Larry O’Brien, Mayor Jim Watson and city council.

But as for the municipality, its principals did not take good care of city assets and money.

OSEG most certainly won this deal. Taxpayers lost it.

 

A tour of Lansdowne from the air.

 

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8 thoughts on “Lansdowne: A Project Doomed To Fail For Taxpayers

  1. OSEG took advantage of Watson’s desperation to create a legacy at all costs. Like in the emperor’s new clothes, OSEG’s promise to the mayor of a new suit (the waterfall) makes a fool of him as he’s left with nothing to show, and now the mayor has no choice but to pretend and keep marching in his own parade.

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  2. Because they’re very savvy business people, you can bet that the Lansdowne contracts with OSEG are etched in stone and can’t be amended. That means that the losses to the city are not recoverable even if we have changes at the council table. However, we can learn some lessons from this exercise. At least, I would hope we can.
    What needs to happen is a complete revamping of the contracting process at city hall so that this kind of deal can never happen again. A very good place to start would be rescinding the motion that gave Watson and Kanellakos untramelled power to ‘negotiate’ with the NCC and RendezVous Lebreton over the new Sens arena and the accompanying development. Even without the gross conflict of interest by an OSEG partner and the hate Watson has for Melnyk, surely the total screw-up at Lansdowne should demonstrate that these two shouldn’t be let out unsupervised. Watson only has another 10 or so months as mayor but can do a lot of damage in that time – take his candy away and get him out of there.
    Written into any future contracts of this nature must be financial disclosure requirements so that the residents will see two things. First, the full costs and benefits of the deal and, second, a full annual accounting of costs and revenues that will show any benefits to or drains on the City as the project rolls out. Lansdowne is turning out to be a money pit for the city and looks to continue that way permanently. At the same time, it appears that our ‘partners’ in the deal are laughing all the way to the bank.
    Even if it’s unlikely to produce any better result, the incoming council has to take a sharp look at all the dealings that went on to produce the Lansdowne fiasco. If there’s any possibility of reworking the deal, that would be amazing but the more important outcome would be learning how to avoid the Lansdowne pitfalls in the future.
    Of course, transparency and accountability would go a long way to stop this kind of thing but those seem to be two concepts that don’t make it off the campaign brochures into the offices and practices of elected officials in this town.

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  3. Don’t forget the role of the Ottawa Citizen and Ottawa Sun in their uncritical coverage of the whole project and its feasibility. Oh the power of being a major advertiser and the chance to be a pro sports team booster!

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  4. Please Ken. Ask any businessperson on Bank Street and on site if this redevelopment hasn’t been a huge economic boost to that part of town. People forget that Lansdowne was 40 acres of asphalt sucking millions of taxpayers money annually out of city coffers with zero benefit back to those footing the bill. Lansdowne is a huge success and one that is lauded by planners across the continent and a model that will surely be copied on other locales North and South of the 49th.

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    1. Patrick:

      I know you’ve done a lot of corporate communications at the city and have advised the mayor’s office so I know where your heart is and god bless ya for that.

      I’m glad that Bank Street businesses are enjoying the economic uplift. I just don’t think I should be subsidizing that uplift.

      I run a business and I’m not asking for a subsidy from any level of government. Fairness perhaps but not a subsidy and certainly not $211 million, using one of the most valuable pieces of city land for a nominal amount for at least 30 years and having whatever revenue the city gets from Lansdowne to be put into refurbishing its properties that are used by OSEG.

      Patrick, I don’t know how many business deals you’ve been involved in but that’s a pretty one-sided and very expensive agreement. If I’m OSEG, I’m ecstatic. As a taxpayer I’m concerned. OSEG and Bank Street don’t need civic government subsidies.

      Furthermore, Ottawa taxpayers are already subsidizing downtown businesses which didn’t want to lose their on-street parking to surface LRT to the tune of $700 million for the rail tunnel.

      That’s close to a $1 billion from government in business subsidies. Remember the city budget is only just more than $3 billion.

      Patrick, when do you and I get our subsidy?

      Worse is we have the mayor saying that civic money won’t be going into building an arena for professional sport at LeBreton. Well Watson and company just dropped $160 million on building and repairing the stadium and arena for events and professional sport. How do you justify that, Your Worship?

      Even worse still is that the mayor is denying the Senators brownfields money they are entitled to. How do you pour $160 million into professional sport at Lansdowne and deny the Senators money for which they are supposed to receive through city policy?

      As a taxpayer I’m offended at paying close to a billion dollars to subsidize business plus the lost opportunity cost of selling the Lansdowne property.

      If OSEG wanted a shopping centre at Lansdowne, buy the land like everyone else does. Or if the city wanted to turn Lansdowne into some public park or facility or whatever, use our tax money to do that on our land.

      If Lansdowne is a partnership or marriage between the city and OSEG, I want a divorce.

      Taxpayers should not be subsidizing some of the richest people in town.

      That’s no partnership at Lansdowne. It’s something else.

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  5. After being escorted out of city hall by security after 16 years with the City in the name of corporate restructuring Ken I can hardly be accused of shilling for the City. I’m not about to debate this issue with you because we have both made up our minds. But let me just say I don’t begrudge the likes of Roger Greenberg and the other principles making some green off this deal as their contribution to this community (to use a sports analogy) is far into the plus side.

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    1. Patrick:

      You’ve turned nasty. I’m but a sweet man.

      The hell with Lansdowne. I want to know how you got escorted out of city hall by security. I usually just left of my own volition though I did hear some muted cheering from councillor row on the way.

      That said I came precipitously close to being thrown out of city hall because I wouldn’t leave city manager Bruce Thom’s waiting area. He decided he wasn’t talking to the press anymore and I disagreed.

      But being the genius I am (lol) I knew he didn’t have a washroom in his office so I stationed myself directly on the route. If I had a six-pack, I would have sent it in to hasten the process. One of the receptionists or the like kept saying to me: “We would prefer you left.” I would respond: “I would prefer to stay.” Furthermore Thom had a copy of the New York Times there and a bunch of good magazines. It was very comfortable.

      Finally King Thom gave me the info I wanted but as I was walking through the heritage building hallway, here were a PR type and two security guards coming toward me. I smiled and walked by and that was it.

      Furthermore the Citizen rented space in the building so legally it would have been hard to throw me out. In fact legally, they weren’t supposed to touch me and they didn’t. So it all worked out.

      But the city editor was sending a photographer there so we could get a pic of me being manhandled out of the building and the newspaper could express outrage accordingly. The Citizen would remind the city manager that he was a public servant, not a private servant.

      I guess I screwed up.

      On another topic, I don’t begrudge Roger Greenberg anything. He’s quite the businessman. I begrudge the people at the city who signed such a one-sided deal.

      Had I been Greenberg, I would have signed it twice.

      cheers

      kgray

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