Sutcliffe Gets Open Letter On Lansdowne (1)

This is an open letter to Mayor Mark Sutcliffe from the Old Ottawa East Community Association:

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Dear Mayor Sutcliffe,

Please find attached a report that raises concerns regarding the Lansdowne 2.0 financial plan, and the manner in which staff have presented the various impacts and risks of the plan.

A summary of the primary concerns follows below; a detailed discussion can be found in the attached document.

References for the report’s data and assumptions are available upon request.

Should you wish further follow-up, please feel free to contact me.

Selective sharing of key information for Lansdowne 2.0 (L 2.0) puts taxpayers at risk

The main pillars in the City’s narrative in support of L 2.0 are:

The only outcome possible from rejecting OSEG’s L 2.0 proposal is huge costs to the city;
L 2.0 essentially is guaranteed to generate strong cashflows, costing taxpayers only $5M/year, and eliminates the need for OSEG members to cover shortfalls.
However, the City’s staff reports have major flaws and omissions, including:

An alarmingly simplistic, overly pessimistic, and incomplete estimate of “The Cost of Doing Nothing” (i.e., if OSEG walks away from its deal at Lansdowne).
Presenting selective financial data – making L 2.0 look more positive & less risky than it really is by failing to clearly explain or evaluate the financial risks to taxpayers that EY identified in its due diligence report.
City’s Oversimplified “Cost of Doing Nothing” estimate

A more accurate and useful estimate would include, at a minimum:
1. Ernst & Young’s (EY) cashflow forecast for L 1.0 (positive cashflow without ~$500M spend)

2. Estimate of net payout of OSEG Equity

3. Inclusion of Facility Repair and Refurbishment Scenario in Financial Projections

4. Assessment of Management Performance

5. Disclosure of Legal Disputes and impact of fees on financials

6. Discussion of potential cost savings from eliminating OSEG Related-Party Transactions

Presenting selective Financial Data to put L 2.0 in best light possible, while minimizing risks identified by EY

EY Cashflow projections tell an important story ignored by Staff
City has made significant investment in Lansdowne compared to OSEG’s “Equity”
Lansdowne has continued to load on retail debt – is Council being properly informed?
$20M Line of Credit earmarked for Lansdowne 2.0 construction period already accessed…why?
The extent of City’s growing Lansdowne Debt exposure not clearly communicated
EY-Identified Serious Risks in Lansdowne 2.0 that are ignored/downplayed

Warning of lengthy 40-year projections:  Inherently risky, reduced accuracy in such a forecast.
Sports Revenue Risk:  Tied to team performance – and no commitment beyond 2032.
Competition from sports/entertainment district at Le Breton (also now, Live Nation Rideau venue)
Ticket Surcharge Risks:  EY says significant risk to City, no control over ticket sales/pricing.
No Opportunity Cost Analysis: ~$500 million vs. other City priorities or better locations
OSEG’s Poor Track Record: Not meeting its own projections to date/losses, cost overruns

CONCLUSION

Lansdowne 2.0’s financial plan will shift more risk onto the City, add significantly more long-term debt while relying on uncertain cashflows to service that debt, and ignores reasonable alternatives that could cost far less.

Council has an opportunity to exercise proper oversight and develop a more prudent and beneficial Lansdowne strategy with less financial risk. Lansdowne is currently running at essentially break-even on a cash flow basis (it has averaged break-even on cash basis in last 3 years), and as per EY, is expected to do that and better beginning just 5 years from now in 2030.  As a responsible partner, OSEG should be willing to agree to this.

Kind Regards,

Alexandra Gruca-Macaulay B. Comm., FICB (Fellow, Institute of Canadian Bankers)

Chair, Lansdowne Committee

Old Ottawa East Community Association

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