AG’s Lansdowne Audit Focuses On Present, Not Past

Published 02/27/2024 · Updated 06/10/2024

This is a release from the Ottawa audit general’s office:

Background
Existing Partnership
The City of Ottawa (City) and the Ottawa Sports and Entertainment Group (OSEG) formed a public-private partnership (P3 or Partnership) in October 2012 to revitalize Lansdowne Park, a place of history and civic pride for the residents of Ottawa. The agreement was based on a closed financial system that captures the equity contributions of both partners, capital costs and cashflows. Net cashflows from this closed financial system were to be distributed to the City and OSEG based on a “waterfall” of priorities as set out in their agreement. The primary benefit of this partnership agreement for the City was that the City was protected from having to contribute money for asset lifecycle maintenance or operating deficits for the stadium, parking, retail or sports teams through the life of the agreement (40 years).

The Partnership oversaw the renewal and revitalization of Lansdowne Park with new south stadium stands, new mixed-use retail, reimagined public realm spaces and subterranean parking. Management has outlined that these changes not only attracted more sports and entertainment visitors, but added foot traffic through the addition of residential, shopping, entertainment, and parking space offerings.

Lansdowne 2.0
In December 2020, at the direction of City Council, a working group composed of City and OSEG representatives began considering options to enhance Lansdowne’s operations and the partnership plan. The objective was to ensure the sustainability and long-term financial viability of this Partnership.

In July 2021, a revised agreement framework and development plan was approved by City Council. Staff were directed to present detailed plans and cost estimates for the revitalization of Lansdowne Park, including a funding strategy. Since then, City and OSEG representatives have developed financial projections and proformas, performed due diligence, and developed cost estimates for the project.

In May 2022, the original OSEG proposal was received by the City. This proposal presented a business case to demolish the existing north stadium stands and arena complex, in order to build a new Event Centre (arena) and north stadium stands and a new retail podium. This proposal also included an estimated 1,200 housing units within a three-tower configuration. It was identified that a portion of the tax revenue from the residential units could help defray the capital cost of the construction of the public facilities.

Since May 2022, at the direction of Council, management has engaged in public consultations and additional due diligence. The City undertook a public engagement process and hired a third-party consultant (EY) for financial analysis of the OSEG financing projections and 2022 funding strategy.

As a result of these engagements, the primary concerns that emerged were around financial risk, residential density, loss of green space, parking, traffic and transportation, cycling and pedestrian infrastructure, lack of public realm (washrooms, public art, less shade), as well as a lack of local vendors.

The estimated cost to the City for the construction of this project is $419.1M as outlined in the proposal that was approved by Council in November 2023 to proceed to the next phase of the project. The source of funding for this proposal, from the City, has been proposed to be a mix of the sale of “air rights”, debentures premiums, capital budget, expected provincial and federal funding and long-term debt. This long-term debt is expected to be repaid by various sources, including a portion of the property tax uplift and payments from the closed financial.

About the Audit
Audit Background
In June 2022, City Council requested that the Office of the Auditor General (OAG) consider an audit of the Lansdowne Redevelopment Plan. Given the inherent risks of this project, our Office accepted the request. Following the drafting of the Lansdowne 2.0 Redevelopment Plan last fall, we began our audit using an agile audit approach.

What is an Agile Audit?
The OAG agile audit methodology is designed to provide periodic reports, performed in iterative cycles (“sprints”). As the project evolves, we successively refine the scope of our work based on new information or changing environmental circumstances. This is meant to provide the greatest value and insight to City management and to Council. This methodology is well suited to the Lansdowne 2.0 Redevelopment as the audit cycles can be performed as individual projects and activities progress to provide timely insights to Council on specific risk areas and how they can be mitigated.

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