Lansdowne Is A Fiscal Quagmire: MENARD

This is an excerpt from the newsletter of Capital Councillor Shawn Menard:

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We know many residents have tremendous interest in the Lansdowne 2.0 project, and, as we dig more and more into this deal, more and more concerns arise.

Here are some of the most alarming financial irregularities with the Lansdowne 2.0 proposal:

First, there are significant risks with the forecasted revenues and the construction:

• The city has indicated it will be taking on a $419 million cost to re-redevelop Lansdowne, with new city debt at $312.7 million at 4.25% interest over 40 years. Debt payments over this time will be $656 million in principal and interest payments.
• The city is banking on significant new waterfall revenues from Lansdowne 2.0 to help offset some of that taxpayer debt. To date, Lansdowne has not produced any waterfall revenue for the city and is not projected to over the lifetime of the agreement (Lansdowne 1.0 had originally projected over $100 million from waterfall revenues according to the Auditor General).
• The city says profits of $358.6 million will flow to the city during the life of the project, which would expire in 2066. There is no iron clad guarantee of this—similar to what we saw with Lansdowne 1.0. Some of the more assured funds come from upping OSEG’s rent from $1/year to $500,000 for leasing the site (though they have threatened to leave the deal several times and the city has now materially changed the plan three times in response) and $700,000/year in ticket price increases. On their own, those amounts come nowhere close to the $358.6 million in profits being projected for the city, with OSEG also expected to receive $302.6 million in profits with new expected retail revenues being the main driver.

• Part of what the city is banking on is also $3.3 million in taxes/year from new residential buildings, taking 75% of them solely for Lansdowne. Those taxes would normally flow to all city wards and services, but in this case, it helps to make the deal look more affordable. At the end of the day, it is simply tax dollars paying for Lansdowne 2.0. 
• The city has also projected that it will receive $500,000 annually from a city-wide tourism tax.  Ottawa Tourism has not yet agreed to this tax, and even if it does, those funds would normally go to other city-wide projects in many wards.

• Unlike in the Lansdowne 1.0 deal where the city was protected from cost increases in construction (which did occur), the city will now be responsible for any construction cost overruns. This is another big risk. As we have seen with LRT lawsuits and the public inquiry, there is no guaranteed fixed price; “on time on budget” is a fallacy with this type of procurement.
• The city has approved the mayor to advocate for $20 to $50 million from other orders of government for the project. That isn’t just a nice to have; the city has actually projected $20 million towards the budget of paying for Lansdowne 2.0 (this is equivalent to about a 1% tax amount for a year). Thus far, no funds from other orders of government have been identified. It is unlikely they will materialize, which would be add to the taxpayers’ burden.

Beyond the financial risks identified above, there are very serious and wasteful costs to proceeding with the project that would not otherwise be present:

• Brand new retail just built in 2014 is set to be torn down. These are some of the smaller businesses at Lansdowne (in the J-Block along the north side stands). What is astonishing is that new retail proposed would be built at almost the exact same square footage as already exists now (41,000 vs 49,000 square feet of retail). An exceptional waste of money with many of the existing businesses on site likely unable to recover from the 7 to 10 years of construction.
• The retail podium land and air/subterranean rights for the proposed towers behind the north side stands would be sold to a developer (estimated at $39 million), and then the retail podium land would be repurchased at market rates by the city through the partnership’s retail loan expansion, estimated at $34.7 million. We would be repurchasing retail square footage that essentially already exists today and was just built in 2014.  
• The city will spend $8 million just to move the large, well-used green berm/sledding hill and area where fans of all ages watch games from afar. A unique sporting experience at the site that doesn’t exist many other places in the country, and it would be no more.
• The city will also incur $18.6 million of debt to build 140 parking spaces to lease or sell to the developer on the site (under the new north side stands where the current Civic Centre is). Debt servicing is set to cost the city $600,000 annually. You read that correctly, the city will be paying public funds for private residential developer parking facilities. The scheme is absent from the stated $419 million cost to the city which has headlined new articles.
• The city partnership will keep a large loan for the roof repairs of the Civic Centre that is to be demolished. There was a dispute with OSEG previously, and the city guaranteed a loan for $23 million in debt to make a new repair to the Civic Centre roof. The city partnership will be left with over $16.5 million of the loan to pay off even after the building is torn down.

There are many other concerns with the plan in front of us, but the overwhelming response we are receiving from the public is a question about why we would spend this money when the city has much more important priorities, such as transit and affordable housing, and when there is no stadium emergency. The existing building is valuable, can be maintained and improved, and is safe—as per staff and previous auditor general reports—with a brand new accessible state-of-the-art facility—the south side stands—just built in 2014.

A better plan, with much fewer expenses and risks, would be to maintain what we have; invest in accessibility improvements to the north side stands and arena, as well as on the grounds of Lansdowne; work on a much-improved transportation plan to and from the site; and ensure better and safe access to the canal. This—combined with weekday Monday-Friday activities such as a work hub, enhanced public events which are well attended but inexpensive (great examples like indoor roller and skateboarding at Aberdeen, outdoor yoga, winter family activities)—will bring more people to the park at a fraction of the cost.

This would mean we would still have a roof over the north side stands, we would still have a green berm to enjoy the games from afar with families, tickets would be more affordable, we would still have room for PWHL attendance and major events, and the existing business in and around the area would not be put at risk with 7-10 years of construction. The issue right now is that the city is about to spend a lot of money with a lot of risk built in to produce a product that is worse for sports fans and park goers (with 58,000 square feet of greenspace being lost).

Finally, there has been an argument floating around that spending this money and taking on this risk would be less expensive than keeping and improving what we already have. Much like other aspects of Lansdowne redevelopment, this is smoke and mirrors. The calculation to come up with that worst-case scenario used pandemic level attendance figures, assumed no sports teams would be operating, that most large public events would be cancelled and that the city would do almost nothing with the site after having just spent $210 million on the first redevelopment. That is, to be frank, not realistic, and it is being used to justify this new spending.

This newsletter excerpt is courtesy of the city-wide community group Your Applewood Acres (And Beyond) Neighbours

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