For Immediate Release
February 15, 2012
Taxpayers' Costs Up and Returns Down on Lansdowne Redevelopment
On Thursday, February 16, the City's Finance and Economic Development Committee will deal with a new financial report on the Lansdowne Partnership Plan that shows that the City's expenses are going up, while its return on equity is going down. In fact, the latest financial figures reveal that the City will get no return on its funding equity.
In June 2010, when Ottawa City Council approved the financial model for the project, the City was to get a total return on its "funding equity" of $43.4 million. In August 2011, this total return went down to $7.5 million. Now, with the low interest rates, the City will get a total return on funding equity of exactly zero. The deal's complex formula now sets the city's funding equity at zero even as costs go up, the city borrows more and taxpayers will have to shell out more over 40 years.
This bad news for taxpayers comes at the same time that the City finds that its direct costs will go up due to higher than anticipated costs for relocating and renovating the Horticulture Building. The initial Memorandum of Understanding stated that the Horticulture building would be moved at the Ottawa Sports and Entertainment Group's expense. Now taxpayers will pay the full cost of moving and renovating the building to the tune of $10 million.
The proposed financial arrangement requires taxpayers to invest over $175 million for Lansdowne's redevelopment while the City's private sector partner, the Ottawa Sports and Entertainment Group (OSEG) will invest only a third of that amount: $57 million.
OSEG's return on its initial equity will be $113 million ($56 million in interest, $57 million return of capital); the taxpayers' return on funding equity will be zero.
The city will receive a return for its "deemed equity", i.e., for the public land, of $61 million. However, payment of this money will not flow to the city for 25 years and only after OSEG has received its return on equity.
According to Friends of Lansdowne spokesman, Ian Lee, the financial deal on Lansdowne is going from bad to worse. "This is a truly terrible deal for taxpayers. We provide the majority of the land and cash up front, but the returns go to the private developers and not the taxpayer".
He also points out that the "if the City's financial projections of funding equity returns go from $43 million to zero in less than two years, what expectation can we have that their projected costs and revenues 30 years from now are going to be right?"
Contact: Ian Lee 613.222.7722 Ian_lee@carleton.ca
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