{Friends of the O-Train cares about the Landsdown Park proposals for two reasons:
a) because the LRT "consultation" process and the Landsdown "consultation" process share the same flaws.
b) because the services that are being proposed for Landsdown Park should be located near transit according to the TMP. Such as in the FOTO 2006 plan, that had two major hubs}

Chair and Councillors of Corporate Services and Economic Development
Committee:



Please accept this e-mail as my input to your discussion on Agenda Item 3. Lansdowne Park Partnership Business Plan – Briefing



Section "A" below is provided as a courtesy in lieu of a City Staff document summarizing the key "business case" parameters for the
Lansdowne development proposal.



Section "B" are some thoughts of alternate financing arrangements and ideas.



Section "C" is a detailed analysis of the Proponent's Proposal along
with Recommendations.



Section A. The key "business case" parameters for the Lansdowne development proposal contained in documentation made public are that:



1. The repair/ replacement of existing infrastructure (Stadium and
Arena) be the responsibility and cost to the City - with an opportunity to get the capital invested back - but not the borrowing costs of this capital.



2. There is to be a fund set up to ensure that the newly built
structures are properly maintained and not allowed to deteriorate as did the current stadium and arena - for the life of the 30 year "no-fee" lease arrangement - at no cost to the City.



3. The costs of maintenance, repair, operation and programming of
the public areas (The Lawn) is the responsibility and at the City's
cost.



4. There is an 8% return on capital provided to the commercial proponent and a return of all his capital.



5. The management and operation of the whole Park be by the
commercial proponent to ensure a steady "fee for service" income stream and control over the operation and development of the Park - without Council interference - to ensure successive Councils don't get any ideas on changing the development/use direction for the Park.



6. The "operating" costs for Landsowne to the City be about the
same (no more) than is currently the case.



Section B- Klaus's comments:



All the rhetoric about creating employment and indirect tax revenue to all levels of government (PST, GST, liquor tax, income tax from employees etc) is nice but does nothing for the bottom line for the City's finances. 
What this is, however, is a basis for asking upper levels of gov't for
grants or contributions towards this project as an "economic development" project ...very much like the new Conference Centre.



So, you have to ask yourself the fundamental question:



Is this "land use" vision for Landsowne - a vision that has the benefit of letting the City off the hook for major redevelopment and higher annual operating costs - and a vison that people want and can support  - or not?



If you want to see a somewhat comparable land use  project, look Granville Island in Vancouver which had also been an eyesore before CMHC got involved.



If you like that, then the "greening" of the "park" by adding pleasant venues and restoring it back to its traditional use - as a regional agricultural/artisian focal point and major municipal sports facility for local/regional/national and international events is attractive.



The "main" street approach leading to the Aberdeen Pavilion can be seen as very pleasing, and the retail area could be developed along the policy lines akin to Vancouver's Granville Island Public Market and lofts (gift shops and artesians) - see
http://www.granvilleisland.com/sites/all/files/file/GI%20Map%20Web09.pdf



I actually see much similarity...Granville is described by CMHC as
"Where else in the world can rusty tin-sided factories boast rebirth as a Public Market, an art school, shops, restaurants, theatres, galleries, a hotel, and a great deal more?"



A focus on artists and (indoor) market could be key and magical and would differentiate the new Landsowne from existing Bank Street merchants and streetscapes. And, I note that CMHC has a major stake in Grandville Island - perhaps this can be replicated at Landsowne as well - thereby permitting additional financial opportunities.



Again, it is all a question of vision and the business plan that delivers it - and up to now - this is the only one that came forward
and the only one that Council directed Staff to "work with".  So it is up to Council to decide if this vision is the correct framework for moving forward with what has been for many, many years a very costly and increasingly costly eyesore.



That is the political and city building question to ask.





Section C. This analysis of the Landsowne Live business proposal is based on
the document entitled " LANSDOWNE PARTNERSHIP PLAN" found on the City's web site at:
http://www.ottawa.ca/residents/public_consult/lansdowne_partnership/sept02_report_en.pdf



Methodology:



I first reviewed in detail the section entitled "MEMORANDUM OF UNDERSTANDING" (page 35)  as this provides me with the specific details of the proposed financial arrangements.



I then reviewed the section entitled "Business Planning and Economic Benefits" to review "Statements of Claim" in light of the wording contained in the "Memorandum of Understanding" and to obtain general information on the guesstimate of tax revenues for the City.



Section I. Findings, Questions and Recommendations:



The findings, questions and conclusions are based on the Financial
Facts identified and referenced below.  Findings regarding Statements of Claim and the associated analysis are found below in Sections III and IV respectively.



Findings and Questions:



1. The initial cash capital contribution of 129.30 million for Stadium
Improvements, the City's share of parking spaces and Front Lawn
development is only a portion of the total (cash) capital required from the City for this Project.



2. Whereas the use for the (cash) capital has been identified (see A. Additional Capital the City is responsible to provide to the Project,  according to the Memorandum of Understanding), the dollar amount of this additional (cash) capital requirement has not!



3. The cost of the Landsowne Property (including and Sylvia Holden
Park) is not considered by the LANSDOWNE PARTNERSHIP PLAN as being deemed capital contributed by the City. Consequently, the LANSDOWNE PARTNERSHIP PLAN treats the value of these properties at $0.



4. Question: Since the ownership of these lands remain with the City, does this imply that there will be no development charges assessed and paid to the City by OSEG for any development on these properties? Does this mean that the costs to the City of development normally paid for out of development charges will in this instance not be paid and hence
represent an additional financial burden to the City?



5. Whereas the annual operating cost items to the City via the
Municipal Services Corporation (MSC) have been identified, the
total annual operating (and maintenance) costs associated with each item has not.  It is noted that these items include the costs to operate, maintain and repair the Front Lawn,  as well as the provision of fees to Ottawa Sports & Entertainment Group (OSEG) for administering Parking, and all elements of operation, maintenance and programming in
Landsowne Park.



6. The initial cash capital from Ottawa Sports & Entertainment
Group (OSEG) is $30 million  and is to be used primarily to finance the purchase of the CFL franchise and the Ottawa 67s, and to fund a reserve to cover operating and capital expenditures related to the Stadium that cannot be financed from time to time out of revenues arising from the Stadium.



7. Revenues other than (a) air rights falling exclusively to either the
City or OSEG; (b) all revenues from the Stadium that go exclusively to OSEG for the first 30 years, (c) all revenues from all sub-leases for the Retail, Office and Hotel components that go exclusively to OSEG and co-lease holders for the first 30 years, (d) the sale or partial sale of the CFL franchise and/or Ottawa 67s - are all to be subjected to the closed system Waterfall provisions which in essence channel all such revenues to first pay the totality of the annual  8% return on outstanding OSEG capital, then return of all OSEG capital before the City is repaid for its capital.



8. The main financial benefit to the City identified in LANSDOWNE PARTNERSHIP PLAN is the value of annual property tax revenues to be collected arising out of developing Landsowne and avoidance of construction risk.  In so far that property taxes are used to pay for City services consumed by the properties, it is important that the net financial value to the City of the property tax collected be identified, and to ensure that this net value cash flow is sufficient to pay the City's operating and maintenance obligations including the costs of MSC.





Recommedations:



1. That the City Manager confirm the additional capital requirements that are the financial responsibility of the City as set out in this document, and provide an estimate of the total additional capital requirements for each component as well as the timeline in which this capital will be required.



2. That the City Manager confirm the City's financial responsibilities
for annual operating costs directly arising out of the Proposed Project set out in this document and provide an estimate of the total annual operating and maintenance costs to the City by year for each item. 



3. That the City Manager confirm that the City will not see any
financial return on its capital whereas there is a financial return of
8% to OSEG for all outstanding capital provided by OSEG.



4. That the City Manager confirm that the LANSDOWNE PARTNERSHIP PLAN makes no provision for the present value of the Landsowne Park and Sylvia Holden Park to be part of the City's deemed contribution to capital; that the City Manager provide Council with the present value of these City-owned properties; that the City Manager confirm the consequence of the City retaining ownership of these lands being that there will be no development charges assessed or paid by OSEG to the City; and that the City Manager explain to Council the net financial benefit and liability to the City in retaining ownership of these lands through the proposed lease and sub-lease arrangements described in the LANSDOWNE PARTNERSHIP PLAN.



5. That the City Manager identify the net value (revenue less costs) to the City of the property tax to be collected as a result of the LANSDOWNE PARTNERSHIP PLAN, and that the City Manager confirm that the annual expected net value provides sufficient cash flow to pay for the City's obligation to operate and maintain Landsowne (and MSC).





Sectrion II. Financial Facts:



This section groups all capital and operating costs identified in the Memorandum of Understanding that are to be borne by the City through Municipal Services Corporation (MSC) and similarly, it identifies the Developer-Proponent'  costs  under the Ottawa Sports & Entertainment Group (OSEG), followed by the revenue streams and triggers for these revenue streams for the MSC and OSEG. 



[Please note that since I am not a corporate lawyer there will be terms that I am unfamiliar with and for that I ask your forgiveness.]



A. Capital Costs identified for the City (MSC) associated with the LANSDOWNE PARTNERSHIP PLAN

• Initial Capital to be provided in cash upon signing of
  agreement: $129.30 million for Stadium Improvements and the City's share of parking spaces (page 31) and 50% share of the $5 million capital cost of the Front Lawn [7.6 (c)]
  

• Additional Capital the City is responsible to provide to
  the Project,  according to the Memorandum of Understanding, is to cover the following:

a) costs arising from any pre-existing conditions for Stadium
Improvements [6.5 (b)]

b) costs for the benefit of more than one component of the Project
shall be extra and apportioned to each component in an equitable manner [6.6 (d)]

c) soft costs before project approval [6.5 (d)]

d) Should the actual development of the Front Lawn be materially
different, MSC would be responsible for any additional capital
expenditures which may
be required as a result. [7.6(c)].

e) Actual and direct costs, site costs and expenses (such as a project manager) for supervising construction on behalf of MSC will be paid to OSEG by MSC [6.7(c)]

f)  Responsibility and costs for overall compliance supervision of all elements of the construction of the Stadium improvements [6.7(d)]

g) The amount of capital to be provided by OSEG includes all
cash-in-lieu of a park dedication from the Retail Component which would be required from OSEG

in connection with the Project and shall be directed by the City
for the benefit of the Front Lawn.[7.6(c]

h) The cost of creating the remaining (i.e. Stadium, Front Lawn}
underground parking spaces would be paid for by the MSC [7.9(b)].

i) Cost of change orders once the Project has been signed off.(page 33)





Please note: There is NO estimate provided in the Memorandum of
Understanding of the magnitude of these additional capital costs that are to be the responsibility of the City through MSC.  As such, these costs represent an undefined financial exposure.





B. Annual Operating Costs for the City (MSC) associated with the
LANSDOWNE PARTNERSHIP PLAN



Please note: None of the following annual operating costs have been quantified in the documentation presented - what has been stated however, is that the City via MSC is financially responsible for these operating costs.  Staff should provide realistic estimates/budgets for these costs and advise Council as to their anticipated magnitude in the context of current annual operating costs of Landsowne Park.



a) Costs for managing, maintaining, operating and programming the Horticultural Building and Front Lawn will be paid by MSC to OSEG as a fee.[3.7(d) and (e)] under the “Front Lawn Management

Agreement” 5.5 (d)] and [7.6(a)]

b) Losses and expenses resulting from operations of the Front Lawn and Horticultural building will (also) be the responsibility of MSC.[7.6(a)]

c) Management Agreement between the MSC and OSEG in which OSEG manages parking operations on the Front Lawn for MSC for a fee. (“Parking
Management Agreement”);[5.5(h)]

d) MSC administration costs







C. Capital Costs for OSEG associated with the LANSDOWNE PARTNERSHIP PLAN

• Initial capital (cash) contribution is to be no less than $30
  million

• Additional Capital:
• OSEG will be solely responsible for any and all amounts above the Maximum Cost (set at $110 million) for the Stadium improvements [6.5(b)]
  
• soft costs PRIOR to project approval will be deemed as
  additional capital [6.5(e)]
  
• To the extent that costs are incurred in respect of or for the
  benefit of more than one of the Components of the Project, such costs will be apportioned amongst two or more of the
  
  Components by the parties in an equitable manner, based upon a
  pre-determined cost-sharing protocol to be contained in the Project
  Agreement.[6.6(d)]
• 50% of up to a max of $5 million in initial capital to develop
  the front lawn and includes cash-in-lieu of park dedication
  from the retail component [7.6(c)]
• OSEG shall be responsible for the cost of creating those
  underground parking spaces attributable to the Retail Component [7.9
  (b)]
• The equity required to acquire and establish the CFL Team will be the responsibility of OSEG. The amount paid by OSEG to acquire and establish the CFL Team will constitute
  
  Equity contributed by OSEG on account of its Minimum Equity Requirement [8.4(b)]
• OSEG shall acquire the ownership of the Ottawa 67’s. The amount paid by OSEG to purchase the Ottawa 67’s will constitute Equity contributed by OSEG on account of its
  
  Minimum Equity Requirement [8.5(a)]
• There will be a minimum equity contribution required of OSEG in the amount of $30,000,000 [10.4], satisfied by way of cash contributed from time to time by OSEG or a letter of
  
  credit (where such letter of credit is required) [10.5(a)], to meet
  Total Project obligations and commitments for future Total Project
  requirements, such as
  
  negative cash flow, in a given period [10.5(c)]

D. Annual Operating Costs for OSEG associated with the
LANSDOWNE PARTNERSHIP PLAN

• 30 year net-net-net lease for the Stadium under which OSEG is responsible for all costs, expenses, obligations and other
  responsibilities [6.8(d)]; [7.9(a)]
• OSEG will be responsible for capital and life-cycle repairs and
  replacements during the term of the Lease (including in the event that Net Cash Flow or the Reserve is insufficient to fund the repairs
  [6.8(f)]
• The Retail lease and each parking lease would be a 50 year (plus two 10-year renewal options) net lease [7.9(a)] in which OSEG is responsible for the payment of property taxes and maintenance and repair for the first 30 years, after which there is rent payable into the "waterfall" priorities (reserve, then return on outstanding equity at 8% to OSEG, return of Additional Equity to OSEG, return of Equity to OSEG, then return of MSC deemed equity, balance distributed to OSEG and MSC in equal shares) (7.4(a), (b) and (c)]
• The Stadium Lease, the Parking Component Lease(s) and the Retail Lease (respecting the Aberdeen Pavilion only) shall each contain an obligation on the part of OSEG to make payments on account of the Reserve.[11.7]
• Office and Hotel components would be developed under a Head Lease to OSEG for 70 years where for the first 30 years there will be no base rent payable by OSEG under the Head Lease, but OSEG has responsibility for all operating and maintenance and repair costs . The Head Lease will be a Net Lease for first 30 years [7.7(a), (b) and (c)]. After the first 30 years, the Net Lease would be the sub-leases where there is a base payment (revenue component) which however will be subject to the
  waterfall provisions [7.7]

E. Revenues that go to MSC:

• Monies from the sale of residential air rights would be paid to
  MSC to reduce its capital outlay for the Stadium.[7.8(d)]
• After 30 years, the Waterfall component for deemed MSC equity MSC from Net Revenues arising from sub-leases and leases
  (MSC is last in line; after OSEG was paid 8%/annum for its outstanding capital, and paid for all equity placed into the Project)
  
• Monetary consideration for the disposition of an interest in the
  Retail Lease paid following the commencement of the term of the lease shall be included as Revenue to be dealt with in the priorities of the Waterfall of the Closed System. [12.8(e)]
• Partial Dispositions of the CFL Team or the Ottawa 67’s shall form part of the Waterfall of the Closed System. [12.8(f)]
• Net revenue earned or proceeds from the sale of the entire CFL Team would be included within the Closed System and included within the Waterfall [8.4(c)]
• Parking revenues which are paid out according to the Waterfall Closed System provisions.
• The Air Rights Marketing Agreement will provide for a reasonable fee to OSEG for its assistance in sourcing and taking carriage of any arrangement to be entered into with the residential condominium developers.
  

F. Revenues that go to the City



Property taxes based on zoning and square area have been estimated in the LANSDOWNE PARTNERSHIP PLAN at:

Retail: $3.8 million in municipal tax revenues annually

Stadium: No figure provided for municipal taxes

Parking: No figure provided for municipal taxes

Residential: $1 million in additional municipal property tax revenues
annually.approximately $560,000 in incremental municipal property tax revenue to

the City annually

Hotel: $542,000 in additional property tax revenue to the City





F. Revenues that go to OSEG

• OSEG entitled to all revenue from the Stadium during the term of the Stadium Lease [6.8(d)]
• The Retail Lease shall contain a provision entitling City Corp.
  to terminate the Retail Lease on payment to OSEG of the fair market value of its leasehold interest at such
  
  time, expressly excluding the Retail Option Terms (the “Termination
  Consideration”) and the then unpaid balance of OSEG`s return on and of
  Equity. The Retail Lease would
  
  contain provisions respecting discussions to be held between the
  parties and a determination of Termination Consideration at a
  reasonable period prior thereto;[12(d)]
• air rights related to residential condominium buildings being
  constructed over a portion of the Retail Component [7.8(g)]
• exclusive sub-lease revenues for all Leases for the first 30
  years including: Retail, Parking, Office Head and Hotel Head leases.
  [7.4], [7.7], [7.9]
• Monetary consideration for the disposition of an interest in the
  Retail Lease paid following the commencement of the term of the lease
  shall be included as Revenue to be dealt with in the prioritiesof the
  Waterfall of the Closed System. [12.8(e)] 
  
• Partial Dispositions of the CFL Team or the Ottawa 67’s shall
  form part of the Waterfall of the Closed System. [12.8(f)]
• Net revenue earned or proceeds from the sale of the entire CFL
  Team would be included within the Closed System and included within the
  Waterfall [8.4(c)]
• The Retail Lease rental shall be based on: (i) fair market value
  land rental, determined at agreed upon intervals; and
  
  (ii) participation rent equal to 50% of OSEG’s share of theNet Cash
  Flow (as shall be defined) from the Retail Component; [12(c)]
• Parking revenues which are paid out according to the Waterfall
  Closed System provisions.

Section III. Findings arising out of the Analysis of
Statements of Claim and Memorandum of Understanding:



1. Sharing of revenues from land rents of the stadium,
retail, hotel, and office leases does not start until year 31 - these
"facts" are somehow not included in the Section entitled BUSINESS
PLANNING & ECONOMIC BENEFITS





Section IV. Analysis of Statements of Claim and Memorandum of
Understanding:



The format for this analysis is as follows:



Statement of Claim (referenced page #), followed by

What is said in the Memorandum of Understanding



1. "OSEG will assume the construction risk during the redevelopment
period and the operations risk on revenues and expense once the site
reopens." (page 31)

MoU: The "revenues" include all programming revenues in the Stadium and
Civic Centre, and all retail, hotel, and office sub-leases. It is
highly unlikely that the expenses will exceed revenues.



2. "The City of Ottawa will receive tax levies from the retail
components and both parties will share revenues from retail, stadium
and parking in accordance with the aforementioned ‘waterfall’.(page 31)

MoU: Both parties will share NET revenues from parking according to the
waterfall provisions [7.9(a)], BUT retail and stadium net revenues go
to exclusively to OSEG for the first 30 years!



3. Compared with historical operations of Lansdowne, the project is
expected to generate positive cash flow to the City over the life of
the proposed agreement with OSEG.(page 31)

MoU: Claim Not substantiated



4. "The city is expected to receive proceeds from the sale of air
rights for the townhomes and condominium units estimated at almost $4.4
million".(page 32)

MoU: Claim Not substantiated



5. "The office space is expected to generate approximately $560,000 in
incremental municipal property tax revenue to the City annually and
will contribute $300,000 per year in land rents to be

shared by the City of Ottawa and the OSEG through the closed system."
(page 32)

MoU: Shared Land rents only start after 30 years [7.7(b)]



6. "The hotel is expected to generate approximately $542,000 in
additional property tax revenue to the City and $300,000 per year in
land rents to be shared by the City of Ottawa

and the OSEG through the closed system." (page 33)

MoU: Shared Land rents only start after 30 years [7.7(b)]



7. "The MSC will be responsible for costs of change orders it issues
after the project has been signed off . OSEG and the MSC will share the
financial risk of environmental liabilities that could arise, and the
MSC will be responsible for managing the minimum 30-year lease with
OSEG." (page 33)

MoU: MSC assumes the TOTAL environmental risk for the Stadium [6.5
(b)]; while OSEG assumes the environmental risks for retail, hotel,
office and residential.



8. In the current project agreement, the City of Ottawa is in the first
and fourth position in the waterfall structure, whereas the OSEG is in
the second and third position.

MoU: A reserve will be established for lifecycle replacements and major
capital repairs for the Stadium, the Parking Component and Aberdeen
Pavilion (the “Reserve”).[11.4]

The Reserve will be based upon an agreed upon formula in the first
instance. A formula will be agreed upon and a separate reserve
established for each of the Stadium and the Aberdeen Pavilion.[11.5]

The Stadium Lease, the Parking Component Lease(s) and the Retail Lease
(respecting the Aberdeen Pavilion only) shall each contain an
obligation on the part of OSEG to make payments on account of the
Reserve.[11.7]



=====



Prepared by Klaus Beltzner, B.Sc., M.Math., M.B.A.









Best regards,



Klaus