Final decision on Landsdowne 2.0

Council took the final decision in the Lansdowne 2.0 project which passed in a 15-10 vote.

Some background:

Lansdowne is a City owned asset. We have a leasehold agreement with OSEG to attract sports, entertainment and retail and to operate and maintain the facilities.  While Lansdowne attracts 4M visitors every year and has proven to be a successful City destination, there are problems getting the most from the site. The North Side Stands and TD arena were built in 1967 – they are in poor condition, not accessible and due for replacement. In 2021, Council were given 3 options: a) do nothing b) renovate c) replace,  and they chose to replace it with a design-bid-build project model. Since then, Council approved the financing model – borrow the full amount then, sell air rights for 2 residential towers onsite to be a source of revenue to offset the costs, use 75% of the property taxes from those units to help pay for the project, increase the municipal accommodation tax (paid by hotel guests) by 1%, use some City money to “save up” for the first debt payments, then split profits on other revenues between the City and the partnership (known as the waterfall distributions). Also, Council directed staff to put a portion of the money from the air rights into a reserve for affordable housing.

Staff got bids on their detailed designs and after negotiations, brought forward the proposal we were voting on at Council.

The City’s relationship with OSEG is unique. OSEG must fund any negative cash flows – to date OSEG has funded over $100M beyond their commitment of $55M. Taxpayers have been protected by this arrangement, but given the losses incurred to date, there were serious concerns about the sustainability of the partnership – something that was a key driver of Lansdowne 2.0.

Every aspect of the actuals that came back after the bid process, came back better than expected – construction costs were almost exactly as estimated, air rights came in at $65M, Tourism industry supported the 1% tax increase, the unit mix on towers would generate $69M in taxes, plus others. Bottom line – if  the revenues pan out the City would pay 1/3 of the total cost across the life of the debt (40 years). That comes out to $4.3M/year, which is about the cost of operating the Walter Baker Centre. If the projections are too rosy- we could pay as much as $17.4M/year.

The Auditor General highlighted risks – projected revenues are not guaranteed and a project as big and complex as this one has timelines and interdependencies that need to be well managed. While the construction contract is a fixed contract (meaning the contractor pays for unforeseen costs on their side) the OAG noted the potential for overruns, including costs from tariffs and change orders.

So here’s why I supported the plan:

• I like that it built-in ways to offset the debt burden on the taxpayer by as much as 69%. Had we gone with a “no” vote, the delay and reset of the project would ultimately cost taxpayers more – that’s upwards of $750M to rebuild later with fewer streams of revenue to offset. We also would have sunk the $22M spent on the project so far.
• I think the new events centre and outdoor space is an exciting addition for our City. We’ll be better positioned to attract world-class talent and events which enhances Ottawa as a tourist destination. Today we get skipped over because of the inadequate facilities.
• Making the site fully-accessible is a win for all.
• The final plan dedicated over $19M to affordable housing, a “no” vote would provide zero.
• Transportation will be improved to the site and surrounding area, eg., people can pre-book parking and free public transit with ticket purchase will continue.
• It stimulates the  economy through tourism and job creation and is supported by the local business community.
• Any profits that Lansdowne gains in the future can be used for other City priorities – like road work.
• OSEG brought this site from 1 sports team to 6, from 250k visitors per year to 4M – this partnership has been good for Ottawa; and only a “yes” vote guaranteed to keep them, and the teams we love, here.
• While the size of the arena meets the “sweet-spot” in the market for mid-size arenas, I was encouraged by confirmation that OSEG and the City Manager are ready to work with the PWHL to increase seating and make it work better for them and their growing franchise.
• No tax increases are expected as a result of this plan.
• Every effort is being made to continue the Farmers Market and other non-sports events onsite during construction and after.
• The project team is employing solid risk and project management practices, they’ll report regularly to council on progress, costs and the status of the contingency.

I admit that I hadn’t always seen it this way. There were strong views on all sides of this debate.

For more information, visit: Lansdowne 2.0 | City of Ottawa