Pandemic sped up revisiting Lansdowne Park deal
COVID-19 pandemic sped up the process to revisit Lansdowne Park agreement
The last thing city council wants during a public health crisis is to fuel another fracas over the future of Lansdowne Park, but the fight was coming at some point. It just took the COVID-19 pandemic to speed it up.
The Ottawa Sports and Entertainment Group (OSEG) is in trouble. There was no Canadian Football League season this year, the start of the Ontario Hockey League season has been pushed into 2021, concerts have been postponed and retail tenants have vacated storefronts in the shopping district. The company has terminated the employment of workers and the corporate partners continue pouring millions more than originally expected into the Lansdowne partnership with the city.
The city, which believes it can't let OSEG sink, is willing to prop up the company by allowing it to access the OSEG-fed life cycle capital account for financial aid on operations, according to recommendations published Wednesday night ahead of a council committee meeting next week.
The account has $4.7 million and exists to make sure the buildings have the right resources to keep them in a state of good repair. OSEG would pay for infrastructure fixes as needed and begin replenishing the account after the pandemic.
The other bit of help proposed by the city is extending the partnership agreement for 10 years on the same terms, giving OSEG more time to make back some of the money it has sunk into Lansdowne. The current 30-year agreement expires in 2044. The company pays $1 of rent annually at the stadium.
There's also a proposal to extend a $1 rent agreement to 2066 in the retail buildings, protecting OSEG from paying market rent and transferring additional money to the city.
But the idea that could reignite a civic barnburner has to do with the city potentially renegotiating the agreement with OSEG, only six years after the redeveloped Lansdowne opened.
City staff are asking for council's support this month to not only approve OSEG's access to the life cycle money and the contract extension, but also support striking a working group to reassess the contract and contemplate changes to the city-owned property. The city would create a public consultation program, flirting with the possibility of waking up ghosts from the Friends of Lansdowne era, and have recommendations by the end of next June.
The city, along with consultants, has been working with OSEG for months on a strategy to help the company survive the requirements of the partnership agreement.
Anyone who has paid attention to the arrangement, however, knows there was trouble brewing before the pandemic.
OSEG launched a strategic review of operations in 2019 after ho-hum financial returns, but one of the first big hits to the company was the discovery of corroded steel in the arena, requiring about $22 million in work. The city settled a dispute with OSEG over the arena remediation in 2015.
OSEG has contributed $97 million more than it originally expected to pay when it inked the Lansdowne agreement with the city in 2012. As of March 31, OSEG has sunk $152 million into Lansdowne through the partnership. Back in 2010, the OSEG partners thought it would only take $30 million to fund the project, which grew to $56 million when council approved the deal in 2012.
Over the next five years, OSEG believes the total investment could get closer to $200 million.
The latest projected distributions through the financial “waterfall” scheme in the agreement would have OSEG receive a
$233-million return on its equity over the 30-year term, but that estimate has been on a downward trend.
In other words, from a straight financial bottom line perspective, it's been a rocky investment for the OSEG partners.
Still, the numbers alone don't tell the story of the civic benefit of having a revamped Lansdowne Park, whose main attraction has been the stadium and the return of professional football.
The city isn't projected to receive a return on its contribution to the partnership. The municipal government's win on the deal has been the avoidance of having to take care of the aging football stadium and arena for at least 30 years and be protected from any operational deficits at OSEG.
The “urban park” at Lansdowne, including the Aberdeen Pavilion and Horticulture Buildings, is the responsibility of the city. The rental revenue doesn't cover the
expenses for operating the urban park — in 2019, there was a $1.6-million gap — but both sides of the ledger have been doing better than what the city has budgeted.
There's a big-picture discussion that will come with the formation of the working group. Everything appears to be on the table, including future development possibilities. The evidence is in the report to council.
“The working group will be looking at ways to increase foot traffic on the site, including the options to enhance animation, improve public amenities, assess aging infrastructure and to increase the density in keeping with council's urban intensification principles, including affordable housing,” the report says.
The elephant in the room is the old TD Place arena complex that supports the stadium's north-side stands. It's functionally out of date for a modern professional sports organization.
There have been other design changes kicked around in the few years since Lansdowne opened.
For example, OSEG has looked into ways to better knit the property with the adjacent Rideau Canal and take advantage of events like Winterlude, a monumental task considering the number of agencies (city, NCC, Parks Canada and the entertainment company itself ) that need to agree.
As for the city's portion of the site, the urban park continues to be a work-in-progress, to the point where OSEG wondered if it could do a better job of managing it. Public controversy killed that idea.
The finance and economic development committee during a meeting next Thursday will decide what recommendations to send to council for a vote on Nov. 25.
It won't be back to the drawing board for Lansdowne Park, but the city and OSEG, through that council vote, could be setting the groundwork for Lansdowne 2.0, and the public will surely have something to say.