November 12, 2009 Comments On The Lansdowne Partnership Plan To

November 12, 2009 Comments on the Lansdowne Partnership Plan to Ottawa’s City Council Dear mayor and council members, I am a tax payer who is very concerned with the distribution of the economic benefits of the proposed Lansdowne Partnership Plan, as well as the non-competitive nature of the proposal. I am not against bringing back football to Ottawa, nor the redevelopment of the Lansdowne site (including a stadium if that’s the most optimal use of the site), nor am I against a public-private partnership approach to development. Clearly, I think it is very important for the City to redevelop the current sorry state of Lansdowne Park, but not in a way that skews all the benefit to the private sector, in this case OSEG and leaves the risk to the City’s tax payers. My concern with the current proposal relates to the very lopsided nature of the deal - to the benefit of OSEG. As a tax payer I resent that we will in effect be subsidizing the private sector, especially when our municipal taxes keep rising. In fact, my 20+ years of experience in the international financial sector, including analyzing very large and complex multi-million dollar transactions from an equity, debt and credit perspective1 teaches me that this deal is so good for OSEG that I would like to commit a portion of my own capital to the deal for a proportional equity stake. My concerns with the plan include (these are just the tip of the iceberg): 1. Since the waterfall payments are accounted for on a cumulative basis and OSEG’s return on equity is made before any payment to the City, all the financial risk is transferred to the City – in a nutshell OSEG is paid out first. Furthermore any losses from the closed system (including from sports) count towards an increase in OSEG equity contribution, for which OSEG will earn 8% - in effect the closed system is subsidizing the sports teams. 2. All the marketing material seem to indicate that the Lifecycle fund contributions come from OSEG, however, based on the waterfall structure in effect they are being shared by the City and OSEG (50:50). 3. The two sports teams will only make direct annual rent payments of $400,000 for a stadium that the City is investing over $110 million in - not a very good return. This rent seems very low – so are we again subsidizing the sports teams? 4. This deal is being marketed to the public as a deal that rebuilds Lansdowne stadium and brings football back to the City, whereas, the majority of the economic benefit from the deal is related to the retail space. The plan is so geared towards the retail development component that it will still be profitable to OSEG

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I have used only the material provided by the City (primarily The Vision for Lansdowne and Lansdowne Park – Business Plan for Transformation 1 Sept 2009 prepared by PriceWaterhouseCoopers and the Memorandum of Understanding) for my comments.

whether the hockey and football teams fail2 and initially retail and parking revenues will subsidize any losses from the sports teams. 5. The business plan is very focused on the economic benefit to the province and/or City from the redevelopment. However, many of these benefits would potentially apply to any redevelopment of Lansdowne Park and should not factor in determining the value of this non-competitive deal. Only in the case of multiple development plans should the economic benefit differences between them be taken into account. 6. The allocation of municipal tax levies to the payment of the City’s debt assumes that these are incremental tax levies to the City, i.e., that the tax base of the City grows. This may not be a viable assumption and would also apply to any proposal that will involve new retail and commercial property on the site. If these tax revenues have been overestimated by the City, can we as Ottawa tax payers be assured that our property taxes will not rise as a result of this transaction? 7. The OSEG equity contribution of $19.6 million is for franchise fees and start-up costs related to two sports teams – why is the purchase of a sport franchise defined as an equity contribution? Shouldn’t the City’s equity stake be defined as the full $130 million investment in the plan, since all the revenue that flows out of Lansdowne Park (the full 37 acres) is included in the waterfall structure, and which first flows to OSEG? Also why is the defined equity value of the 10 acres that has been designated for retail space so low at $20 million – is this really the value of 10 acres in the Glebe leased out for 30 years at zero rent? My comments do not change whether some of the retail space is changed for other types of commercial space since the basic structure still protects OSEG over the City’s tax payers. So I ask the council to seriously consider voting down this proposal and to start again with an open competitive process – please do not use the tax payers’ money to subsidize OSEG and their professional sport interests. If this deal was approved by a board in the private sector – they would be fired. Respectively yours, Harri Vikstedt Concerned Ottawa Citizen

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Revenue from sports account for only 20.6% of the total benefits of the whole project.