Wednesday, June 22, 2011
by Paul Jay, CBC Ottawa
Lawyers for the Friends of Lansdowne plan to argue in court Wednesday the City of Ottawa gave Ottawa Sports and Entertainment preferential treatment in its partnership over the redevelopment of Lansdowne Park.
In particular, Friends of Lansdowne alleges the city provided OSEG leases at below market value, provided financial assistance to acquire and operate CFL and OHL franchises, and gave preferential terms for OSEG to get money back from their investment in the deal.
Much attention is likely to be spent today on the "waterfall" payment system, in which payments are to be delivered in levels, where level one payments are first handed out before any money is delivered to level two.
The CBC's Giacomo Panico will be reporting today from the court proceedings, but we thought it would be worth it to explain the waterfall levels here online, for a better understanding of how the city fares, financially, under the waterfall scheme, and what issues Friends of Lansdowne has with the plan.
The priority payment structure, as laid out in the partnership plan, is as follows:
Level 1: Annual payments to the City's lifecycle fund - for maintenance and other costs associated with the park - take precedence over all other payments. This is estimated to be $1.3 million in 2013, growing with inflation in years after;
Level 2: Annual payments to both OSEG and the City of eight per cent of their equity stake in the project. OSEG's stake is estimated at $30 million, though expenditures could push that higher, while the city's funding equity is about $13 million.
Level 3: Annual payments to the OSEG partners of a return of additional equity above the $30 million minimum.
Level 4: Annual payments to OSEG based on OSEG's minimum equity of $30 million and the city's equity of $13 million.
Level 5: Annual payments to the City of Ottawa of eight per cent of its deemed equity, valued at $23.75 million;
Level 6: Cash balances after levels 1 to 5 have been fully met are split evenly between the City of Ottawa and the OSEG.
If cash flows are not enough to pay out to all of these levels, annual deficits will accumulate and be paid out in subsequent years.