REPORT TO COMMITTEE(S) OF COUNCIL

INTERNAL ROUTING CHECKLIST

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Report to/Rapport au :au:

City Council

Conseil municipal

2 September 2009 / le 2 septembre 2009

Submitted by/Soumis par : Kent Kirkpatrick, City Manager/Directeur des services municipaux

Contact Person/Personne ressource : Kent Kirkpatrick, City Manager/Directeur Municipal

(613) 580-2424 x 25657, Kent.Kirkpatrick@ottawa.ca

Capital/Capitale (17)

Ref N°: ACS2009-CMR-OCM-0006

SUBJECT:	Proposed Lansdowne PArk PArtnership Plan
OBJET:	PROPOSITION DE PLAN DE PARTENARIAT POUR LE PARC LANSDOWNE

REPORT RECOMMENDATION

That Council:

1. Receive and table the Lansdowne Partnership Plan for subsequent consideration by a Joint Corporate Services and Economic Development and Planning and Environment Committee meeting on October 26October 26, 2009 and City Council on November 12, 2009;
2. Approve the public consultation plan as outlined in this report, and provide a supplementary report on the results of public consultations to the October 26, 2009 Joint Committee meeting;
3. Direct staff to prepare a second supplementary report detailing the next steps that would be required for the implementation of a Lansdowne Partnership Plan, including the requirements for the creation establishment of a Municipal Service Corporation, and an understanding of the resourcing requirements, and how risk transfer could be assigned, for the consideration of the Joint Corporate Services and Economic Development and Planning and Environment Committee meeting on October 26October 26, 2009 and City Council on November 12, 2009;
4. Authorize the City Manager to expend the funds necessary to conduct the public consultations and develop the detailed implementation report.

RECOMMANDATION DU RAPPORT

Que le Conseil municipal :

1. prenne connaissance du plan de partenariat de Lansdowne et le présente ensuite à la réunion conjointe du Comité des services organisationnels et du développement économique et du Comité de l'urbanisme et de l'environnement, qui se tiendra le 26 octobre 2009, et à celle du Conseil municipal, le 12 novembre 2009;

2. approuve le plan de consultation publique tel que mentionné dans le présent rapport et produise un rapport supplémentaire sur les résultats de cette consultation le 26 octobre prochain, à la réunion du Comité mixte;

3. demande au personnel de la Ville de préparer un rapport additionnel présentant les autres étapes à suivre en vue mettre en œuvre le plan de partenariat de Lansdowne, y compris les exigences relatives à la création d'une Société de services municipaux, et une entente concernant les exigences en matière de dotation qui sera pris en considération lors de la réunion conjointe du Comité des services organisationnels et du développement économique et du Comité de l'urbanisme et de l'environnement, qui se tiendra le 26 octobre 2009, et à celle du Conseil municipal, le 12 novembre 2009;

4. autorise le directeur municipal à dépenser les fonds nécessaires à la tenue de les consultations publique et à la production d'un rapport sur la mise en œuvre.

Translated Recommendations…

EXECUTIVE SUMMARY

The purpose of this report is to present to Council for consideration the proposal that has resulted from the partnership negotiations between the City of Ottawa and the OSEG.

This plan includes a combination of commercial and retail development to support the continued operations of the revitalized Frank Clair Stadium and Civic Centre and to ensure the site’s long-term sustainability. The site will also feature unique entertainment, dining and programming opportunities, including destination shopping that complements the existing businesses along Bank Street and does not include big box stores or large national retail chains.

What is proposed is an innovative partnership that includes residents, all levels of government, stakeholders, businesses and community groups. Key partnerships are also currently being forged with Parks Canada and the National Capital Commission (NCC) that would allow for Lansdowne’s integration with the Rideau Canal, Queen Elizabeth Driveway and related NCC parkland, creating an inviting and accessible entrance to the facility.

In preparing this plan and partnership framework, all of the requirements set out in Council’s motion of April 22, 2009 were thoroughly considered. A detailed accounting of how the Lansdowne transformation plan and partnership framework addresses Council’s requirements is contained in the attached report. (Refer to Document 1.)

The plan and partnership framework that has been negotiated creates a closed financial system that sees cashflows from the operations of the entire site, other than the front lawn, distributed in a “waterfall” to the City and to the OSEG according to an agreed upon formula. Under this closed system, OSEG is responsible for any deficits that may accrue from the operation of the site and for making mandatory contributions to a lifecycle reserve fund. The subsequent distribution of any additional net cashflows then provides for OSEG to realize a modest return on equity of eight per cent, then a return of equity, then, for the City, a return on deemed equity contributed, and, finally, for a fifty-fifty sharing of any residual net cashflow between the City and the OSEG.

The City’s shared capital contributions will be made up of cash and debt as per the table below. Of the $129.3M, $12.4M will come from City reserves and annual budgetary avoidances for the stadium and the arena during the construction period. The balance will be financed through a debenture of $116.9M.

City of Ottawa Capital Contributions
	Stadium ($M)	Parking ($M)	Total ($M)
Capital Cost	110.0	19.3	129.3
City Reserves		(4.0)	(4.0)
Operating Costs Avoided Between 2010 to 2012	(8.4)		(8.4)
Debt Issue	(101.6)	(15.3)	(116.9)

The transformation of Lansdowne Park presents an opportunity for the City of Ottawa to generate incremental tax revenues, create jobs and enhance public space. Over the first thirty years of the project agreement, the Lansdowne transformation will not create additional tax pressures; rather, it will generate surpluses for the City.

As a result of the work completed to date, it is recommended that Council direct staff to proceed with, and complete the first phase of public consultation as outlined in Section 7.10 of the Lansdowne Partnership Plan and provide a report on the results of the public consultations and any additional recommendations related to the September 2, 2009 report as a result of the consultations to a joint meeting of the Planning and Environment Committee (PEC) and Corporate Services and Economic Development Committee (CSEDC) on October 26, 2009.

Additionally, it is recommended that Council direct staff to prepare a supplementary report detailing the required next steps and anticipated resource requirements for the implementation of a Lansdowne Partnership Plan, including the necessary considerations for the establishment of a Municipal Services Corporation, for consideration at the joint meeting of the Planning and Environment Committee (PEC) and Corporate Services and Economic Development Committee (CSEDC) on October 26, 2009.

The PEC and CSEDC would then jointly make a recommendation to Council on the Lansdowne Partnership Plan report for Council’s consideration on November 12, 2009.

As a result of the work completed to date, it is recommended that Council direct staff to proceed with, and complete the public consultation on the Lansdowne Partnership Plan by October 16, 2009, as outlined in Phase One of the Public Participation section of that document (refer to Section 7.10 of the attached document).

Upon completion of this public consultation, staff further recommends that they be directed to report back to a joint meeting of the Planning and Environment Committee (PEC) and Corporate Services and Economic Development Committee (CSEDC) on October 8, 2009, at which time they will outline the results of the public consultation and any additional recommendations related to the September 2, 2009 staff report.

The PEC and CSEDC can then jointly make a recommendation to Council on the Lansdowne Partnership Plan report for Council’s consideration at the meeting of October 28, 2009.

RÉSUMÉ

RÉSUMÉ

L’objectif de ce rapport consiste à présenter au Conseil, à des fins de considération, la proposition issue des négociations de partenariat entre la Ville d’Ottawa et l’OSEG.

Le plan prévoit également une combinaison d’aménagement d’un espace commercial approprié qui permettra la poursuite des travaux de revitalisation du stade Frank-Clair et du Centre municipal tout en assurant la pérennité du site. Le site offrira également des possibilités sans égales en matière de divertissement, de restauration et d’activités, y compris des petits commerces qui complètent les entreprises de la rue Bank plutôt que des grandes surfaces ou des succursales de grands magasins de détail.

Ce partenariat novateur fera appel aussi bien aux résidants et à tous les échelons de gouvernement qu’aux intervenants, aux entreprises et aux groupes communautaires concernés. On conclut actuellement des partenariats clés avec Parcs Canada et la Commission de la capitale nationale; ceux-ci mèneraient à l’intégration du parc Lansdowne au couloir du canal Rideau, à la promenade Reine-Élizabeth et aux parcs relevant de la Commission, créant ainsi un accès invitant et accessible au site.

Au cours de la préparation de ce plan et du cadre de partenariat, toutes les exigences établies par la motion du Conseil du 22 avril 2009 ont été prises en considération. Vous trouverez dans le rapport ci-joint une description détaillée des réponses qu’apportent le plan de transformation et le cadre de partenariat du parc Lansdowne. (Consultez le document 1.)

Le cadre du plan et du partenariat qui a été négocié crée un système financier « fermé » en vertu duquel les flux de trésorerie résultant des activités de l’ensemble du site, la pelouse avant exceptée, seront répartis en « cascade » entre la Ville et l’OSEG selon une formule fixée d’un commun accord. Aux termes de ce système, l’OSEG est responsable de tous les déficits liés à l’exploitation du site et aux contributions obligatoires au fonds de réserve du cycle de vie. La répartition ultérieure de tout flux net de trésorerie permet alors à l’OSEG d’obtenir un taux modique de rendement des capitaux propres de huit pour cent, puis un rendement des capitaux propres, accordant ensuite à la Ville un rendement sur l’avoir réalisé qu’elle a versé, et finalement un partage à part égale entre la Ville et l’OSEG (50 % chacun) de tout flux net de trésorerie résiduel.

Les apports en capital partagé de la Ville seront répartis en liquidités et en dettes, comme le montre le tableau ci-dessous. Des 129,3 millions, 12,4 millions seront tirés des réserves de la Ville et de l’évitement fiscal budgétaire annuel pendant la construction du stade et de l’aréna. Le solde sera financé à l’aide d’une débenture de 116,9 $.

Financement de la Ville d’Ottawa pour la phase 1
	Stade (M$)	Stationnement (M$)	Total (M$)
Dépenses d’immobilisations	110,0	19,3	129,3
Réserves de la Ville		(4,0)	(4,0)
Coûts d’exploitation évités de 2010 à 2012	(8,4)		(8,4)
Émission de titres de créances	(101,6)	(15,3)	(116,9)

La transformation du parc Lansdowne offre la possibilité à la Ville d’Ottawa de générer des revenus différentiels d’impôts, de créer des emplois et d’améliorer l’espace public. Au cours des 30 premières années de l’entente de projet, la transformation du parc Lansdowne ne créera pas un fardeau financier supplémentaire; au contraire, elle apportera des surplus à la Ville.

Au vu du travail accompli jusqu’à ce jour, il est recommandé que le Conseil enjoigne le personnel de procéder à la première phase de consultations publiques et de l’achever, comme il est exposé dans l’article 7.10 du Plan de partenariat pour Lansdowne, et de présenter un rapport sur les résultats desdites consultations publiques et tout autre recommandation relative au rapport du 2 septembre 2009 à la suite des consultations à la réunion conjointe du Comité de l’urbanisme et de l’environnement (CUE) et du Comité des services organisationnels et du développement économique (CSODE) qui aura lieu le 26 octobre 2009.

De plus, il est recommandé que le Conseil enjoigne le personnel de préparer un rapport supplémentaire indiquant en détail les prochaines étapes nécessaires et les exigences en ressources prévues pour la mise en œuvre du Plan de partenariat pour Lansdowne, y compris les considérations nécessaires pour la création d’une Société de services municipaux, pour examen à la réunion conjointe du Comité de l’urbanisme et de l’environnement et du Comité des services organisationnels et du développement économique qui aura lieu le 26 octobre 2009.

Le CUE et le CSODE pourraient alors présenter conjointement une recommandation concernant le rapport sur le Plan de partenariat pour Lansdowne au Conseil pour examen par ce dernier à sa réunion du 12 novembre 2009.

BACKGROUND

Lansdowne Park has a proud heritage, having capably served Ottawa and the surrounding region as a major destination for almost a century. However, in recent years, this once proud landmark has fallen into disrepair, its aged facilities no longer able to satisfy the community’s needs and the expectations of residents’ expectations.

To begin the important work of restoring this community and cultural landmark, Council directed staff to commence a review of potential redevelopment opportunities. At approximately the same time, a group of prominent local business people, the OSEG, approached the City with a proposal to revitalize Lansdowne Park. Referred to as LansdowneLive, their plan aimed to upgrade the facilities and surrounding parkland comprising Lansdowne Park.

A key component of OSEG’s proposal was the revitalization of the Civic Centre and Frank Clair Stadium to accommodate a Canadian Football Team franchise. The proposal also included the development of complementary commercial space, the revenue streams from which were identified as necessary to offset the operational costs of the stadium and civic centre facilities.

Following an analysis of their proposal, along with a competing proposal for a multi-use sports complex in Kanata, on April 22, 2009, Council directed staff to negotiate a partnership agreement with OSEG for the purposes of redeveloping and revitalizing Lansdowne Park.

In directing the City Manager’s Office to enter into partnership negotiations with OSEG, Council stipulated that any redevelopment and revitalization plan must ensure that Lansdowne Park would have more green space, improved pedestrian and cycling linkages to the Rideau Canal, and sufficient public spaces to support community initiatives like the Ottawa Farmers’ Market and other year-round festivals and events.

Furthermore, Council directed that the redevelopment be revenue- and value-neutral, subject to Committee and Council approval, and based on the following conditions:

1. That the City continue to support the Central Canada Exhibition’s move to the Albion Road site;
2. That the City of Ottawa’s contribution to the revitalization of Lansdowne Park be limited to a dollar amount to be established during the negotiations, based on the principle of not increasing the overall cost to the taxpayer; and
3. That any revenues generated from the revitalized Lansdowne Park not be used to subsidize any professional sports teams.

Having already confirmed the revitalization of Lansdowne Park as its stadium priority project, Council directed staff to conclude negotiations and necessary due diligence by August 26, 2009 and return to them with a report that highlights the extent to which the development program is consistent with the conditions set by Council in their motion of April 22, 2009.

When directing staff to enter into negotiations with OSEG, Council also approved a series of parameters and design principles to guide the revitalization and redevelopment plans. They included:

1. That the composition of retail, commercial, and community-benefit public space, including the Farmers’ Market, for the balance of the lands at Lansdowne Park give regard to the criteria established by Council and be determined through a design process as follows:

i. That a substantial portion of the existing hard surface area must be reserved as, and designed as, public open spaces that are green and sustainable, suitable for recreational use and complementary to Lansdowne Park’s overall function;

ii. That the Aberdeen Pavilion remain in its current location and plans must preserve and enhance sight lines to this building from the surrounding streets and from the Rideau Canal, and the façade of the Horticulture Building be retained;

iii. That public pedestrian and bicycle access to the Rideau Canal, to the recreational pathways and gardens that abut Lansdowne Park and links to adjacent parks be improved;

iv. That plans recognize Bank Street’s designation as a Traditional Mainstreet in the Official Plan;

v. That the opportunities for use of the site by community stakeholders, such as local sports groups, should be enhanced;

vi. That the plan should provide for the continuation of the seasonal Ottawa Farmers’ Market in a public space;

vii. That the plan should also explore opportunities for outdoor performance and festival areas;

viii. That any proposed buildings should achieve a minimum standard of LEED Silver;

ix. That plans are able to be implemented in a timely fashion, and to keep in mind the City’s financial ability to contribute to the redevelopment; and

2. That the plan respect the scale and character of the neighbourhood and the public nature of the site, and that:

i. There be no housing component;

ii. There be no large format commercial;

iii. Commercial uses be limited to uses that support the main uses on the site, and/or that are compatible with the neighbouring business districts;

iv. Public transit options be considered;

v. That the City approve the design and form of any buildings constructed on the site; and

vi. Both members of the partnership must agree on the acceptance of each tenant; and

3. That the design process includes a comprehensive public consultation process prior to a final decision by City Council.

The City Manager’s Office was also directed to ensure that negotiations include consultations with the National Capital Commission and an understanding from the Federal and Provincial Governments regarding their level of financial commitment.

DISCUSSION

The purpose of this report is to present to Council for their consideration the proposal that has resulted from the partnership negotiations between the City of Ottawa and the OSEG.

Partnership negotiations between the City of Ottawa and OSEG commenced immediately following Council’s direction of April 22, 2009. Under the direction of the City Manager, Graham Bird and Associates were contracted to lead the overall project, given their proven track record leading other recent similarly challenging projects in the Ottawa area, including the Ottawa Convention Centre, the Algonquin College Expansion and the new Royal Ottawa Mental Health Care facility.

To respond to Council’s directives, a series of teams were formed comprising City staff, representatives from OSEG and, where necessary, third-party subject-matter experts or representatives from other government agencies, to complete the necessary due diligence on the various components of the redevelopment program, including:

• The Master Plan for the Stadium Design and Site Redevelopment;
• Infrastructure;
• Construction Costing;
• Transportation, Parking and Transit;
• Environmental Sustainability and Green Space Solutions;
• Heritage Considerations;
• Marketing;
• Development and Analysis of the Financial Plan and Commercial Business Case Proposal;
• The Legal Framework for the Partnership Agreement and a Potential Governance Structure for Lansdowne; and,
• Proposed Communications and Public Consultation Plan.

A complete description of the membership, work and accomplishments of these teams is included in the partnership plan.

Lansdowne Revitalization Key Principles

In preparing the partnership plan for the redevelopment and revitalization of Lansdowne Park, City staff and OSEG representatives were guided by a series of key principles. These principles were formulated based on Council’s motion of April 22, 2009, as well as the City’s Official Plan policies and guideline directions.

These key principles are:

1. The primary focus of the transformation of Lansdowne must be the implementation of a new “Front Lawn”. To become a “Pearl of the Capital’s World Heritage Site” the front lawn should not be a chain link and asphalt parking lot. Furthermore, the creation of a significant public open green space abutting Queen Elizabeth Drive (QED) and integrated with the canal must be a primary driver of the plan and can only be fully realized though the partnership and the collaboration with the NCC and Parks Canada.

2. The development of this new unique open green space along the canal would be undertaken with the intent that it allow for various activities and events to be staged there, such as Winterlude, the Tulip Festival, outdoor art shows, and concerts. It would also be developed to accommodate various community events, such as opening and closing ceremonies for local or national sporting competitions.

3. Lansdowne cannot accommodate the extent of every association’s desires. In programming Lansdowne it must be created as the heart of a larger system. It can be centre stage for sports and other programs and it must rely on a satellite support network.

4. The overall amount of parking must be reduced and removed from sight, where possible. Transit on Demand (TOD) and Transportation Demand Management (TDM) systems should be implemented to support events and major programs at the park.

5. The rich history of the site should be preserved and celebrated, with the Aberdeen Pavilion serving as a focal element of the park and a highlight of the front lawn open space. Its use for food, restaurant, bistro or café should be year-round and accessible to all.

6. The stadium revitalization, the “centre court” for sports, is a key element of the Lansdowne transformation. The new stadium should be integrated into its surroundings and enhance the functionality to permit at least football, soccer and hockey. Similarly, the architecture of the facility should be inspiring, innovative and consistent with the overall vision for Lansdowne.

7. The new development should be a mix of uses that exemplify the goals of a healthy and sustainable community, respecting important views and architectural design guidelines.

8. Development should be concentrated within the northwest sector of the site, making this area a unique urban space and pedestrian priority zone with uses that will establish Lansdowne Park as an innovative, functional and modern venue complementing sports and entertainment activities, the Ottawa Farmer’s Market, the Rideau Canal and the Bank Street commercial corridor. Furthermore, this development should enhance the surroundings and provide for significant gateways from Bank Street to the canal.

9. Create a governance model for Lansdowne that will ensure the sustainability of Lansdowne and the Partnership, focusing initially on the implementation and subsequently on the ongoing operations and programming of the site.

10. Create an overall mix of uses, which can provide a basis for the Partnership that is financially sustainable. The transformation must have a solid basis to ensure that Lansdowne can be enhanced over time.

11. Embed LEED-certified infrastructure and lifecycle maintenance into the plan and avoid future decay as seen today.

Business Model

In recent years, public-private partnerships have garnered increasing support in Canada and internationally as a way to use private sector capital, innovation and efficiency to deliver public goods. LansdowneLive proposes such a partnership between the City of Ottawa and OSEG.

It is proposed that the City of Ottawa first create a share capital Municipal Services Corporation (MSC) wholly owned by the City of Ottawa. Lansdowne Park and all existing facilities will then be transferred to MSC. The City will transfer funds to MSC for the redevelopment of the stadium, the arena and its share of the associated parking.

The interface between the MSC and OSEG is key to the success of the Lansdowne transformation. The MSC will enter into a minimum 30-year head lease with OSEG for the entire park and it will contract OSEG to undertake redevelopment and construction. OSEG will assume the construction risk during the redevelopment period and the operations risk on revenues and expense once the site reopens.

The plan and partnership framework that has been negotiated creates a closed financial system that sees cashflows from the operations of the entire site, other than the front lawn, distributed in a “waterfall” to the City and to the OSEG according to an agreed upon formula. Under this closed system, OSEG is responsible for any deficits that may accrue from the operation of the site and for making mandatory contributions to a lifecycle reserve fund. The subsequent distribution of any additional net cashflows is as follows: provides for OSEG to realize a modest return on equity of eight per cent, then a return of equity to OSEG, then, for the City, a return on deemed equity contributed, and, finally, for a fifty-fifty sharing of any residual net cashflow between the City and the OSEG.

In Phase 1, both parties will contribute capital to redevelop Lansdowne Park. The City will contribute the capital required for the redevelopment of the stadium and the parking not required by the retail development. The OSEG will contribute the capital to build the retail component with associated parking. 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. 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.

City of Ottawa Phase 1 Financing

The City’s shared capital contributions will be made up of cash and debt as per the table below. Of the $129.3M, $12.4M will come from City reserves and annual budgetary avoidances for the stadium and the arena during the construction period. The balance will be financed through a debenture of $116.9M.

City of Ottawa Capital Contribution
	Stadium ($M)	Parking ($M)	Total ($M)
Capital Cost	110.0	19.3	129.3
City Reserves		(4.0)	(4.0)
Operating Costs Avoided Between 2010 to 2012	(8.4)		(8.4)
Debt Issue	(101.6)	(15.3)	(116.9)

Stadium and Arena

To fund the redevelopment of the stadium and the arena, the City will transfer to the MSC $110M comprised of cash raised through avoided budgetary costs during the construction period ($8.4M) and the issuance of $101.6M of debt. The ownership of the stadium and the arena will also be transferred to the MSC. The MSC will contract OSEG to redevelop the stadium and arena.

The OSEG assumes responsibility and risk for the redevelopment of the stadium and arena and will fund all operating costs for those facilities when completed. A lifecycle fund will be established from operating revenues with an annual transfer to the MSC for lifecycle repairs.

Upon reopening, OSEG will be responsible for all stadium and arena operations and will cover any losses resulting from such operations.

Upon reopening, the stadium and arena is expected to employ over 220 full-time staff in Ottawa, generating over $9M in labour income and almost $1M in direct and indirect taxes to all levels of government annually.

Front Lawn

The front lawn includes both improvements to the southward facing green space that borders Queen Elizabeth Driveway and the underlying water and power infrastructure for the park. Redeveloping the front lawn is estimated to cost $5M. These costs will be shared equally between the City and OSEG and are contained within construction costs estimates for the stadium, arena, and the retail components, respectively.

Parking

The City of Ottawa and OSEG will partner to build 1,100 new below-grade and 135 at-grade parking spaces at Lansdowne Park. The City will contribute $19.3M and the OSEG will contribute $17.5M to construct the below-grade parking. Project costs for the at-grade parking are contained in the construction costs estimates for the stadium and arena, and retail component. An additional 360 space will be made available in the redeveloped front lawn for overflow parking when required for special events. Parking will be operated and maintained by OSEG. Revenues, expenses and provisions for lifecycle will form part of the closed system and as such will not require additional tax contributions from the City.

Creating the below-grade parking is expected to create over 400 full time jobs over the three year construction period, with over $20M in labour income and $2.6M in indirect taxes to all levels of government.

Retail

OSEG will invest $97M in construction costs to create almost 300,000 square feet of retail space. Beginning in 2013, the retail complex is expected to generate $3.8M in municipal tax revenues annually. Rents from retail tenants will form part of the closed system waterfall.

The labour income generated though the construction of the retail component will be over $53M and 1,090 jobs will be created over the three-year period. Indirect tax revenue to all levels of government from products and services from the construction project is estimated to be almost $7M.

The following development opportunities represent Phase 2 of the Lansdowne transformation:

Residential Space

As part of Phase 2, OSEG will lease land to a residential developer to construct 40 new, 1,000 square-foot town homes on Holmwood Avenue and 168 new condominium units on Bank Street.

This residential project will require a capital outlay of approximately $45.8M by a residential developer. The City will receive proceeds from the sale of air rights for the townhomes and condominium units estimated at almost $4.4M. These revenues may be used to reduce the amount of the debt the City issues to fund Phase 1 of the development.

When built, the project is expected to generate approximately $1M in additional municipal property tax revenues annually.

Office Space

As part of Phase 2, OSEG may lease land to a commercial developer to build 100,000 square feet of new office space in a five-storey building at a capital cost of $21.1M. The office space is expected to generate approximately $560,000 in incremental property tax revenues 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.

Hotel Space

OSEG may also lease land to a hotel developer to construct a new 180-room hotel as part of the Phase 2 redevelopment program at a capital cost of approximately $21.8M. The hotel is expected to generate approximately $542,000 in additional property tax revenue and $300,000 per year in land rents to be shared by the City of Ottawa and the OSEG through the closed system.

Financial Summary

The transformation of Lansdowne Park presents an opportunity for the City of Ottawa to generate incremental tax revenues, create jobs and enhance public space. Over the first thirty years of the project agreement the Lansdowne transformation will not create additional tax pressures, rather, it will generate surpluses for the City.

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. Balancing waterfall payments with priority and the size of the financial obligation has produced a proportionate business model for all parties over the first term of the project agreement. The following diagram illustrates how waterfall payments are expected to be made.

Over the first term of the project period, total waterfall payments by level are as follows:

• L1 – Additions to MSC Lifecycle Fund: $65.7M, or 38.0%
• L2 – Distributions to OSEG – return on equity: $31.8M, or 18.4%
• L3 – Return of OSEG’s Equity: $19.0M, or 11%
• L4 – Distributions to City – return on equity: $48.0M, or 27.8%
• L5.1 – Net Cash Share to City: $4.2M, or 2.4%
• L5.2 – Net Cash Share to OSEG: $4.2M, or 2.4%

Under the proposed project agreement, the City is expected to receive over two thirds or $118M of the totally payments made through the closed system waterfall.

The chart below shows debt principal outstanding and cash balances for the City for the Phase 1 and Phase 2 components.

The components of the Phase 1 program are expected to generate positive cash flows to the City through property tax levies, avoided budgetary costs and waterfall distribution payments. If these cash flows were held in reserve over the first term of the project agreement, the reserve would be sufficient to retire all debt by 2040.

Should the City and the OSEG choose to pursue the Phase 2 components, the City will receive additional property tax revenues and additional waterfall distributions. The City would also receive profits from the sale of air rights for the residential component. If increased tax revenues and waterfall distributions are held in reserve and if the profits from the sale of air rights are used to lower debt, the City will have sufficient cash reserves to retire all debt in 2033 and have positive cash flows for other purposes in years after.

Conclusion

Lansdowne Park has reached the point where a complete and lasting transformation is necessary. The partnership proposal detailed in the Memorandum of Understanding between the City of Ottawa and OSEG, coupled with the attached Partnership Plan proposal, provides a clear path forward for this transformation; one that is based on solid financial planning, provides the opportunity for meaningful input from residents, community groups, existing tenants and stakeholders, and recognizes the park’s historic and prime location within the city.

The proposal, if implemented, will transform Lansdowne Park into a unique, green landmark with pedestrian and cycling pathways and recreational and athletic facilities along the Rideau Canal, in the heart of the nation’s capital.

This innovative partnership will include residents, all levels of government, stakeholders, businesses and community groups. Key partnerships are also currently being forged with Parks Canada and the NCC that would allow for Lansdowne’s integration with the Rideau Canal, Queen Elizabeth Driveway and related NCC parkland, creating an inviting and accessible entrance to the facility.

This plan also includes a combination of commercial and retail development to support the continued operations of the revitalized Frank Clair Stadium and Civic Centre and to ensure the site’s long-term sustainability. The site will also feature unique entertainment, dining and programming opportunities, including destination shopping that compliments the existing businesses along Bank Street and does not include big box stores or large national retail chains.

The plan and partnership framework that has been negotiated creates a “closed” financial system that sees cashflows from the operations of the entire site, other than the front lawn, distributed in a “waterfall” to the City and to the OSEG according to an agreed upon formula. Under this “closed” system, OSEG is responsible for any deficits that may accrue from the operation of the site and for making mandatory contributions to a lifecycle reserve fund. The subsequent distribution of any additional net cashflows is as follows: provides for OSEG to realize a modest return on equity of eight per cent, then a return of equity to OSEG, then for the City a return of deemed equity, and, finally, for a fifty-fifty sharing of any residual net cashflow between the City and OSEG.

In preparing this plan and partnership framework, all of the requirements set out in Council’s motion of April 22, 2009 were thoroughly considered. A detailed accounting of how the Lansdowne transformation plan and partnership framework address Council’s requirements is contained in the attached report (refer to Document 1.)

After careful consideration, the partners of this proposed plan and agreement determined that excluding any residential property and enhancing trade show and consumer show space on the site would have jeopardized their ability to achieve a transformation plan that respects the intention of Council’s motion, the unique characteristics of Lansdowne Park, and the financial viability and long-term sustainability of the site.

To further the year-round use of the site, and to offset the operational costs associated with the stadium and arena, it was found that limited residential development would be beneficial. To that end, a housing component has been included in the second phase of the site’s development – though it should be noted that it is subject to further refinement pending the completion of Phase 1. This development will include a low-profile condominium project atop retail space, consistent with neighbourhood scale, and 20-stacked condominium townhouses integrated into the residential fabric of Holmwood Avenue on the south side of site.

Incorporating this modest residential component in the Lansdowne transformation plan is consistent with Council’s Official Plan (Section 2.2.3 – Managing Growth within the Urban Area; Section 2.3.1 – Transportation; Section 2.5.1 – Compatibility and Community Design; Section 2.5.4 – A Strategy for Parks and Leisure Areas; and, Section 2.5.5 – Cultural Heritage) and smart growth and land-use policies on urban density, mixed-use development and residential intensification.

Furthermore, while the provision of sufficient trade and consumer show space strengthens Ottawa’s economy, it was also found that Lansdowne is not the most strategically-viable location for such space. While existing indoor facilities will receive significant upgrades and retrofits that will allow for smaller-scale trade show programming, larger events should be transferred to other, more appropriate venues. The City is currently in discussions regarding the re-location of trade show space from Lansdowne Park, and exploring various alternative locations. The new Ottawa Convention Centre, scheduled to open in April 201l, is one such location; the other is a yet-to-be developed venue at the Ottawa Airport, which the City is actively pursuing with positive results to date.  Ensuring Ottawa is able to continue to provide sufficient and effective consumer and trade show space remains a top priority for the City and work continues on this front.

As a result of the work completed to date, it is recommended that Council direct staff to proceed with, and complete the first phase of public consultation as outlined in Section 7.10 of the Lansdowne Partnership Plan and provide a report on the results of the public consultations and any additional recommendations related to the September 2, 2009 report as a result of the consultations to a joint meeting of the Planning and Environment Committee (PEC) and Corporate Services and Economic Development Committee (CSEDC) on October 26, 2009.

Additionally, it is recommended that Council direct staff to prepare a supplementary report detailing the required next steps and anticipated resource requirements for the implementation of a Lansdowne Partnership Plan, including the necessary considerations for the establishement of a Municipal Services Corporation, for consideration at the joint meeting of the Planning and Environment Committee (PEC) and Corporate Services and Economic Development Committee (CSEDC) on October 26, 2009.

The PEC and CSEDC would then jointly make a recommendation to Council on the Lansdowne Partnership Plan report for Council’s consideration on November 12, 2009.

As a result of the work completed to date, it is recommended that Council direct staff to proceed with, and complete the public consultation on the Lansdowne Partnership Plan, as outlined in Phase One of the Public Participation section of that document (refer to Section 7.10 of the attached document).

Upon completion of this public consultation, staff further recommends that they be directed to report back to a joint meeting of the Planning and Environment Committee (PEC) and Corporate Services and Economic Development Committee (CSEDC) on October 8, 2009, at which time they will outline the results of the public consultation and any additional recommendations related to the September 2, 2009 staff report.

The PEC and CSEDC can then jointly make a recommendation to Council on the Lansdowne Partnership Plan report for Council’s consideration at the meeting of October 28, 2009.

CONSULTATION

Council’s motion recognized that the revitalization proposal for Lansdowne required additional work and refinement, and that this work would occur as part of the partnership negotiations. Council further recognized that meaningful consultation with the public on the proposal would have to occur subsequent to the proposal being refined and a draft partnership agreement developed. Therefore, Council’s motion also directed staff to include a proposal for a comprehensive public consultation process in the report back to Council on the outcome of the partnership negotiations and revitalization proposal. The details of the proposed public consultation plan are included in the Lansdowne Partnership Plan.

As directed by Council, the City Manager’s Office and representatives from OSEG corresponded and/or met either jointly or separately with the following groups and stakeholders:

• The Central Canada Exhibition Association (CCEA);
• The Ottawa Association of Exposition Managers (OAEM);
• Coliseum Incorporated;
• The Glebe Community Association;
• The Glebe Business Improvement Area (BIA);
• The Ottawa Farmer’s Market (OFM);
• The Algonquins of Pikwàkanagàn;
• The National Capital Commission (NCC); and,
• Parks Canada.

The City Manager and, in most cases, OSEG representatives met with these stakeholder groups to ensure that each group was provided with an opportunity to raise any issues and concerns they wished to have considered in the development and refinement of the revitalization plan and partnership agreements.

Finally, each stakeholder group was advised that they would be specifically engaged at the outset of the comprehensive stakeholder and public consultation process that would take place should Council direct staff to proceed with the public consultation process subsequent to receiving this report on September 2, 2009.

LEGAL/RISK MANAGEMENT IMPLICATIONS:

For the reasons set out hereafter, there are no Legal/Risk Management impediments to implementing the recommendations contained in this report. Pursuant to section 22 of the City of Ottawa’s Purchasing By-law, it is permissible for the City to waive the requirement for competitive bid solicitation for goods, services and construction and replace it with negotiations where there is an absence of competition for technical or other reasons and the goods, services or construction can only be supplied by a particular supplier and no alternative exists.

The OSEG is the only party that has a conditional Canadian Football League franchise that would be an anchor tenant for a revitalized Frank Clair Stadium. Moreover, under the proposed Lansdowne Partnership Plan, the OSEG would be responsible for all stadium and arena operations and would cover any losses resulting from such operations. OSEG would also fund lifecycle repairs. The financial due diligence carried out to date by the City and its consultants on the OSEG proposal has demonstrated, among other things, that the City would be receiving fair value under the Plan. The proposed Plan also acknowledges and respects the current collective bargaining relationships with CUPE 503 and IATSE at Lansdowne Park.

The City is the sole owner of Lansdowne Park and there are no restrictive covenants or reservations within any of the previous deeds by which the City acquired the property that now constitutes Lansdowne Park that would constitute a legal impediment to the long-term leasing of the property for redevelopment.

Finally, should Committee and Council approve the Lansdowne Partnership Plan, the City will not be fettering its authority as a regulator of land development. OSEG and/or the MSC would have to obtain the appropriate planning approvals as any other developer in the circumstances.

FINANCIAL IMPLICATIONS

The Lansdowne redevelopment program will require a capital funding contribution from the City totalling $110M for the stadium renovations and $19.3M for the construction of 600 below-grade and salon parking spaces. These capital costs include all construction financing. OSEG assumes the risk for any potential cost escalations.

The City can finance this capital requirement from a combination of debt and cash as follows:

	Stadium ($M)	Parking ($M)	Total ($M)
Capital cost	110.00	19.30	129.30
Cash-in-lieu of parking, parking reserve		(4.00)	(4.00)
Capital costs avoided from 2010 to 2012	(8.40)		(8.40)
Debt issue	(101.60)	(15.30)	(116.90)

The Assessment of Stadium Proposals – OSEG (LansdowneLive) and Senators Sports & Entertainment (SS&E), Kanata, issued on April 6, 2009 and tabled at Council on April 22, 2009, indicated that the City would avoid net operating and capital costs of $3.8M per year, on average, from having another organization rebuild and run Lansdowne Park. This funding level (as per Section 4 of the April 6, 2009 report) consisted of the annual operating subsidy ($650,000); minor capital requirements ($750,000) and lifecycle investment ($2.4M per year on average over the next 10 years).

During Lansdowne’s three-year construction period (2010 to 2012), it is estimated the City would avoid $2.8M of the $3.8M in annual capital costs associated with maintaining and operating the stadium. As a result, these funds would be available to the City during that time period to contribute towards the capital costs of the Lansdowne redevelopment program. It is anticipated that the remaining $1M per year associated with the maintenance of Lansdowne Park will be spent on Lansdowne’s current contractual obligations and any custodial costs that may be incurred during the construction period.

If approved, the 2010 budget will include a reduction of the contribution to capital of $2.8M and a contribution to a separate Lansdowne account of an equivalent amount.

The debt to be issued was modeled as a 40-year term at 5.35 per cent (the current posted 40 year rate at which the City could borrow from Infrastructure Ontario) and would require debt yearly debt servicing of $7.142M per year. The debt servicing can be funded from:

• The cost savings of $3.8M already included in the City’s budget for both capital and operating expenses;
• 75 per cent of the forecast tax revenue generated from the retail space being proposed as part of Phase 1 ($2.874M); and,
• Contributions totalling $1.370M from the parking reserve over the first 6 years (average of $228,333) and repaid in years 7 to 11

The Lansdowne redevelopment program also includes an estimate of property taxation that will be generated from the redevelopment of the site. While the tax revenue estimate was prepared by the Altus Group, a well-known tax advisory company, in order to provide a margin for error, only 75 per cent of the taxation from Phase 1 has been included in the City’s financial plan. Should this proposal be approved, staff will perform more due diligence on the taxation estimates, and, if accurate, the additional taxation would be available for other City purposes.

The debt-servicing model also assumes that the taxation on these properties will increase by 2.5 per cent per year, reflecting inflationary tax increases. Because the debt servicing requirements are not completely offset by the fixed cost savings and gradually increasing taxation in the first seven years, a small contribution will be required from the city-wide reserve during this initial period. The city-wide reserve can be reimbursed these contributions over the next 5 years from the tax increases generated from these properties.

The Lansdowne redevelopment program will also create a number of other potential revenue streams for the City. In addition to the 25 per cent of tax revenue from the retail component, there will be additional taxation revenue from the residential, office and hotel planned for Phase 2 of the redevelopment program should those proceed. While they may generate an estimated, additional $2.1M per year in revenue for the City, these potential revenue streams have not been used to offset capital financing. The distribution from the “waterfall” in the later years of the project should provide the City with a return on the equity investment from both development phases. The following table identifies the City revenues projected in 2013 and 2042 from this proposal and how much will be required to service the debt. As the debt costs will be fixed and the revenue streams will be increasing, the percentage required to service the debt declines significantly over the term of the debt.

	2013 ($M)	2042 ($M)
Property Taxes from Phase 1*	2.874	5.881
Property Taxes from Phase 2**	2.064	4.223
Return on Equity and Cash Share Phase 1		4.461
Return on Equity and Cash Share Phase 2		4.370
Total Revenues	4.938	18.935
Debt Servicing net of savings of $3.8 M	3.342	3.342
Debt Servicing as a percentage of Phase 1 tax revenues	116%	57%
Debt Servicing as a percentage of Total Revenues	67%	18%

*75% of taxes assuming an inflationary tax increase of 2.5% per year

** 100% of taxes assuming an inflationary tax increase of 2.5% per year

The additional revenues the City receives, above the amount required to service the debt, will be available for other City purposes.

Impact of Debt Financing on the Fiscal Framework Principles

Council has endorsed the use of debt financing for identifiable legacy projects, defined as “one of a kind” projects that contribute to the overall quality of life in the city and will have “long-lasting benefit”. The Lansdowne redevelopment program meets this definition.

The City’s Fiscal Framework sets a limit on the amount of debt that can be used to fund capital projects: principal and interest payments for tax- and rate-supported debt must not exceed 7.5 per cent of the City’s own source revenues. In order to ensure that the increase in debt servicing required for this project does not exceed that limit, a 10-year projection of debt servicing was prepared for all the known initiatives currently undertaken by City, and a conservative estimate puts debt servicing at 6.11 per cent of own source revenues by 2019 – well below the 7.5 per cent limit set by the Fiscal Framework.

The City’s Fiscal Framework also limits the amount taxes can be increased in a given year to service debt on non-legacy projects to no greater than one-quarter of 1 per cent of property taxes. Because it is considered a legacy project, this limitation does not apply to Lansdowne Park – nor is it required, as the debt will be serviced without a tax increase.

SUPPORTING DOCUMENTATION

Document 1 – Summary of City of Ottawa Council Directions & Solutions

Document 2 – Lansdowne Partnership Plan

DISPOSITION

Subject to Committee and Council approval, staff will implement the recommendations as outlined in the report.

Document 1
SUMMARY OF CITY OF OTTAWA COUNCIL DIRECTIONS & SOLUTIONS
Direction	Transformation Proposal
A substantial portion of the existing hard surface area must be reserved as public open spaces that are green and sustainable, suitable for recreational use and complementary to Lansdowne Park’s overall function.	A key component of Lansdowne’s transformation will be the establishment of a ‘front yard’ along Queen Elizabeth Drive, which will be integrated with the Rideau Canal. The east and south portions of site will also be converted to parkland to better support seasonal outdoor activities and programming.
The Aberdeen Pavilion remain in its current location and plans must preserve and enhance sight lines and the façade of the Horticultural Building be retained.	The historic Aberdeen Pavilion will become the centrepiece of a revitalized Lansdowne, with sightlines in the park enhanced to better feature the building. The Horticultural Building’s unique façade will also be preserved.
Public pedestrian and bicycle access to the Rideau Canal, recreational pathways and gardens and links to adjacent parks be improved.	A comprehensive Transportation Strategy for the park has been developed that preserves links to existing pathways and improves access to the site for cyclists and pedestrians through enhanced green space and recreational areas.
Enhance Frank Clair Stadium & the Civic Centre	A major component of the revitalization program is the enhancement of the Frank Clair Stadium and Civic Centre: new south grandstands will be constructed; the north grandstands will be refurbished; all existing facilities will be upgraded with multi-function program spaces and state-of-the-art technology; and, both facilities will receive complete facelifts.
Recognize Bank Street’s designation as a Traditional Main Street	Lansdowne Park will respect Bank Street’s Traditional Main Street designation: new development along Bank Street will continue the tradition of two-storey irregularly shaped blocks, creating a ‘village-type’ streetscape with mixed pedestrian and vehicle areas.
Enhance opportunities for use of the site by community stakeholders, such as local sports groups	Lansdowne’s numerous indoor and outdoor spaces are being upgraded to better accommodate community groups.
Continue the seasonal Ottawa Farmer’s Market in an exterior public space	The Ottawa Farmers’ Market will continue to have a home at Lansdowne Park, in the Horticultural Building, and it will enjoy a longer programming season.

SUMMARY OF CITY OF OTTAWA COUNCIL DIRECTIONS & SOLUTIONS
Direction	Transformation Proposal
Explore opportunities for outdoor performance and festival areas	Lansdowne’s new ‘front yard’ along Queen Elizabeth Drive and the south and east portions of the site will allow for all-season programming opportunities, including Winterlude, the Tulip Festival, arts and cultural fairs, and other recreation and leisure pursuits.
Achieve a minimum standard of LEED ‘Silver’ level in proposed buildings	Lansdowne’s redevelopment program will achieve LEED Silver certification through a combination of energy efficiency measures, the conservation of building materials and resources, improved indoor environmental quality, water conservation and quality efforts, the reduction of heat and light pollution, reliance on alternative, non-fuel-dependent transportation methods, the conservation and adaptive re-use of existing buildings, historic structures in particular, and the use of green rooftops, where possible.
Plans are able to be implemented in a timely fashion	Phase 1 of the Lansdowne redevelopment program is anticipated to be complete by 2013. Public consultations and the planning approvals process will begin shortly.
Respect the scale and character of the neighbourhood	A revitalized Lansdowne Park will respect the scale and character of the surrounding Glebe neighbourhood. New development along Bank Street will continue the tradition of two-storey irregularly shaped blocks, creating a ‘village-type’ streetscape with mixed pedestrian and vehicle areas, in keeping with the street’s Traditional Main Street designation.
No large format (‘big box’) retail stores	There will be no ‘big box’ retail at Lansdowne. On the contrary, Lansdowne’s retail component will be limited to unique, ‘destination’ enterprises that complement the existing Bank Street commercial zone.
Commercial uses be limited to uses that support the main uses on the site, and that the commercial uses be ‘boutique’ in nature	A revitalized Lansdowne will feature a vibrant, ‘boutique focused’ and pedestrian-centric retail sector. Stores will offer products that enhance visitors’ sports and entertainment experiences, as well as support the Ottawa Farmers’ Market and Made-in-Canada products.
City approves the design and form of any buildings constructed on the site.	Included in Partnership Plan.
Both members of the partnership must agree on the acceptance of each tenant.	The partners have agreed to jointly approve the mix of tenants on the site.
SUMMARY OF CITY OF OTTAWA COUNCIL DIRECTIONS & SOLUTIONS
Direction	Transformation Proposal
Public transit options be considered	A comprehensive Transportation Strategy for the park has been developed that employs OC Transpo and other public transit options to address the various transportation requirements depending upon the nature of the site’s events and activities. New, below-grade parking facilities will also be constructed, and vehicular access to the site from the Queen Elizabeth Driveway and related bike and footpaths will also be enhanced and improved.
Include a comprehensive Public Consultation Process	A comprehensive communications strategy has been developed that includes a multi-phased public consultation process. Community groups, residents, local businesses and the required government partners will all be engaged in this process.
Limit the City of Ottawa’s contribution to a dollar amount based on not increasing the overall cost to the taxpayer	Under the current Memorandum of Understanding, City staff and the OSEG have negotiated an agreement, which is forecasted to generate cash and avoid tax pressures. Tax revenues generated through the redevelopment will place the City in a cash-positive position.
Agree not to use any revenues generated to subsidize professional sports	No tax levies will go to support the professional sports teams. The City will financially support the debenture and the redevelopment program. OSEG will assume responsibility of any construction and operating losses, as well as lifecycle costs. OSEG will realize a reasonable return on its equity, a return of its equity, and the City will realize a return on its deemed equity. Any additional net cashflow will be shared equally between the partners. The City will receive property tax revenues resulting from the redevelopment program.
Include consultations with the National Capital Commission and an understanding from the Federal & Provincial Governments regarding their level of financial commitment	A Letter of Understanding between the City of Ottawa and the NCC has been signed regarding the public consultation process for the site’s redevelopment and discussions with the NCC, Parks Canada, and the Province of Ontario are underway.
SUMMARY OF CITY OF OTTAWA COUNCIL DIRECTIONS & SOLUTIONS
Direction	Transformation Proposal
No housing component	The Lansdowne Partnership Plan suggests a two-phase approach.  Housing is included in the Phase 2 development, which still needs to be refined after Phase 1 has been achieved. Consistent with Council’s policies on urban density and residential intensification, to further the year-round use of site, and to offset the operational costs associated with the stadium and arena, it was found that limited residential development would be beneficial. This development will include a low-profile condominium project atop retail space, consistent with neighbourhood scale, and 20-stacked condominium townhouses integrated into the residential fabric of Holmwood Avenue on the south side of site.
Enhance Trade Show & Consumer Show space	While existing indoor facilities will receive significant upgrades and retrofits that will allow for smaller-scale trade show programming, it was found to be most appropriate to refer larger events to other, more appropriate venues. Solutions to re-locate trade show activity at Lansdowne Park are still under discussion while alternatives are being explored. The opening of the new Ottawa Convention Centre, in April 2011, will provide an excellent opportunity for trade shows. Another potential site is the yet-to-be developed venue at the Ottawa Airport, which is being pursued with positive results to date.  This solution is still being finalized.