OSEG and the City and the lopsided partnership


By Bob Brocklebank


It is encouraging to see that Lansdowne continues to elicit comment from across the city. But what seems to have been forgotten in the discussion is the prime reason for the current debate – making the partnership sustainable.

The partnership between the City of Ottawa and Ottawa Sports and Entertainment Group (OSEG) is a strange arrangement. In my opinion, the partnership’s objective is to obscure the degree to which Ottawa taxpayers are pouring resources into the arrangement. That objective has been splendidly achieved.

Let’s look at the parties involved. On the one hand you have the Ottawa Sports and Entertainment Group, a closely held private corporation. The owners are four or so wealthy individuals. OSEG is not a corporation listed on a stock exchange in which the public can buy shares. It is not obligated to issue public statements of account. At any moment, the owners of OSEG can decide to wind up the corporation or, if they wish, to have the corporation declare bankruptcy. The public has no right to know if any of the owners of the corporation have pledged any of their assets in support of OSEG or if bankruptcy would be a simple loss of investment made to date.

The other partner is the City of Ottawa, a municipal government created by the province. It is unlikely that the province would permit Ottawa to go bankrupt. Financial undertakings by the City are backed by the taxation power of the City and, theoretically, by the greater authority of the province.

Thus, if we are considering the continuity of the partnership, it appears that one partner can readily walk away, leaving the other partner responsible to pick up the pieces. Moreover, the partners are not treated equally within the partnership.

The City owns all the land at Lansdowne and it owns the stadium and arena. But as landlord, the City receives only nominal rent – one dollar a year! The City put up $110 million to rehabilitate the stadium and arena plus further money for the parking garage, but under the terms of the partnership, none of this is “deemed equity” to justify any return to the City. By contrast, investment by OSEG in the teams or the facilities is recognized as equity and is to receive an eight-per-cent return with measured repayment of that equity taking precedence over any payment to the City.

Moreover, there are other payments by the City that conveniently have been forgotten. The City gave a grant to the 67s to play elsewhere while work was underway on the arena. The City provided funds for the EY Centre, which was built to provide exhibition space lost in the Lansdowne redevelopment.

Risk which the City has taken on board through the partnership is unclear. Could the City be left with the football and hockey teams and their associated debts? Is the City responsible for mortgages on the retail buildings? What are the City’s responsibilities in maintaining the foundations supporting the residential and office buildings constructed on top of the parking garage?

As long as the City owns the land, the stadium and arena, those values do not figure in the calculation of property tax. While the residential and commercial buildings pay tax, the land under the buildings is tax-free. The stadium element of the partnership is not paying property taxes, in contrast to the Canadian Tire Centre in Kanata (which has its own tax classification).

The partnership has produced benefits, but still is said to need to be “sustained.” Before residents of Ottawa stump up more money for the continuation of the Lansdowne arrangement, a serious discussion is needed to review what the past decade has produced, what benefits have been realized and for whom. Until there has been a comprehensive discussion, we should resist being stampeded into a quick acceptance of any additional commitments.

Bob Brocklebank is a long-time Glebe resident and the Glebe Community Association representative on the Federation of Citizens’ Associations.

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