Olympic Village may cost Vancouver taxpayers $875M

[rafterman]

Ha ha ha

Just get a mortgage.

Olympic Village may cost Vancouver taxpayers $875M: Mayor

09/01/2009 9:22:14 PM

Vancouver taxpayers could be on the hook for as much as $875 million to complete the Olympic Athletes Village unless city council can reopen a loan given to the developer or find new financing.

The city has been forking out money to keep construction going since New York-based hedge fund Fortress Investment Group stopped advancing funds in September to Millennium Development Corp., Mayor Gregor Robertson said Friday.

The previous city council, Fortress and Millennium signed a $195-million "completion guarantee" in the spring of 2007, Robertson said, committing Vancouver to finish the project.

"We cannot turn back the clock of the actions of the last mayor and council. We are financially and legally committed to completing the project," Robertson told reporters Friday afternoon during a special briefing on the financial arrangements of the project.

"Fortress, acting within their rights under that deal, stopped advancing funds to the developer for the Olympic Village construction ...," he said.

A $100-million bailout loan was approved on Oct. 14 by council during an in-camera meeting, and $79 million has been used so far. The balance will run out later this month.

The financial details released Friday ended months of speculation about the village finances, which began when the bailout made headlines during the civic elections in November.

The initial budget for building the Olympic Village was $750 million, but there has been an estimated cost overruns of $125 million due to increasing construction costs and the global economic downturn.

That means the city is now liable for $875 million if negotiations with Fortress to reopen the loan fail, Robertson said.

That's on top of $200 million Millennium was to pay the city for land of the Southeast False Creek development site.

"The Olympic village is a billion-dollar project, and the city taxpayers are on the hook for all of it," Robertson said.

Construction of the project will be halted in mid-February if the city cannot come up any new money.

"Council has directed city staff to negotiate a financial arrangement that will best protect the taxpayers of Vancouver. And these negotiations are ongoing," Robertson said.

"We know we've been dealt a very tough hand, but I believe we can meet our obligations."

Asked what would happen if negotiations with Fortress fall through, Robertson said there could still be other sources of financing available.

"It is a difficult time to be accessing that but the city is in good strong financial condition. We, ultimately, have other means to do that but we have a negotiation with Fortress first and foremost to carry forward," Robertson said.

Council will inform taxpayers every decision it makes in the months ahead regarding the financing of the Olympic Village construction, he said.

 

[TheGuy]

Well, clearly it will not be for the full amount because the units will be sold but my guess is that the city will be on the hook for a good $200-$300 million of that depending where real estate goes.

Perhaps the Province will step in and cover it which will spread the pain amongst everyone in the province.

This is all about Political ego - like the fast ferries.

Should have got Jimmy Patterson to organize the Olympics and we would end up will a billion in profit - then again her would put up with the political Bull shit.

 

[maude]

hmmm . . . cost over-runs . . . big bills . . . modern day version of Montreal 1967 for Vancouver/Whistler . . . As I recall, it took the Montreal taxpayers 30 years and change to pay off the debt ... some legacy!

 

[island-guy]

I think that bringing the Olympics to Vancouver was likely the smartest thing Glen Clarke ever did.

Think about it, the NDP brought the olympics here, the Liberals are going to take the blame for all the costs and the mess and as a result, due to the election timing, the NDP will get re-elected because people are so ticked off about the Olympics.

Even though it was the NDP who started the whole mess in the first place.

Vancouver voters have the memories of goldfish, and Clarke knew it.

 

[Yman]

What about the people in the Sudan?? Murdered daily by militant groups??
Iran / Iraq? Bin Laden still out there somewhere.
Aids in Africa?
But yet the G-7 countries keep funding these games?

Often in times of adversity it's important for our collective spirit to be lifted by human excellence and individual accomplishment. It's what inspires. The Olympic games are important in this regard.

Vancouver is a highly desireable place to live. The property in the downtown of Vancouver will remain valuable over the long term. I'm not too concerned about the Olympic Village . The cost overruns on the convention center concern me much more.

 

[island-guy]

Part of this is the same sort of media silliness that is counting the ENTIRE cost of the skytrain expansion and the ENTIRE cost of the sea to sky highway renovations as 'olympic costs'.

I can't wait to see them rip up the skytrain and tear up the sea to sky highway the day after the Olympics are over. After all, they were built JUST for the Olympics, right?

Meanwhile the same people who are whining about things like the capital expenditures for the Olympics are crying that we need to have 'large government funded infrastructure projects' to combat the recession.

Mass transit and highways must have stopped being 'infrastructure' when I wasn't looking.

 

[island-guy]

mass transit and the highways. They are good infrastructure projects. I'm much less optimistic about the Olympic Village.

At this point only one-third of the units are sold. I don't know how many units at what price they need to sell them for to come out even but it may well be that fully half of them won't sell even at reduced prices. We are only at the beginning of a severe real estate downturn that will hit condo units the hardest (partly because so many of them were bought by investors hoping to flip them for a profit).

As someone else said this really is looking like a rerun of that popular hit the Montreal Olympics.

Didn't they spend way more on the construction to make it 'sustainable' and 'green' and didn't they also add in some 'affordable housing' units?

All that political correctness has to be paid for somehow.. Maybe it's time for Vancouver taxpayers to walk the walk instead of just talking the talk...

 

[Stella_Hardon]

I have scanned thru the verbiage and I didn't see how many condos are being built as part of this olympic village. Are we talking 1000 units ?

If we are on the hook for a billion then each condo cost a million dollars.

 

[FunSugarDaddy]

I would think at the very least construction costs going forward should drop dramatically, given the drop in material prices (ie steel) prices and the fact we're in a recession.

One option they might have is to rent these units out after the olympics and sell them gradually as the market picks up.

And since they are being used during the olympics I would assume no GST would be attributable on the sale of these units.

 

[island-guy]

I have scanned thru the verbiage and I didn't see how many condos are being built as part of this olympic village. Are we talking 1000 units ?

If we are on the hook for a billion then each condo cost a million dollars.

Sort of..

30% of the units have to be sold as social 'low-income housing' units for something like 100k each. THOSE units are already all sold.

The other 70% of the units have to be sold for roughly 1.25 million each to subsidize the social housing units.

Like I said, it's time for vancouverites to walk the walk.

Enjoy the nice big property tax increase because with a provincial election in May there's no way in hell that Campbell is going to let the rest of the province pick up the tab for Vancouver's silly political correctness.

 

[kodiak_bear3]

Citymanager presentation

http://vancouver.ca/pdf/citymanager_presentation_Jan0909.pdf

The City has provided a "completion guarantee" to the Lender (a group of financing institutions lead by the Fortress Investment Group). Basically the Lender wanted to be sure to be paid back even if the real estate development failed.

The high costs for cleaning up the site and the increase in construction costs due to the big real estate bubble of years 2003-2007 have created a budget overrun. This would not be a big problem if the real estate market were still hot, with prices still going up.
Unfortunately the market has changed and nobody knows today if it will make any money or, eventually, how much money it will lose.

Developers take these kind of risks all the time, when they decide to develop a land. It's their business.
What really upsets me, is the incompetence, irresponsibility and stupidity of our elected representatives (and their advisers) who play to be entrepreneurs with our money.
They should be held accountable for this mess and pay with their own house.

 

[island-guy]

Anyone wanna bet that it costs them another billion in cost over-runs before it is done?