Ottawa looking to settle $23M dispute over Lansdowne construction costs
30-year financial plan revised as mayor hopes to avoid arbitration over arena roof costs
The cost of fixing rusted steel in the arena of the former Ottawa Civic Centre now totals $23 million, and city staff are proposing a deal to avoid further costs in case the dispute with Ottawa Sports and Entertainment Group goes to arbitration.
OSEG discovered corroded steel beams from a water leak when it was renovating the arena's roof for the Lansdowne re-development.
In 2013, it said those repairs cost $17 million. But a report going to the city's finance and economic development committee Dec. 1 now pegs OSEG's claim at $23.6 million. The new figure includes $1 million for extra asphalt, concrete pavers and bigger bollards for the development's shopping and restaurant district.
OSEG argues the city should bear those costs. But the city argues OSEG took on the risks of construction at Lansdowne.
City staff are now recommending a settlement that would see OSEG take out a loan, with the city acting as its guarantor.
"I think it's the best arrangement that protects taxpayers," said mayor Jim Watson.
He said the proposed deal won't cost taxpayers anything, even if it does delay the city's return on investment.
"I think given the history of the start of Lansdowne and all of the different court cases, the public just wants us to just get on with it, and operate Lansdowne, and make it a success and the people place that it's become instead of getting dragged out in court and arbitrated settlements," said Watson.
Long-term revenues rise, but so do costs
The first annual financial report on Lansdowne also goes to committee Dec. 1.
Longer retail leases, higher-than-anticipated payments from the Canadian Football League and additional income from naming rights mean net revenues for the 30-year contract could reach $424 million, $110 million higher than projected in 2012.
On the flip side, the steel repairs and extra retail construction increased OSEG's capital costs by $54 million.
According to the report, the end result for the city is "an elimination" of the $22.6 million in revenue that was expected to flow to the city when the Lansdowne agreement was signed in 2012.