Ottawa’s auditor general tables Lansdowne 2.0 concerns

Ottawa’s auditor general has said the city has left a “minimum buffer” for overrun costs on the Lansdowne 2.0 file and warns there is always the risk for "unforeseen costs”, which could  include tariffs and construction delays.

Accounting for new underground parking and ground-level retail space, the entire price tag for the project is $483 million. That includes $418.8 million for the construction of two new residential towers, a new, smaller arena where the Great Lawn currently sits, and new north-side stands that would no longer include a roof. 

Auditor general Nathalie Gougeon also said the estimated $45.9 million for the retail component of the project is an early estimate, but that it “appears to be reasonable and reflective of current market conditions.”

While hard costs are fixed, uncertainty over U.S. tariffs could drive up the costs of some goods.

“The city’s draft contract with EBC transfers the risk of new or increased tariffs back to the city and establishes the process by which EBC may claim impacts resulting from new taxes, customs duties, and tariffs imposed after bid closing,” wrote Gougeon. “Even minor adjustments to tariffs may result in budget overruns, project delays, claims and disputes.”

The City has $36.1 million — 10 per cent of the project's costs — as an emergency buffer. But Gougeon said if certain risks were to fully materialize, taxpayers would be taking on more debt. She used the example of the BMO Field Expansion in Toronto, which went 25 per cent over its $120 million renovation and expansion budget. 

“Given the expected duration, size and interdependencies associated with the Lansdowne 2.0 construction project and the current level of economic uncertainty, there is a risk that the City’s contingency of 10 per cent for the project may not be sufficient to cover all unforeseen costs,” Gougeon said.

There are also concerns over how potential delays could impact next stages of the project. For example, if there was a delay in completing the North side stands, that would impact the air rights sale from closing, leading to financial penalties.  

The draft purchase and sale agreements state the City must confirm the feasibility of completing the north side stands by December 29, 2028. If not, it must pay Toronto developer Mirabella, which is managing the retail component, $1 million. If the transaction does not close by July 31, 2031, the penalty increases to $13 million.

Betting on the Ottawa Redblacks

A lot of weight is also being put on the success of the Ottawa Redblacks. To cover debt, the City is betting on revenue from the team to grow by 9.85 per cent over the next four years – but that is double the growth the team has actually seen. And operating costs for the team, stadium, and arena, have been tremendously higher than the two-per-cent figure staff are using. 

Gougeon also expressed concern over the City’s partnership with Ottawa Sports and Entertainment Group (OSEG), and said her fears have “heightened.” 

The City now plans to extend its partnership with OSEG from 2066 until 2075. OSEG has verbally committed to keeping the team around until at least 2042 – a decade more than the current agreement – but as Gougeon points out, there are still 33 years to go after that. 

Ottawa Mayor Mark Sutcliffe – who has been a vocal supporter of Lansdowne 2.0 – said he still thinks the project is good for taxpayers and better than it was a year or two ago. But he said it will be up to councillors to decide whether they agree with that assumption when the project goes for a final vote on Friday.  

Sutcliffe said Gougeon raised “a number of good recommendations” and noted staff are in agreement and ready to execute on them.

“We will have regular reporting on the financial model, on the costs of the construction, and all the other aspects of Lansdowne 2.0. In fact, we may even exceed some of what is being recommended by the Auditor General. So I think it’s a good report,” Sutcliffe told reporters. “We’re ready to respond to it. I think it's important work that’s been done to support our decision-making process.”

A heated audit committee

While Sutcliffe might be confident in the Lansdowne 2.0 plan, the same cannot be said for Capital Ward Coun. Shawn Menard who tried to question city staff about the auditor’s findings during a meeting on Tuesday.

Menard asked whether or not the $17.4 million allocated yearly to service the project debt could be used for other city priorities. City chief financial officer Cyril Rogers felt that was not a fair question, but the Capital councillor pressed on. 

Committee chair Kanata North Coun. Cathy Curry said that the level of questioning was out of line and told Menard, “This is not a court of law where you are cross-examining staff.”

Menard fired back and said he's heard other councillors in the past ask such questions, and then got into a spat with Beacon Hill-Cyrville Coun. Tim Tierney who was sitting beside him.

“I was just called a swear word by my colleague here next to me,” said a shaken Menard. 

Curry said it was obvious that tensions were rising.