Even in its present skeletal state, the Olympic Village impresses. So it should, at a cost of $1.1-billion and counting.
Towers that in 13 months will house 2,800 Olympic Winter Games athletes and officials are still under construction, but their irregular shapes and competing angles already dominate the southeast corner of False Creek. Downtown Vancouver looms just across the water.
Unique, overlapping "fish scale" windows adorn one especially stylish structure. An environmental theme prevails. Everything on this 6.8-hectare plot is designed to meet or exceed tough green standards.
No expense was spared: $200-million committed for the purchase of the city-owned False Creek land; another $750-million in the budget to build 850 housing units; an extra $125-million added to cover exploding construction fees. And there are tens of millions more, for extraordinary infrastructure costs: soil re-mediation; the restoration of dubious "heritage" buildings; shoreline paths for bicyclists and pedestrians; a man-made nature island; public art.
Almost all of the costs associated with the Olympic Village were to be borne privately, making it -- initially, at least on paper --a tolerable extravagance. The project's developer, Millennium Properties Ltd., would borrow the necessary funds to build the village. It would recover all its costs and earn some profit through the private sale of village units, retrofitted into luxury condos post-Games. Or so it was imagined.
The risk to city taxpayers? None. Or so they were promised three years ago, when City of Vancouver staff announced details of the Olympic Village plan. Millennium beat out two other, more experienced local development companies bidding for the same Olympic Village project. Highlights from the winning proposal include "a guaranteed, unconditional [land purchase price] that does not ask the city to assume any of the marketing or financing risk in the development.... A project financing plan that is independent of pre-sales or market conditions," according to city documents.
Taxpayers are now told that they are "on the hook for everything." Vancouver's new Mayor, Gregor Robertson, broke the news a few weeks ago.
The remark seemed to catch everyone by surprise, but it shouldn't have. The city had already guaranteed to backstop the entire project, according to notes contained in its 2007 financial report. The report was released to the public last March, but few seemed to notice. "The City has provided a Completion Guarantee which obligates it to complete the Market Project in time for the 2010 Winter Games should Millennium be unable to complete.... In the case of a default, it is expected that the City will assume completion of the Market Project and become responsible for repaying [a new $190-million loan]."
So much for the city not assuming any risk. Its new guarantee seemed to foresee the worst: construction deadline pressures and rising costs. The collapse of Vancouver's real estate bubble, and a dearth of Olympic Village condo sales. A global economic crisis, and a severe tightening of credit. All these negative factors coalesced this year. In September, Millennium's U. S.-based lender, Fortress Capital Corp., cut off its flow of borrowed capital, the project's lifeblood. This put the completion of the Olympic Village in immediate jeopardy.
The city responded in September with another loan guarantee, for $100-million. The loan was agreed to by city council in camera; details were leaked to the media a month later and controversy erupted. The $100-million has been paid to Millennium in large chunks; the last payment is due next month.
The Olympic Village funding saga now dominates the conversation in Vancouver. Each day seems to bring a fresh development. Politicians point fingers at each other. Bureaucrats topple. Vancouver's director of finance resigned first. Next to fall was Vancouver's top municipal bureaucrat, city manager Judy Rogers. She was fired earlier this month, by Vancouver's new Mayor and council. The latest departure is Jody Andrews, the city's Olympic Village manager. He resigned on Thursday.
Vancouver now wants to borrow $458-million, money it would also advance to Millennium. Under current legislation, the city must request in a municipal plebiscite permission to make such a loan. The provincial legislature in Victoria is to reconvene today to consider changing the plebiscite law.
All of this appalls Scott Busfield. He is a former federal government internal auditor who now conducts forensic audits on behalf of individual clients. He is an inveterate fiscal snoop and has spent some of the past two years attempting to crack open Vancouver's municipal books, making access to information requests with only partial success. Mr. Busfield is suspicious by nature, more so when he's denied access to information that should be made public.
He says the Olympic Village debacle is the latest and largest example of a badly run city where spending is out of control and oversight nonexistent. To wit: Approval last year from the city's then elected council to spend $30.5-million on a new dog pound, even though the existing facility was perfectly adequate. Approval was granted even though council had received no detailed plan of the new pound, and no clear explanation why a new one was needed.
Mr. Busfield determined that the cost to finance the proposed new shelter, allowing for depreciation and using current occupancy levels, worked out to $750 per dog, per day. Mr. Busfield has since gathered information that indicates that animal control-related funds may be missing from city coffers. What's more, no one inside the city's administration seems aware, or to even care.
"I don't see any internal controls in the city budgets," Mr. Busfield says. This makes financial arrangements that Vancouver has made with Millennium and its lender all the more troubling, he adds.
"You'd have to be a moron to sign what the city signed with Millennium. The city is not a property developer. It can't handle this sort of negotiation. It can't even manage the budget for a dog pound. How can it be expected to negotiate a $1-billion residential development?"
The entire bid structure of the Olympic Village project made it doomed from the start, insists one prominent Vancouver real estate developer, who spoke to the National Post on condition of anonymity. His private company has completed large residential construction projects across Canada; it did not participate in the bid process for the Olympic Village.
"It was a city-led deal and it was amateur hour," he says. "I don't like competitive bids. One bidder will promise more than the other guy and it can just get crazy. The city settled on the highest offer for its land, rather than the most realistic offer overall. It should have chosen a more proven developer that could have absorbed cost overruns and had better access to capital. It assumed that [Millennium] could manage all of the risk."
The city's next big mistake, he says, was offering its own completion guarantee.
"That was insane," says the developer. "The whole project is a disaster. A catastrophe."
He's happy not to be involved. If only Vancouver taxpayers were so lucky.