Vancouver property owners won't see an explicit tax increase to cover the $230-million loss on the Olympic Village, with the city saying it will use profits from other real-estate ventures to absorb the shortfall.
"No council would try to put in a tax increase to manage this," said Councillor Geoff Meggs, the Vision council's point person on the increasingly complex financial mess.
Instead, the loss will be filtered through the city's famous Property Endowment Fund, a huge real-estate holdings arm that is used to acquire land for social housing, libraries, and other city projects.
While Mr. Meggs and city staff didn't specify the effects on the billion-dollar fund, whose workings few people truly understand, but the $230-million loss ultimately leaves less money and flexibility for city acquisitions.
Those losses are the final chapter of a saga in which councillors, staff, and the public were told for years that the city couldn't lose money on the Olympic Village project no matter what because the private developer had pledged millions in assets.
But when it came down to it, the city got only $45-million from the now defunct Millennium Development's real-estate empire, with a possibility of up to $17-million more depending on how certain deals work out.
That will leave the city short about $230-million on the whole project. There is still $178-million, including interest, owing for the land. And the city is preparing to write off up to $50-million of the $579.5-million owing on the construction loan.
"The previous council and our council believed the recoveries would be higher," said Mr. Meggs. "We hoped there was more. But I would never raise my hand in favour of any deal like this again without oversight."
Mr. Meggs couldn't say what the original guarantees were from Millennium directors Peter and Shahram Malek.
Several councillors and others have said the Maleks pledged their personal property - some in France and Iran, and all of their local holdings - and there were assurances this could cover any losses at the village.
"The personal assets were also listed, but there was some question about whether the city could go after that," said former councillor Peter Ladner.
In the end, the city did not go after the Maleks's residences, one in West Vancouver, one in the Lumiere building downtown. Lawyers in London informed the city that it could not get cash for property in Iran, since the Maleks themselves haven't been able to do so since they left the country in the late 1980s.
And it turned out that the Maleks's real-estate holdings in Vancouver and Toronto had so much debt accumulated against them - some of it acquired after they were pledged as security for the Olympic Village loan - that only $45-million in value was left.
The city didn't attempt to get Millennium's Evelyn Drive property in West Vancouver because it is worth only $75-million and has mortgages on it for $116-million. The situation was similar for Millennium holdings in Whistler and at the Hermitage development in downtown Vancouver.
In the end, however, the city has acquired a collection of properties unmatched since it took over foreclosed buildings during the Depression of the 1930s - the foundation of the city's lucrative Property Endowment Fund today.
The city now owns the heritage Province building next to Victory Square, a site on Pender that staff identified as a possible housing location, big blocks of land in West Vancouver, Burnaby and North Vancouver that have significant development potential, and some residential units in Toronto.
The land sites are worth $83-million in total, but have $38-million in debt registered against them.
Finally, the city is hoping to get $5-million from the controversial tower the Maleks are still building in the West End at Bidwell and Davie, once two other mortgage holders are paid off. As well, it could get as much as $12-million from the value in the company the Maleks created to hold the Olympic Village property, through potential tax writeoffs.
NPA Councillor Suzanne Anton that it's clear now that "due diligence was not carried out on the worldwide assets." But she's not surprised, given the time pressure staff were working under to finish the village, after its start had been delayed by the previous COPE council.Report Typo/Error