Vancouver taxpayers are on the hook for the $875-million it will cost to build the Olympic athletes village, Mayor Gregor Robertson announced Friday.
He blamed the previous Non-Partisan Association city council for decisions that have now tied the city to a legal requirement to finish building a luxury condo development, if the private developer is unable to, and to a lender that refused to continue financing the project four months ago.
“We face significant risk in terms of losses for taxpayers,” said Mr. Robertson, whose news conference followed a one-hour briefing for reporters by a senior city hall manager on the details of the Olympic village deal. “The exposure for the city is significant.”
Mr. Robertson was elected after a turbulent campaign that was dominated by the news that city council had voted in September to lend up to $100-million to the village's developer, Millennium Development Corp., to help meet cost overruns.
He promised that within 30 days of taking office, he would provide as much information as possible about the project and the city's involvement.
That promise was kept Friday, when he revealed that the full cost of the project, originally calculated at $750-million, had risen to $875-million; that Fortress Investment Group had essentially stopped lending money in October; and that the city has a legal obligation to finish the project to market readiness and according to the original design for the 1,100-unit village.
The city has provided Millennium with $79-million to cover construction costs in three instalments since September and the new council agreed to provide another $21-million for the January bills.
Mr. Robertson said the completion guarantee took the city to a new level of risk compared with the original guarantee it made in the 2003 Olympic bid book, which was to provide a basic athletes village, because it put the city on the hook for a much more expensive project.
City council agreed to the completion guarantee, along with giving a $193-million loan guarantee, in the fall of 2007 to enable Millennium to get its financing from Fortress.
Mr. Robertson said it is difficult to know whether the city will actually lose any money, since that partly depends on how the condo market performs over the next couple of years.
The project's 730 condos are being sold for between $600 and $1,200 a square foot. About one-third have been presold and about half have not yet been put on the market.
The Millennium Water Project, as its known, includes 250 units of social housing and 120 apartments that will be rentals, according to the deal negotiated with the city. Vancouver got $30-million from the federal government as its contribution to the Games, to be used for building the social housing. No city officials had any information on whether the city's costs for that social housing has exceeded the $30-million.
Vancouver's immediate challenge is to get financing started again for February. Mr. Robertson said the city is in delicate negotiations with the lender over the $458-million of the original $750-million loan that still hasn't been disbursed.
He said Fortress refused to continue paying construction draws after September because of its concerns about the project's cost overruns.
If agreement can't be reached with Fortress, it's unclear what will happen next. The mayor said the city is working with all of its partners, including the provincial and federal governments and the Vancouver Organizing Committee (VANOC), to ensure the project is completed.
VANOC issued a statement late Friday, saying: “We fully support Mayor Robertson, City Council and the City administration in their efforts to responsibly manage the construction and long term legacy and viability of this key venue in an extremely challenging economic environment.”
