Vancouver City Council knew as far back as the summer of 2007 that the Olympic athletes village was in jeopardy and that the city's own financial investment in the project was at risk, The Globe and Mail has learned.
At an in-camera meeting held that June, staff informed councillors that project developer Millennium Development Corp. was in "anticipatory default" - in other words, it was anticipated the company would not be able to meet its financial obligations to the city, according to minutes of the meeting.
At that point, Millennium owed the city $193-million for the land on which the village was being built. At the June meeting, staff recommended that the city accede to a request by Fortress Investment Group to guarantee $200-million of the $750-million loan that the New York-based hedge fund had made to Millennium because of concerns the lender had about the developer's financial situation.
Out of that meeting, the Non-Partisan Association party majority on council agreed to provide Fortress with the loan guarantee and a completion guarantee, obligating the city to complete the project in the event Millennium was unable to. That also meant the city would be responsible for paying the Fortress loan in the event Millennium defaulted.
Councillors for Vision Vancouver and the Committee for Progressive Electors voted against approving the loan and completion guarantees.
Newly elected Vision Vancouver Councillor Geoff Meggs said yesterday that decisions flowing from the June meeting effectively "made the city the developer from that day forward."
Council would later secretly agree to lend Millennium another $100-million to keep construction on the site going after Fortress stopped advancing loan payments amid concerns Millennium was in material default.
And that point, the city's exposure was $500-million. Fortress, meantime, had first charge on the property, which meant that in the event of a default by Millennium, Fortress would be first paid of any creditors.
According to a source, council decided to press ahead with Millennium as developer despite revelations it was in anticipatory default, because halting the project at that point and finding another firm to take over would imperil deadline obligations the city had with the Vancouver Organizing Committee for the 2010 Games.
"The city's exposure in these circumstances is secured by guarantees and other rights provided to the city by Millennium, including corporate and personal guarantees and the transfer of all interests in the market project," say 2007 financial statements about the guarantees made at the June meeting.
The city has never disclosed the nature of those corporate and personal guarantees exacted from Millennium.
Mayor Gregor Robertson said last week that the city is responsible for the entire cost of the $1-billion project. He also said Fortress is refusing to advance any more of the $750-million loan to Millennium unless the city guarantees the entire loan, not just $200-million of it. Fortress has so far lent Millennium $317-million.
Raymond Louie, who was present at the June in-camera meeting, said he does not recall staff referring to Millennium being in anticipatory default. Two other councillors at the meeting did not respond to Globe and Mail requests for an interview.
Despite Mr. Robertson's commitment to "openness and transparency" around the Olympic village project, Mr. Louie would not divulge what guarantees Millennium offered to the city because the developer is "still a partner so it would not be prudent to discuss that."
Meantime, Estelle Lo, the city's chief financial officer who resigned in November, will not be interviewed by Mr. Robertson or anyone from his staff.
When the newspaper first broke news of Ms. Lo's resignation - allegedly over differences she had with then-city manager Judy Rogers over the handling of the Olympic village financing - Mr. Robertson said that if elected he would talk to the former CFO to get to the bottom of why she had mysteriously left city hall.
While former mayor Sam Sullivan said Ms. Lo had voluntarily resigned from her position, The Globe disclosed that she left with a severance payment worth one year's pay. Her salary was $220,000 annually. Employees who resign voluntarily are not normally given severance.
The Globe reported that Ms. Lo did not want to resign but was forced to by Ms. Rogers, who found the CFO's constant questioning of the village financing a drag on the process.
Mr. Louie said there were no longer any plans to interview Ms. Lo about the concerns she may have had because council has since hired both inside and outside financial experts to investigate the project.
Meantime, he said the city still plans to go ahead with an investigation into the leak of confidential information to The Globe in October, which touched off the Olympic village scandal. The city hired Vancouver lawyer Richard Peck last fall to conduct the inquiry. It is not known how much Mr. Peck is billing the city for his work or whether there is a budget for the inquiry.
Mr. Louie said a separate police investigation into the leak is ongoing.
