Vancouver City Council is seeking emergency borrowing powers to meet a funding shortfall of $458-million needed to complete the troubled Olympic village project.
At a special meeting yesterday, council voted unanimously to ask the provincial government for a one-time amendment to the Vancouver Charter in order to borrow the substantial sum without going to a public referendum.
A speedy amendment would require an extraordinary session of the B.C. Legislature, which is not scheduled to reconvene until Feb. 10. But Mayor Gregor Robertson said there is an urgent need for "quick and decisive action ... due to the current emergency and financing required for the project."
Premier Gordon Campbell said he would like to see the council resolution before deciding whether a recall of the legislature is warranted, but affirmed that the government wants to be part of any solution to the situation. "I think the mayor has handled it very responsibly. ...We're not going to get in the way."
The council move comes just days before the city is to fork out another $21-million to the project developer, Millennium Development Corp., in order to keep construction going. The village must be finished by November so it can be ready for housing athletes competing in the 2010 Winter Olympics.
The advance represents the last chunk of the city's controversial $100-million loan to Millennium, which became a huge issue in the recent municipal election campaign after the in-camera decision was reported in The Globe and Mail.
But another construction draw of approximately $30-million is due Feb. 15, and project lender Fortress Investment Group has not provided any money to Millennium since September, because of concerns that development costs had soared $125-million over budget.
Mr. Robertson said the city is in the midst of "urgent and delicate financing discussions" with all partners in the village project to hammer out a recovery business plan that "puts taxpayers first and brings stability to the long-term project."
The mayor disclosed last week that the city is on the hook for the entire $875-million Olympic village if it flounders financially, because of a completion guarantee the previous city council signed in 2007.
Gaining extra borrowing powers would give the city a chance to seek alternative funding at a better rate than the 11-per-cent interest Fortress is charging on the $317-million it has advanced to date, and thus reduce financing costs.
"We require a tool, so we are able to negotiate more fully with our partner [Fortress] It gives us more negotiating powers," the mayor said.
However, Fortress could insist that Millennium pay a penalty of more than $50-million to get out of the existing loan, sources said. That would likely be fought out in court at a later date.
Total construction costs for the 1,100-unit village are now set at $875-million, up from the previous budget of $750-million. So far, Fortress has lent $317-million and the city $100-million to the developer, leaving $458-million more to cover.
Costs are to be recouped by selling most of the units as market housing once the Olympics are over, but the recent real-estate downturn has raised questions about how much of the outlay will be recovered.
However, Mr. Robertson indicated that, despite the current problems, taxpayers will not be out enormous amounts of money in the long run. "This project, when completed, should leave us with significant value, assuming the real-estate market rebounds," he said. "That will reduce the potentially dramatic losses to city finances."
He said there has been no approach to either Victoria or Ottawa for financial assistance.
In Surrey yesterday, Prime Minister Stephen Harper said the federal government ruled out extra money for the athletes village.
"I will be crystal clear," Mr. Harper said. "We will not be funding cost overruns at the Olympic village."
The mayor's party, Vision Vancouver, which swept to power in the last municipal election, has blamed the previous Non-Partisan Association council for the current debacle, arguing that the "completion guarantee" exposed the city to huge financial risk.
During debate on yesterday's resolution, Vision Councillor Geoff Meggs said there needs to be some sort of fact-finding inquiry so taxpayers never face this sort of problem again. "I hope not, but the city may be facing the largest financial loss in its history," he said.
NPA Councillor Suzanne Anton, the lone member of her party to be elected, said it was wrong to engage in "finger-pointing. ...Those decisions were made in an era of high housing prices [and were made]to get the best deal for the city and its taxpayers."
Despite the crisis, Mr. Robertson vowed the Olympic village will be completed on time.
New Democratic Party Leader Carole James, meanwhile, said she would use any debate over the city's requested amendment to demand answers from the government on the real costs of the Olympics. "I'm quite happy to come back early to ask questions about all of the Olympic spending," she said.