The city will be better off financially if football doesn’t work out at Lansdowne Park, at least in the short term.
It may sound counterintuitive, said city manager Kent Kirkpatrick, but under the funding arrangement the city made with the Ottawa Sports and Entertainment Group, the city would receive more money during the first 12 years of the deal if the CFL was not playing.
That’s because the football team is expected to lose money for the first few years. The payment formula does not assume any revenue coming from the team until well after 2020. After that, the city could expect to less money coming in from Lansdowne Park compared to a scenario where the team is successful.
According the a report from Kirkpatrick forecasting five “worst-case” scenarios, the financial model worked out with OSEG will hold up even if interest rates jump or if the retail component is not as successful as they hope. It would just take longer for the revenue from the property to surpass the debt payments.
If all goes according to plan, the city would use 37 per cent of the property taxed generated by the retail development to pay off their debts.
The original financial model assumes a two per cent vacancy rate, but if 10 per cent of the retail space stays empty for the next 30 years, the city would have to devote 52 per cent of property tax revenue to debt repayment.
After reviewing the financial modeling, Auditor General Alain Lalonde, said assumptions and the modeling was accurate.
“It makes sense,” said Lalonde. “The risk is minimal.”
