This is a multi-million dollar business deal that has generational implications to taxpayers in Hamilton. If we are going to pander to investors, then we should focus our gratitude on the long-suffering, fatigued taxpayers of the City of Hamilton.
By Graham Crawford
Published October 11, 2010
Dear Mayor Eisenberger and Councillors,
Once again, a Staff report is released on the eve of a critical COW meeting. Once again, it includes fuzzy, or non-existent, financial information you are being asked to approve at face value, with details to follow. Once again, I'm concerned we're letting emotion affect rational thinking regarding many tens of millions of dollars of taxpayer money.
Let me be more specific related to observations regarding the latest document.
1. Bob Young precedes his announcement of a financial contribution to the capital costs of the stadium with a personal letter full of sentimental meanderings that stretch to find a non-existent connection between rail cars downtown at the TH&B station and rail yards in the west end. What one has to do with the other is beyond me.
Bob Young is allowed to write whatever he wishes, but, at this late hour, I would prefer if he kept the content relevant to the numbers associated with the Pan Am Games.
Perhaps Bob Young, now that he is so obviously in a mood to speak publicly, might agree to come to talk to all Councillors in public, versus only with our City Manager in private. He's the one who wrote the letter. He's the one who is, once again, negotiating in public.
2. Bob Young says he will contribute between $8 and $10 million into stadium construction. Already, Chris Murray is saying it is $10 million. Why? Which is it? That's 25% higher than $8 million. Is he saying the funding gap could be 25% higher too? Or the clean up costs? Why such a spread? I fear he is being a bit clever with the numbers. Please see Point #3.
3. Bob Young says he will pay the $8-$10 million over 10 years. Let's take Chris Murray's number of $10 million. What do you think it will cost the taxpayers of Hamilton (either through the Future Fund, taxes, provincial top-ups, etc.) to accept Bob Young's offer? We have to put up the money now to build the Stadium, and he pays it over 10 years.
After interest charges on $10 million over 10 years with a $1 million dollar payment per annum, what will the costs be to the City, and what will the $10 million then actually be worth in terms of capital contribution?
Please ask Mr. Rossini to run the chart for you. Ask him what he projects the interest rate to be 8 or 10 years from now that would be applied to the remaining balance owed by Bob Young. I'm quite sure you will find the resulting number to be sobering, to say the least.
In addition, in the Draft Memorandum of Understanding, Mr. Murray states, "Subject to the terms of the payment, this will provide between $8 and $10 million towards the construction cost of the stadium currently estimated at $160 million", in 2011 dollars of course.
To what terms of the payment is he referring? Where are the terms? I don't understand it, and I suspect you don't either. Find out.
We use $160 million in 2011 dollars now, and Bob Young uses $1 million in 2011 dollars now. Exactly what will $1 million be worth in 2020, or likely beyond as I suspect Bob Young will want to wait as long as possible before offering up any dollars?
4. Bob Young offered to pay the City of Hamilton $3 million to rent the stadium FROM us if it were built at the East Mountain. Now that the citizens of Hamilton have compromised from our preferred site of the West Harbour to the CP Rail site, Bob Young offers to charge the citizens of Hamilton $300,000 per year to operate the Stadium.
Why? Do you know? I don't. I think it's your job to find out. Please do so on behalf of all taxpayers.
5. Mr. Murray says that $6 million will be required for traffic infrastructure improvements at the CP Rail site. How much of this $6 million was budgeted for road improvements prior to the stadium debate? When were these improvements scheduled to take place? What are the gaps in both budget allocation and timing.
In other words, are we spending more sooner because of the stadium? Please ask Mr. Murray to contrast this with the infrastructure requirements at the West Harbour. This is our true spending gap for infrastructure.
6. Mr. Murray includes a number of $3,300,000 under the heading Environmental Conditions. Please focus your attention on what nearly $3.5 million does not include. What is his estimate for what remains?
Clearly Mr. Murray is comfortable dealing with + or - 25% numbers, as witnessed by his statements to the Spectator on the Ticat investment in stadium construction costs ($8-$10 million over 10 years).
7. Mr. Murray says that he has no idea what it will cost to relocate the existing businesses at the CP Rail site. Please ask for an estimate. His focus on tax revenues is an important number, but in no way does it reveal, or even suggest, what the true financial exposure may be to the citizens of Hamilton.
8. According to Appendix C and Appendix D, excluding land acquisition costs, the City of Hamilton has spent $1.2 million on external costs (Appendix C), and 694 days, 150 days of which are from the City Manager's Office.
What is the estimated cost of these 694 days? The numbers are known, as they are based on existing salaries. This is not guesswork.
How many days has Mr. Murray spent on this brief? That's not his fault, but it is our cost. It means he hasn't been doing other things. Again, not his fault, but it is our lost opportunity.
9. Mr. Murray makes it clear that the City of Hamilton must purchase the entire site, and that the "cost of clean up and relocation may effectively put the property out of the purchase range of any type of commercial development." That statement concerns me and it should concern you.
What are the implications of owning a 55 acre (more or less according to Mr. Murray's report, yet another example of imprecise numbers) site, all of which has to be cleaned up to make "any type of commercial development" even possible? This is a number citizens need to know, now, before we commit ourselves to a deal that may very well turn sour before we even get started.
Let me re-state, there are no monies allocated for the brownfield remediation of the West Harbour site in Mr. Murray's report, yet he acknowledges this could be a significant problem at the CP Rail site. Now we have two problems. What exactly do you plan to do to solve both of these problems simultaneously?
10. In the Draft Memorandum of Understanding, Mr. Murray says "the Tiger-Cats organization will purchase the balance of the CP Aberdeen site, currently estimated to be in the range of 10 to 15 acres."
This time, the difference between the two numbers is 50%! Which is it? If they choose to purchase 10 acres, what will be the additional costs to the taxpayers of the City of Hamilton to purchase and to remediate the additional 5 acres?
The fact that we are dealing with numbers that have a 50% difference, even in a Draft Memorandum of Understanding, is outrageous. When will the gap be closed? After you have been asked to approve it? This citizen thinks that is irresponsible.
Furthermore, Mr. Murray says the City of Hamilton will purchase between 35 - 40 acres of the site. What if we buy 35 acres? Who buys the remaining 20 acres? This is just plain sloppy accounting. Sadly, it's potentially very expensive, sloppy accounting that may come back to haunt the citizens of Hamilton.
I expect more from our City's most senior bureaucrats, no matter how much pressure they are under to come up with a solution. The site has been in play for more than a month.
11. In the Draft Memorandum of Understanding, Mr. Murray refers to "a minimum of 2,200 on-stie parking spaces." What is the maximum number? Have any discussions taken place to increase this number? What criteria will be used to recommend increasing this number? As Council, will you be asked to approve an increase in the number of spaces?
12. Why is this Draft Memorandum of Understanding written to remind us all of Bob Young's choice to operate the Tiger-Cats and how much that has cost him? "Whereas the City acknowledges the investment in excess of $30 million...and appreciates that the Tiger-Cats organization may be required to invest an additional $8 - $10 million to sustain the Franchise until the new stadium is operational for the 2014 season."
This is inappropriate inclusion in a MOU. It is irrelevant. It is emotional. It is pure myth and marketing. Please get rid of it. This is a multi-million dollar business deal, not a history lesson of business losses due to poor product and/or management.
Why not add a statement from the Premier's Office such as, "Whereas we acknowledge how tough times are now and have been in the Province of Ontario, due to the recession...."? Or, "Whereas the City of Hamilton acknowledges the taxpayers of Hamilton are suffering under the burden of an imbalance between the residential and commercial/industrial tax base."?
For whom are we writing this Draft Memorandum of Understanding? Is this just sloppiness, or is it a function of Stockholm Syndrome? Perhaps the Tiger-Cats submitted these clauses to Mr. Murray for inclusion?
13. I suggest we remove language such as, "the Tiger-Cats will assume the risk of operating the new Stadium for a period of 20 years." Risk is risk. All businesses face it when they open their doors. Usually it's not referred to in an MOU, but somehow whenever we want to communicate either how generous or how challenged the Tiger-Cat Organization is, we make mention of it.
This Memorandum has far too much Tiger-Cat spin to it for my liking. It seems to have been worded to gain sympathy and respect for the Tiger-Cats, but not for the citizens of Hamilton who are taking on all of the significant risks.
Why don't we add a line that says, "The Citizens of Hamilton will assume the risk of building the new Stadium over a period of 3 years (give or take a year or two)"? This kind of one-sided pandering to a minority partner is simply inappropriate.
Not only that, but we state we will pay the Tiger-Cat Organization $300,000 per year over 20 years ($6 million) to help cover their risk. I thought the whole idea was for the Tiger-Cat Organization to take the risk? Why would we then pay to help them cover the risk? I suggest all such wording be deleted.
14. Why do we continue to take money we currently spend on something else, and "re-allocate" it for something completely different. We will have a brand new stadium, yet somehow the current allocation to Ivor Wynne of $1.25 million is "re-allocated" to the new stadium. Why? Why isn't it $500,000, or less? Why does the amount have to remain the same?
Simply because Council won't have to make a decision to "re-allocate" current budget dollars to other high priority items? If you found a spare $1 million in the budget, what would you do with it? I think we need to sharpen our pencils and our minds here. This is juvenile accounting.
15. The Hamilton Legacy Foundation is nothing at the moment. It does not belong in the Draft Memorandum of Understanding as it has absolutely no direction.
Does Bob Young want to participate in the redevelopment of the West Harbour and the Ivor Wynne sites? Or is his Foundation purely charitable? Will he, or any of his current or future organizations, potentially benefit financially from any involvement by the Hamilton Legacy Foundation?
You need to know this if you are going to leave this nonsense in the Draft Memorandum of Understanding. Otherwise, there is an implied acknowledgement we will work together on lands in which Bob Young has absolutely no financial interest.
Be careful. This is a simple matter of asking the right questions. If Bob Young wants to privately fund a free kids day care centre in the middle of a new residential development on the Ivor Wynne site, that's fine, but I think you need find out.
As I say, my recommendation is to remove any reference to the Hamilton Legacy Foundation. At the moment, in terms of details, it's simply window dressing that once again panders to the Tiger-Cat Organization.
16. Now we're not going to use the new Stadium for amateur sport? Really? Why not? Please get to the bottom of this. The Tiger-Cat Organization proposes a Hamilton Legacy Foundation with absolutely no details, and the City of Hamilton proposes not being able to use the new stadium for amateur sport. You simply must get to the bottom of this.
Remember, the Future Fund money is funding our contribution to the new Stadium. How does not letting amateur athletes play in our new Stadium reflect the principles of the Future Fund?
What was that part of our vision statement that said, "To be the best place in Canada to raise a child"? This is criminal. Vote for this clause and you should all have an asterisk placed beside each of your names for sticking it to the kids!
17. The Tiger-Cats will receive all parking revenues and all revenues at the Stadium. Why? What about HECFI? We already pay a CEO, staff, office space, marketing, etc. Why not leverage this current investment?
Please see my earlier note about there being "a minimum of 2,200 parking spaces". Will this number increase? If so, do the Tiger-Cats receive all of the parking revenues from the additional spaces the taxpayers provide to the site? Why?
18. The Draft Memorandum of Understanding says "the Tiger-Cats must make the stadium available to the City for reasonable access, for community uses at no charge to the City." Will they charge the community groups? How is "reasonable access" defined. This is important. It's not a minor detail.
City staff announced at a recent COW meeting that over 220 days of community use are booked annually at Ivor Wynne. How do the Tiger-Cats feel about accommodating this level of community access?
Remember, this is our Future Fund money. It's about us. It's about our community. And don't forget about best place to raise a child. Sweat the details on this one. It's written like it's meaningless. It's not!
19. In the Draft Memorandum of Understanding, there is a reference to "Garage Liability insurance arising from parking lot operations". Are we talking about surface parking, or a multi-level parking garage, or both?
20. The Draft Memorandum of Understanding says "Naming rights will remain for the sole use of the Tiger-Cats Organization to defray stadium costs." Why? Why are the citizens of Hamilton not entitled to keep the naming rights sold to adorn the their stadium.
May I suggest that we split the naming rights using the same formula we are using for soil remediation, namely "based on their proportionate" investment? Sounds really fair to me, and to every single other taxpaying citizen in this City. Do you agree?
21. Chris Murray recommends tearing down certain of the buildings at the West Harbour. He claims that tearing down will send a clear message of our desire to build up.
Really? What evidence is there that this will be the result? What examples does Mr. Murray offer of polluted brownfields being attractive to developers in the City of Hamilton?
He includes not a single line about funding for remediation and development of the West Harbour. Why? If he considers tearing down buildings as a signal to the future, then using Mr. Murray's chosen beacon of hope, I suppose Hamilton does indeed have a bright future.
I could go on, but I believe these 21 points are more than enough to assist you in developing a prudent line of questioning to be used at the upcoming meeting.
Please resist trying to make this all sound wonderful, based on the fact that Bob Young has now been forced to announce even a modest investment in the cost of building our Stadium. This is a multi-million dollar business deal that has generational implications to taxpayers in Hamilton.
If we are going to pander to investors, then may I suggest you focus your gratitude on the long-suffering, fatigued taxpayers of the City of Hamilton, and not on a minority partner who has rather a lot of explaining to do given the documents before you.
Your support for our citizens should be paramount. Please save the private, for-profit, organizational pandering for when you have a beer with Bob and Scott. Please don't rub the collective noses of the citizens of Hamilton in it by fawning over a recalcitrant "partner" whose offers-to-date have been less than specific, and certainly in no way magnanimous.
Not only that, but I feel compelled to express my disappointment in the quality of analysis and of the proposed clauses in the MOU presented by, and therefore presumably supported by, our City Manager, Mr. Murray. I accept his desire to get the deal done, but I don't want to be done in by the deal.
Given Mr. Murray's recommendations, I think he has a great deal of explaining to do. I trust you will ensure that detailed explanations are forthcoming. All citizens of this City deserve such detail before investing our future.
Thanks for your attention. Hope you're having a truly great Thanksgiving with your families. I write this not because I have nothing better to do on this glorious Thanksgiving weekend, but because I feel a need to remain engaged in one of the most important decisions we will have made as citizens in decades.
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