By Jon Willing, Ottawa Sun
The city will guarantee a $23.6-million loan for the Ottawa Sports and Entertainment Group to pay for the corroded steel discovered in TD Place arena, if council agrees to a settlement.
The recommended deal, outlined in a report released Tuesday, would put an end to a beef between the city and OSEG over the damaged steel in the old Civic Centre. The remediation cost was previously pegged at $17 million, but now it's $22.6 million.
Councillors are also learning OSEG wants the city to pay $1 million related to temporary asphalt, concrete pavers and bollards in the public parts of the mixed-use area at Lansdowne Park to make everything match the materials in the urban park.
City staff are recommending the settlement to avoid going through time-consuming commercial arbitration — costing up to $2.5 million in taxpayer money for legal costs if the city loses — with one of its most important business partners.
The city says guaranteeing OSEG's loan would help the sports company land a 3.5% interest rate.
A loan guarantee always comes with the risk the guarantor could be on the hook for the debt if the borrower defaults.
But city management believes it's the best way to resolve the disagreement over who should pay the bill for the steelwork.
The $23.6-million would not be considered equity, which means OSEG wouldn't get a return off the borrowed money.
The loan payments and interest would be paid from the revenues received under the Lansdowne partnership, the report says.
OSEG has argued it shouldn't pay the extra cost for the arena steelwork because it's outside the scope of its redevelopment agreement with the city. The company didn't realize how bad the water damage was until it opened the roof and walls.
Since timelines were tight, OSEG went ahead and made the repairs without holding up the Lansdowne project.
The city argued any extra construction costs were always OSEG's responsibility.
The finance and economic development committee will be asked to approve the settlement during a meeting next Tuesday.
The city also published the first financial snapshot of the Lansdowne partnership with OSEG. It's projecting an extra $110 million in net revenue over 30 years thanks to long-term leases, plus higher football revenues, naming rights money and ticket fees.
On the other hand, an extra $54 million was sunk into construction in 2014 and 2015 because of the corroded arena steel, mixed-use public realm and technology fit-up. Retail building construction was $20 million more than expected.