Somebody turn off the tap!

Lawyer Richard Peck's report on The Leak has been released and it's up for download now on the city website (or at least an executive summary of the report).

Peck has decided not to look into the Whodunnit aspect of the Olympic document saga, leaving it up to an ongoing VPD investigation.

In short, Peck found that oversight and accountability in Vancouver's code of conduct are "lacking."

"The code itself is fundamentally flawed in that there is no independence from the city built into the code," Peck writes. "Alleged contraventions of the code are to be reported to the mayor regardless of the complaint.

"... There is no provision in the code for an alternative reporting regime if an individual wishes to make a complaint about the mayor. This current regime is particularly problematic given the party-based governance model in place in the City of Vancouver."

Peck makes several recommendations to tighten up council's in camera system, including the creation of a super secret electronic crypt for super secret documents and hiring an ethics commissioner.

His least hi-tech solution? Marking confidential documents "confidential." Yup.

Here's one: Tap Gary Mason's phoneline.

"The obvious needs to be stated," Peck writes. "The proper functioning of the city business ultimately depends on the personal integrity of those charged with the responsibility of carrying it out. In the end, internal protections can only go so far."

Condos for sale!

I can't for the life of me fathom why, but it seems pre-sales on condos at Vancouver's Olympic Village have been a bit sluggish of late.

In fact, last fall, only two of the Bob Rennie-marketed homes were scooped up, leaving 480 or so units still on the market at what's being called Millennium Water - Vancouver's Last Waterfront Community.

Ken Bayne, the city's GM of business planning and services, broke the news delicately to council Wednesday.

"There's little uptake on that at this point," he said, serving his sales update with a slice of understatement.

But at this point, the folks at city hall would appear to be breathing a sigh of relief with today's news that it had bought out the loan on the Olympic Village project from struggling New York-based hedge fund Fortress Investments.

For a sum of $319.5 million, the city now holds the purse strings on the project, effectively becoming the banker for developers Millennium.

The deal, officials are quick to point out, saves taxpayers $90 million in interest payments compared to what it would have cost the city to stick with Fortress. I suppose that's kind of like finding a dollar-off-coupon outside a theatre showing a movie you don't really want to watch.

"For the first time since taking office ten weeks ago, we are finally able to share some good news with the taxpayers of Vancouver on the financing of the Olympic Village project," Vancouver Mayor Gregor Robertson gushed in his press release today.

In person, councillors were a bit more subdued.

"This is the best of a bad situation," said Vision colleague Raymond Louie.

In any case, it appears some at city hall suspected all along that Fortress may not have been the "ideal choice" to back Millennium's loan.

It was Millennium that first brought the U.S. firm to the table. The financier was willing to take the project from a pre-design stage to completion.

"That was a very attractive looking arrangement of the day, for the developer," said Bayne.

The only problem, as far as the city was concerned, was that Fortress required some kind of guarantee to get involved, since Millennium didn't technically own the land.

Fast forward to today, and as of 10 a.m. this morning, Fortress is no longer in the picture.

Now the concern seems to be that Millennium, anxious to get some cash flow going in what may still be a murky residential sales market, doesn't end up holding a fire sale on its condos.

Not to worry, councillors were told. The original Fortress loan agreement, which Vancouver now inherits, contains wording that limits how low the prices can go.

Now, what should we do about that other multi-million-dollar problem at the Olympic Village?

Olympic Village news triggers another round of blame game

There was a rush to point fingers Tuesday as city officials in Vancouver searched for answers to the latest financial conundrum facing the Olympic Village.

Soaring costs have jeopardized plans to build 252 units of affordable housing at the site in Southeast False Creek, it was revealed this week.

"It's infuriating to inherit yet another big problem," Vancouver Mayor Gregor Robertson said.

His Vision Vancouver party has sought to pin the blame on the former ruling party, the NPA, which had oversight of the project for three years.

But the project was started under a previous Vision/COPE government with more ambitious social housing targets in mind. The NPA toned down those goals when it came to office in 2005, but it was responsible for choosing development group Millennium to spearhead the project, which has been besieged by cost overruns in completing the overall project.

"It would be wrong to point to any one decision," said Suzanne Anton, the lone NPA councillor at city hall. "There were a series of decisions made over eight years."

But Anton couldn't help pointing out the city could be in a tougher bind today if it had gone through with Vision's original plans for 1/3 affordable, 1/3 mid-market and 1/3 market housing in the project.

"This shows how hard it is to build social housing," Anton said. "We took out the mid-market piece for mid-income earners. Imagine if two-thirds of this was subsidized. Imagine how hard it would be to build."

But the finger pointing isn't being restricted to just civic leaders. Quietly and otherwise, city councillors are raising questions as to how the project has been managed and why the extra costs appear to have caught them by surprise.

Why were costs like $7.5 million in fees to Millennium, nor $4.85 million in fees to B.C. Housing and others, not factored into the original $65-million budget?

Why was council not given the option to reduce the $5 million it will take to build the project to LEED Gold building standards?

And who approved the use of high-quality exterior materials like Swiss pearl panels, stainless steel and etched glass, on the project so that it would align aesthetically with the market-priced units Millennium is concurrently developing on the rest of the site?

"The numbers are quite startling," said newbie Vision Coun. Andrea Reimer. "It seems completely incomprehensible to me how the costs could double."

There's some question as to when exactly city hall knew the affordable housing aspect of Southeast False Creek was in trouble.

It's clear incumbent councillors had some idea of cost overruns in December 2007. That's when, during an in-camera meeting, the previous council (minus COPE's David Cadman, absent from that get-together) approved up to $95 million in financing from the city's "capital financing fund" to complete the project.

Back then, councillors were apparently under the understanding that much of the funds would be recovered from B.C. Housing, even though there was no specific commitment to do so.

On Tuesday, that expectation turned into a wish.

"There's a hope some money may come from B.C. Housing, but that hasn't happened yet," Ian Smith, the manager of development in the city's Southeast False Creek/Olympic Village office, told council.

Some councillors wondered why the December 2007 decision was made behind closed doors. I'm told no one present at that in-camera meeting objected.

And while the escalating costs of finishing the affordable housing project couldn't have come as a surprise to those city councillors this week, the tens of millions it might take to keep the project affordable did.

The city now faces dishing up to $77 million more to keep future rents for the project subsidized, or scaling back the level of affordable housing.

But given that the affordable housing was a key part of Vancouver's bid book promises that won the city the Olympics, it appears the city is unlikely to go with the latter option.

Robertson on Tuesday suggested the city might consider building out the affordable housing units off-site from the Olympic Village property itself.

"We've got to deliver on affordable housing somewhere in this part of the city," he said.

Soaring costs threaten affordable housing in Olympic Village

Escalating costs are threatening the viability of a planned 250 units of affordable housing at Vancouver's Olympic Village site.

It means the city may need to find anywhere from $56 to $77 million extra if it hopes to "sustain affordable housing" in the troubled project, according to city staff.

The capital costs required just to build the project have ballooned to $110 million from $65 million in 2006.

"The impact of this 70 percent cost increase over the original estimate eliminates the ability to utilize the normal business model ... to allow affordable rents," reads a report released late Monday that details the soaring costs.

The report suggests it would cost the city $35 million to make the affordable housing work at average market rents with no subsidized units, according to estimates from B.C. Housing. That's on top of $32 million in city funds already committed to the project.

A price tag of $56 million extra would see half the units subsidized for "core need" renters - those who pay more than 30 per cent of their income on rent.

And $77 million would make all the units "core need."

Where that money might come from isn't clear. But the affordable housing component was a key part in original visions for the Olympic Village and Southeast False Creek sites. Today's news presents a significant roadblock to those plans.

"The impact on the affordable housing initiative is of significant concern as the viability of the business model for affordable housing has been compromised," the report continues.

The report lists several reasons for the escalating costs. Construction costs, while the largest single factor at 16 per cent of the increase, are by no means the sole reason.

• $8.4 million for added floor area to account for a less 'cookie-cutter' design for the buildlings.
• $5 million to meet LEED Gold building standards
• $3 million for high quality materials (swiss pearl panels, etched glass, stainless steel) to make the city's affordable housing buildings align with the rest of the market priced development.
• $9.75 million in escalating construction costs.
• $6.5 million due to limited time and the firm deadline demanded as hosts of the 2010 Games.
• $7.5 million in fees to developers Millennium, a price tag that wasn't part of the original budget.
• $4.85 million in fees to B.C. Housing

The report states that council approved $63 million in interim financing in an in-camera meeting in December 2007, meaning city hall was prepared to pay up to $95 million to complete the project more than a year ago, expecting the funds to be recovered.

Olympic Village gives city Moody's Blues

While Ottawa was doling out cash Tuesday, city hall was learning that the outlook on its prized AAA debt rating has been revised to negative by rating agency Moody’s Investors Service.

It’s a direct result, the agency said, of risk exposure related to the construction of the Olympic Village project.

"In Moody's view, the city's decisions have led to a situation where the city is now exposed to risks associated with a residential real estate project as opposed to typical city operations," say the Moody folks.

The city could get a downgraded rating, Moody's said, if the Olympic Village suffers from additional cost overruns or if there's a "further deterioration in the Vancouver real estate market."

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