July 19, 2006

Recreation

Defining ‘assets’ can have impact on construction of public sporting facilities

PETER KENTER

correspondent

TORONTO

Initiating new construction projects requires greater understanding between partners, both public and private, and a proper definition of the term “assets.”

That was the conclusion at a recent Canadian Urban Institute conference on the future of public sporting facilities.

Increased construction of school athletic facilities in Toronto, for example, can only proceed when major players — the provincial government and the City of Toronto — see both The Toronto District School Board and The Toronto Catholic District School Board (TCDSB) as owners with land and property assets, says Oliver Carroll, Chairman of the TCDSB.

“We’re able to levy education development fees in new developments, such as the Railway Lands, but we have no ability to leverage our surplus sites,” Oliver says.

“When the city notices that we have a school that doesn’t appear to be used, they ask us if they can ‘use’ it. Not buy it or lease it. The school boards are expected to make a donation. If we could see some benefit from the use of our capital assets, we could build new schools and facilities in other parts of the city where they’re needed.”

If capital is freed up, Carroll predicts that new standalone construction will be less likely than expansion of existing structures, with single-purpose school buildings becoming multi-purpose facilities incorporating arenas, aquatics centres, seniors’ centres and libraries.

Successful public-private partnerships (P3s) also require the proper identification of assets, says Ronald Bidulka, Firm Director, Financial Advisory, Deloitte & Touche LLP.

“There’s no one P3 solution for all projects, whether it’s a community arena or major sporting facility,” says Bidulka. “Not every hockey arena, pool or gymnasium is a viable P3 project on its own, but it can be financially engineered to make it viable.”

Public projects require identifiable assets to attract private investors — part of the rewards that private partners take on in exchange for assuming project risks. Bidulka lists P3 arena projects in Ottawa, London and Hamilton where the public partners understood what made the projects valuable to them and were willing to give up control of certain assets in exchange.

“In many communities, after calculating maintenance costs, debt financing and user fees, public arenas sell ice time at an overall loss,” says Bidulka. “That business provides no assets for a private partner to become involved. In London, the city allowed a private partner to operate the facility, run concessions and secure sponsors.

The city purchased ice time at market rates and sold it with no mark-up to the community. If there is no perception of an asset, the deal must be structured to create the asset.”

Bidulka says that all P3 deals must be completely transparent to government and public stakeholders.

“The public often has no understanding and appreciation that the cost of ice time has no economic basis in relation to the cost of developing and maintaining a facility,” he says.

“People might need a ‘P3 101’ to understand the benefits of the deal.”

The comments were made in Toronto last Friday at a conference entitled “Reinvesting in the Public Realm: How Sports Activists are Inspiring a New Era of Community Building.”

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