Vancouver assumes financial control

Updated: February 18, 2009, 8:21 PM ET
Associated Press

VANCOUVER, British Columbia -- Vancouver taxpayers are on the hook for $254.2 million to complete construction of the 2010 Winter Olympics athletes village.

Vancouver Mayor Gregor Robertson said the city has bought out the remainder of village financing from New York-based hedge fund Fortress Investment Inc.

The purchase means the city becomes the lender to Millennium Development, which is building the 1,110-unit village to house the athletes.

Fortress stopped payment on its $633 million construction loan in the fall.

The city said Fortress backed out due to cost overruns, and a crashing real estate market meant Millennium Development might not be able to pay them back.

The city stepped in with $84.3 million interim financing to keep construction going, but that funding runs out next month.

Robertson said Fortress was bought out on terms that will save the city $71.7 million compared to the Fortress deal.

The city had to pay Fortress a $3.2 million early payment penalty, city councilor Geoff Meggs said.

Robertson said Vancouver's reputation was at risk over the issue.

"This change allows us to put our focus for this project where it belongs -- getting the site ready to turn over to [Olympic organizers] and become the athletes village for the 2010 Games," Robertson said.

Vancouver Games organizing committee executive vice president of construction Dan Doyle said in a statement that organizers are confident the city will deliver on its commitment to deliver the village on schedule.

The city had to go to the provincial legislature last month for an amendment to its charter to allow it to get a loan for the buyout.

Much of the athletes village was planned to be sold as housing after the Games to recoup costs. But Vancouver's housing market has slumped, and construction costs have risen.

Chris Shaw of the watchdog group 2010 Watch fears the city won't be able to recoup its costs and could face bankruptcy over the village.

"They can cut services, raise taxes, and they can pray. Those are the options," Shaw said.

Fortress told Millennium it would not advance further funds as the loan was "out of balance."

Games security costs also remain an ongoing concern.

The cost was originally estimated at $140 million to be split between the provincial and federal governments.

The Canadian government has since acknowledged that cost could be as high as $797 million.

However, when the latest Canadian budget was released Jan. 27, there were no Olympic security numbers.


Copyright 2009 by The Associated Press

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