The Hook

The 2010 Olympics athlete's village could pose "significant" problems for the city because of rising costs and the US credit crisis, said developer Michael Geller, who's also an NPA candidate for Vancouver city council.

City officials assert no taxpayer money will be needed to finance the project. But a local advocacy group said the city is prepared both to bill its citizens and to cut up to 250 social housing units to help recoup escalating costs.

The athlete's village is a $1 billion project that will encompass seven city blocks on the southeast shore of False Creek. After the 2010 Winter Games finish, the development is expected to be converted to 850 private residences and 250 social housing units.

Millennium Development paid the city $198 million for the land two and half years ago. In doing so, the company agreed to honour the city's agreement with the Vancouver Organizing Committee (VANOC) to have the village ready by late 2009.

But last week, city council held an emergency in-camera meeting to discuss what action the city would take if that didn't happen. Council was worried that rising construction costs and tightened credit lines from the US could impede Millennium Development's ability to complete the project on time.

"Ultimately, it's the city that's responsible for delivering the village," said Michael Flanigan, director of real estate services for Vancouver.

Local developer and Non-Partisan Association council candidate Michael Geller said he's not certain of the severity of the overrun costs, but he thinks the project could face troubles. A city-wide shortage of trades people and building supplies combined with a "fast-tracked" building schedule is a formula for escalating costs, he said.

Because Millennium Development is financed by the New York-based Fortress Investment Group, the financial crisis down south might restrict the availability of funds to cover such additional costs

"This could potentially be a very, very significant problem for Vancouver," Geller said.

Flanigan said Millennium Development is currently meeting with its financier to make sure the project receives all the funding it needs. He added that though the company is facing overrun costs of up to six and a half per cent of its budget, the challenge isn't unique.

"Those are costs that any developer in Vancouver faces," Flanigan said.

Recent media reports have explored the possibility of cost overruns as high as $100 million. Flanigan said that number was a worst-case scenario.

"I think it will be much less than that," he said.

In the event that Fortress Investment can't finance the overruns, Millennium Development would absorb the costs, according to Flanigan. He said it would have to be a "doomsday scenario" before Vancouver taxpayers were asked to foot the bill.

However, Chris Shaw, of the local advocacy group 2010 Watch, said the city has agreed to pay for extra workers and equipment if the project is behind schedule.

"Basically the city signed a blank cheque with this deal," Shaw said. "I would suggest that Vancouver's taxpayers have been dealt a pretty lousy hand."

Shaw said the city has already agreed to pay $159.4 million to build infrastructure such as sewers on the site and up to $82.5 million more to help construct the 250 social housing units.

When potential cost overruns are factored in, Shaw said the city could lose a significant amount of money on the athlete's village unless the affordable housing plan is scrapped.

"I don't think there will be social housing at all," he said. "I think there will be market housing."

Geoff Dembicki is a staff reporter for The Hook.