This article by Bruce Sharp (reprinted in the quote below) is based on little if any analysis, just opinions coated in emotional language. My counter-arguments are in
Milton helps Hamilton dodge velodrome bullet Town can’t afford Pan Am facility, diverting funds from other projects, even hospital expansion Bruce Sharp is a professional engineer and energy consultant and has been a Milton resident and taxpayer for more than 10 years.Hamiltonians:
On Jan. 30 you dodged a bullet when Milton politicians provided their town’s support for the Toronto 2015 Pan Am Games velodrome. This decision came despite negative taxpayer sentiment and the likelihood of a high cost to taxpayers. The warning signs ignored are a cautionary tale for all athletic games hosts — prospective or actual.
Total Milton taxpayer dollars — to be paid, at risk or of otherwise questionable value — total $18.7 million. Adjusting for differing populations, this would be the equivalent of the City of Hamilton incurring an additional taxpayer cost of about $100 million.
Mentioning the $18.7 million risk right off the bat without substantiating it is laughable. Also, the per-capita risk in Milton is higher than if it had been built in Hamilton since Hamilton has a much larger population. Sensationalizing the figure by equating it to a $100 million dollar risk is a bogus comparison. The real argument is that Hamilton could more likely afford the Velodrome because it has a larger population base.On the surface, the velodrome project is not supposed to cost Milton taxpayers anything — upfront or on an operating basis. The reality is that the project has many financial risks and will likely be costly — facts seemingly lost on most Milton politicians. Before discussing the financial issues, it’s worth exploring the things Milton politicians said in making the decision — putting their hubris and faulty logic on full display.
From the start, only two councillors seemed to understand — either directly or intuitively — the financial risks involved. They alone heeded the broad, negative sentiment from taxpayers.
I like the use of the words hubris and faulty logic after suggesting the project will likely be costly and stirring up the emotions of the readers. Makes for good fiction. 
The remainder of the politicians ignored this sentiment and displayed equal amounts of ego and very questionable judgment.
They are definitely guilty of looking at the numbers in the business plan instead of going with their gut feeling. The mayor asserted that he too was a local property taxpayer and so he would never support the project if he felt there was a financial risk involved. The implied suggestion that the project had no financial risk seemed to be directionally similar to the circa-1976 statement by Montreal’s then-mayor Jean Drapeau — that “the Olympics can no more lose money than a man can have a baby.”
Okay, if Krantz said there was no financial risk, that would be incorrect. Every project has risks. However, you are comparing the Velodrome with the Montreal Olympics that happened 35 years ago and what Milton’s Mayor said versus what the Montreal Mayor said. Come on, that does not prove anything. Also, I’m assuming some lessons were learned from the Montreal Olympics. What error is Milton making that is identical to what Montreal did?A councillor, prominent in hospital fundraising, suggested that the velodrome would encourage cycling — resulting in improved health for residents and so a relatively lesser need for better and larger hospital facilities. This is particularly and unfortunately ironic as anecdotal evidence suggests otherwise. An acquaintance of mine rides a track bike and noted that when he lived in another city with a velodrome, an ambulance was frequently called to attend to and transport cyclists injured in mishaps. Milton’s velodrome will then likely increase demands on the town’s overwhelmed health care system.
This whole paragraph is pointless. I agree the Councillors suggestion is speculative, has not been proven and was not a benefit outlined in the business case. Bruce Sharp immediately proves that he can make equally ironic and anecdotal claims that the demands on the health care system would increase based on a comment made by ONE person who has cycled at a velodrome.Another councillor trumpeted: “What do we know that they don’t know? The difference is Milton delivers.” This comment concerned the likelihood of the project coming in on budget — a process Milton will have little or no role in, given that it is Infrastructure Ontario’s responsibility.
Okay, you may have a point here. However, you fail to mention if Infrastructure Ontario’s responsibility is to oversee financial and/or project management, and if so, what is their failure rate for delivering similar projects on budget and to what degree. Again, more hearsay not based on facts.Does this sound like any politicians you know?
Now to the hair-raising financial details:
Bruce, keep your argument emotional with terms like hair-raising because facts so far have not been your strong suit.One of the frightening things about the facility is that, just like cellphones, the ongoing costs can be a bear. Annual shortfall amounts may seem benign but basic financial math that translates them into equivalent upfront costs can expose staggering liabilities. The consultant’s report and presentation to council certainly seemed to gild the lily by providing a myriad of low estimates for operating costs.
They spoke of the likely need for an international search for a velodrome-specific facility manager and yet had modest salary estimates for that and at least one other key position. Most glaringly, they almost certainly lowballed the annual capital reserve allocation required to provide appropriate asset renewal.
The other operating issue is a so-called games “legacy fund” that is to offset long-term operating costs. The assumption is that Milton will receive a full third of the annual payments from this fund, when there will be stiff competition for the money from the other two games facilities, both of which are likely far more costly to run.
So you accuse the business plan of low-balling the salary estimates without comparing the salary estimates to similar positions at other velodromes. Making assumptions without researching facts does require a lot less work when preparing an editorial. The $80k salary seems pretty reasonable (page 427 of 440) to me. Now I do agree that there is risk regarding the assumption that one third of the legacy fund will go to each of the three facilities but it is a fair assumption to make. You then, as expected, suggest (without facts or arguments) that the other facilities are likely far more costly to operate. I would argue the swimming pool in Scarborough would have the highest operating costs. However, I believe the Velodrome, as an enclosed year round structure would have a higher operating cost that Ivor Wynne stadium, an outdoor facility only used in the warmer months. Hence a one third estimate seems fair.Every $100,000 of annual operating shortfall converted to an upfront cost requires an equivalent set-aside of $3.6 million. Including conservative amounts for just the payroll and capital reserve discrepancies and assuming the one-third legacy fund share does materialize, a minimum $9.4 million of additional upfront funds should be set aside to pay for the additional operating shortfall.
What an asinine assumption, that none, nada, zero (trying my hand at being passionate) of the legacy funding will materialize and an unsubstantiated payroll argument I have previously addressed. I do agree that a substantial amount of money would need to be set-aside for every $100,000 operating shortfall, I calculated closer to $3 million using a pretty low 2% return rate.Concerning other upfront costs, there are yet more problems.
Two and a half-million dollars of town funny money, related to Milton’s aspirational goal of attracting a Wilfrid Laurier University satellite campus, has already evaporated and is firmly on the taxpayer tab.
Next up is at least $3 million to be raised via fundraising. If this money doesn’t materialize, Milton taxpayers will be on the hook. If the money is raised, there will be another problem: local efforts, needed in addition to yet another amount of $9 million from a large donation and venue naming rights, will likely displace local fundraising for Milton’s very badly needed hospital expansion.
Joan is looking into how the endowment counts as capital. The other components of the Financial Sustainability Strategy (FSS) seem reasonable but are easier for you to dismiss as “funny money”. The likelihood of obtaining the Laurier campus probably increases significantly with the construction of the Velodrome meaning a lot of the FSS may end up being a surplus. Another asinine assumption is that none of the $3 million fundraising will materialize. Bruce makes another assumption that the Peter Gilgan donation to the Velodrome is in lieu of the hospital expansion. I understand Mr. Gilgan is an avid cycler, perhaps that may explain his enthusiasm for donating to the Velodrome? Furthermore, most people donate to more than two causes and I believe they prefer to donate to local causes. Therefore, the money raised for the Velodrome in my opinion will offset fundraising for other causes, likely national or international charities, not the Milton Hospital. Furthermore, Velodrome fundraising will likely come from a larger geographical area than the Milton Hospital, further diluting Bruce’s argument.Last but not least, the town has allocated to the project $3.8 million of development charge money intended for indoor recreational facilities. This notionally covers the cost of the track infield but there’s a good chance of a related cost overrun. Worst, though, is that once the games are over, the track’s infield users will become second-class citizens — by virtue of the facility’s role as a high-performance training facility for cyclists. Access for regular users will be limited — the exact opposite of the open access a stand-alone facility would provide. One then has to wonder about the usefulness of that $3.8 plus million portion of funding.
Bruce Sharp states there is a good chance of a cost overrun with no figures or examples to support his argument. A successful Velodrome may have a negative impact on access to recreational facilities but the surface area in the Velodrome is 50% larger than a standalone facility so a 33% decrease in available times leaves us at a break-even proposition.The potential upfront costs at risk, etc. are then $9.3 million. Adding the operating shortfalls converted to an upfront cost, the total Milton taxpayer dollars — to be paid, at risk or of otherwise questionable value — reach $18.7 million. Last, let’s not forget the $9 million of displaced hospital fundraising.
As I’ve already pointed out most of this argument is bunk. Bruce Sharp also conveniently ignores the economic impact to the town in his argument ($2.9 million annually, page 128 of 440) in pursuit of his one-sided argument.So there you have it Hamiltonians: Your “gain” is Milton’s “loss.”
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