Arena deal reveals downside to contracting out

The National Post’s Natalie Alcoba:

The City of Toronto is looking to take over a new four-pad arena in Etobicoke that is dangerously close to defaulting on loans guaranteed by the municipal government.

Lakeshore Lions Arena, also known as the Mastercard Centre for Hockey Excellence, was built to replace an ageing single-pad facility run for some 55 years by the not-for-profit Lakeshore Lions Club. It’s the home of the Etobicoke Dolphins, the Faustina hockey club house league, and most notably is used as practice space by the Toronto Maple Leafs and Marlies.

via City looks to take over debt-troubled Etobicoke hockey arena | Posted Toronto | National Post.

Though the venerable Toronto Sun’s Sue-Ann Levy tried to spin this story as a lingering failure left by the David Miller administration, I’m really not sure that holds up to any kind of scrutiny. If anything, this works as an example of how contracting out a service to the private sector can sometimes not turn out as well as governments might hope.

The private sector is not and has never been the magic elixir that automatically makes government smaller and reduces costs.

This arena deal still seems like something the current administration would salivate over. A private, not-for-profit company assumes responsibility for building and managing the arena — which provides a tangible benefit for local residents — keeping it out of the hands of the city bureaucracy. The city is only the hook to back a loan issued to cover construction costs.

What’s not to love? It’s hockey without bureaucracy. And they even sold naming rights to Mastercard to sweeten the deal. Conservatives love selling naming rights.

But it didn’t work. Sometimes these things don’t work. Construction costs went up as the arena was constructed, requiring the city to increase their loan guarantee. Once completed, commercial space in the complex didn’t lease. Something had to give.

Mayor Rob Ford told the Toronto Sun’s Don Peat that he’s “furious” about the arena’s financial problems, which have led to a staff recommendation that would essentially in-source control of the facility:

“(The arena) is completely mismanaged,” Ford told reporters at City Hall. “I’ve voted for it and I regret doing that.”

via Ford ‘furious’ over arena bailout | Toronto & GTA | News | Toronto Sun.

And okay, fury is an acceptable emotion, but the revelation of this scenario isn’t that Ford and the previous council were wrong to vote for the deal — on the surface, it was a pretty good deal — but that, with contracting out, you inevitably give up something that’s incredibly valuable: oversight.

That’s an important thing to consider as council continues down this road of contracting out everything not nailed down.

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