A Winnipeg municipal body voted in favour of a negotiated agreement to reduce a penalty against Stuart Olson for failing to deliver a hotel project.
The agreement also released the general contractor from its hotel obligation.
Stuart Olson was initially contracted by the Winnipeg convention centre to manage a $180 million expansion of the facility.
Part of the agreement was to attract a hotel to a nearby lot owned by Centre Venture, a development corporation created in 1999 by Winnipeg City Council to spearhead the revitalization of downtown Winnipeg.
The lot is the former site of the Carlton Inn, which was demolished last year.
The agreement stated that if Stuart Olson couldn’t find a hotel proposal, the centre would hold back $16 million in payments.
Earlier this month, convention centre board chair Bob Silver requested that the executive policy committee (EPC) vote to reduce the penalty to $3.75 million.
Silver told committee members that if the penalty wasn’t reduced Stuart Olson could initiate a long, expensive legal battle. The committee made the decision with great reluctance, noting they were on deadline and lacking key pieces of information.
The EPC also forced Centre Venture to start a public bidding process for the hotel project, rather than move forward with a secretive deal.
The details of the deal came to light after Centre Venture officials were questioned at the EPC meeting on Jan. 26, shortly before the vote.
"The citizens are very frustrated, they don’t want to see this kind of thing going on again," said councillor Marty Mortanz.
"I think we have an obligation to the taxpayers of this city that we cannot do business this way ever again."
When Roger King, legal counsel for the centre, was asked by EPC members about the details of the new penalty amount before the vote, he didn’t know them.
"I believe at all times that the convention centre and its board acted properly. I am not here to cast blame," he said.
When asked why a valid hotel plan was not secured prior to the expansion project, he said that none of the levels of government demanded it and it only became viable if expansion went ahead.
To uncover the details of the deals and confirm rumors, councillors grilled Centre Venture officials.
Mayor Brian Bowman read a list of documents, including meeting minutes, deal documents and correspondence materials, expressing frustration at not receiving the information and a lack of communication.
Curt Vossen, chairman of Centre Venture, confirmed that True North came forward with a plan to develop the Carlton Inn lot and the two had signed an option agreement.
The committee expressed frustration that Centre Venture would do that while the city was still in a contract with Stuart Olson to deliver a hotel.
During the meeting, True North issued a press release confirming its plans with Centre Venture.
"We are making big decisions with millions of (dollars of) taxpayers’ money and we haven’t seen the option agreement," Bowman said.
"We are all scratching our heads with the lack of transparency on this matter."
According to a release from True North, the agreement gives it the right to acquire the property in the future for a "significant mixed-used real estate development for downtown Winnipeg."
This development would include office, hotel, retail, residential, parking and public plaza components.
"During this process, we have considered major mixed-use real estate projects in other cities developed by our industry peers, including Maple Leaf Square in Toronto and LA Live in Los Angeles," it stated.
"It is anticipated that this investment in our downtown will greatly enhance Winnipeg and its (Sports, Hospitality and Entertainment) district."
Vossen explained that Stuart Olson gave various signals that it had no intention of ever finding a hotel project for the lot.
He said Stuart Olson officials approached the city about getting out of the hotel obligation and the company indicated it would not help with demolition or carry over costs on the site.
He said the city then encouraged Centre Venture to seek out other options.
Vossen said they were approached by True North with what he called the first and only credible proposal that had surfaced in more than two years.
"True North is the best route to proceed," he said.
But, the mayor and other councillors were not satisfied with the private nature of the process and made amendments requiring the project go through a public bidding process.
Committee members stated that if the True North proposal is as good as Centre Venture believes, it will win and make the process more legitimate.
The committee voted in favour of adding an expression of interest component to the deal.
"There’s doing the right thing and doing it the right way," Bowman said.
"I want to make sure things were done the right way."