It was a meeting done behind closed doors. In August 2010, the mayor of Markham and two city councillors sat in a hotel room at the Four Seasons Hotel in Toronto basking in the company of the who’s who of the NHL: Commissioner Gary Bettman and second-in-command Bill Daly. It was an informal meeting, to give Markham a chance to pitch itself as a contender in the pursuit of the country’s next NHL team.

The NHL liked what they saw. On paper, Markham had potential: The city of 300,000 was booming, ideally situated with highway access and public transit and perhaps most importantly, within reach of a hockey-hungry fan base. All Markham needed now, the NHL advised the eager councillors, was an owner and an arena.

“He said to us, north Toronto good,” recalled Markham regional councillor Jim Jones. “But he didn’t promise anything,”

It was hardly a guarantee of a team, but it was all the assurance city officials needed.

Markham’s aspirations surfaced 18 months later. In April 2012, the city officially announced a proposal to build a NHL-size arena north of Hwy 407 near Kennedy Rd., in the heart of what will be the city’s new downtown. Reporters flocked to the city northeast of Toronto intrigued by speculation that an NHL franchise would soon follow.

Graeme Roustan, a hockey promoter and head of the private group pushing for the arena denied the claims. This was to be a “sports, cultural and entertainment facility” that would rival the Air Canada Centre, he said.

The excitement of a possible team distracted from the bigger story. Six days after the announcement of the project — the biggest in Markham’s history — council voted, with almost no public input, to endorse a financial plan that would see the city borrow $325 million for the 20,000-seat arena. The private group GTA Sports LP, headed by Roustan and financially backed by well-known developer Rudy Bratty of Remington Group, would eventually pay back half the costs.

“What’s the rush?” said Councilor Joe Li, who voted against the framework and proposed a 60-day period to study the plan. “Why are we pushing it through so fast?” he asked, when his motion failed.

It was a bold move, even more so for debt-free Markham, better known for keeping its residents happy with a tame political culture and 0 per cent tax increase. And it left many residents wondering: Where did the deal come from? Could the plan actually work? And most importantly, who would be on the hook if it didn’t?

“This is an incredible opportunity for our city,” said Mayor Frank Scarpitti, who has been the project’s most fervent supporter. “This will be the catalyst the city needs to see the plan for Markham’s (new) downtown come to fruition.”

But an examination of the project shows it was underway years before becoming public to both residents and council, and it’s a taxpayer-funded venture with little public input and no tendering.

It’s also a project that hinges on a complicated funding scheme that is vulnerable to a legal challenge, according to some experts. Furthermore, it still involves crucial negotiations involving a lease deal for the arena and politicians acknowledge the public may never see some key details because of the commercial nature of the public-private venture.

Wary taxpayers only have to look down the Don Valley Parkway to the Rogers Centre, formerly the SkyDome, to see evidence of arena dreams going bust. Estimated to be built for $125 million, the final price for the stadium soared to $600 million — with taxpayers on the hook for most of it.

In Markham, the promoter, mayor and senior staff are adamant that residents are protected — even if a major tenant never shows up. Still, some Markham residents are starting to ask: Why should public money be used at all?

“If Markham residents had actually been given a say over how $350 million in taxpayer-financed debt would be spent, would they have chosen a privately run hockey rink over other valuable and more critically needed public services?,” said Markham resident Lorne McCool, the former planning commissioner and CAO of Markham from 1990-1999, in a letter to the editor in the Economist & Sun. “Likely not.”

Building a downtown from scratch is no easy feat. Markham has spent the better part of two decades trying to get it right. When the town approved the official plan for Markham Centre, south of Highway 7 between Warden and Kennedy Rds., in 1994, the plan for a suburban downtown was considered ahead of its time with its pedestrian-friendly infrastructure and transit-oriented concept.

But the town took the plan one step further a decade later. Jones conceived a concept called Markham Live to pitch the hidden cultural potential of downtown Markham and make it a destination location for sports facilities like an NHL arena. Jones, who has become the arena’s biggest critic, said his vision was always for a fully privately funded arena for amateur athletes.

“When you are looking at civic competition, it’s really difficult to differentiate yourself,” said Brad Humphreys, a sports economist at the University of Alberta, who advised Markham on the economics of arena building. “But somehow, cities have gotten into their heads that a good way to do it is by building a new arena,” adding that there is almost no evidence it works.

After unsuccessful bids for the Commonwealth games and the Canadian Sports Institute, the city finally scored with an aquatic facility and badminton centre for the 2015 Pan Am Games scheduled to break ground next week. Building a hockey arena seemed to be simply a matter of time.

“This isn’t just something that dropped out of the clouds for us,” said Scarpitti. “This is something we have been pursuing for the past two decades.”

Roustan, former chairman of Bauer Performance Sports Ltd., who left his post at the sporting-goods company in September, was also looking for a way in. He was in the business of building, managing and owning small arenas and believed the GTA market was underserved.

“For the past 10 to 15 years, I have been watching this market very carefully,” said Roustan, who says a deal like this can only work in Markham where development has been booming. “It became very clear to me that nobody was getting it going. So I took it upon myself to do it.”

Global Spectrum, a venue management company recently hired by GTA Sports, told Roustan that due to pent-up event demand in the GTA, an arena in Markham could be busy for 130 days a year — even without a major tenant.

Sensing an opportunity, Roustan met Scarpitti in August 2010 to share his idea for an arena in Markham. “What we were thinking and what Graeme was thinking fit. So the question was where?” said Scarpitti, who introduced him to Bratty, the billionaire developer and founder of the Remington Group. Bratty had been at the table with the NHL and the city in August, as well.

Bratty had nearly 100 hectares of undeveloped land in Markham Centre and a soft spot for sports teams. Bratty had invested in the Toronto Toros of the World Hockey Association in the 1970s, and was part of an effort to bring an NFL team to Toronto a decade later.

Roustan said his first meeting with Bratty, in September 2010, was a hockey love-in.

“During the dinner, he started telling me his stories about his love for hockey,” said Roustan, including the time he travelled to Russia during the height of the Cold War to watch the ’72 Canada-Russia series. “I had watched those games as a kid in Montreal, but I had never met anybody who had actually gone before.”

Bratty has declined repeated requests for interviews on his involvement in the project.

With all parties onside, the mayor, regional councillors Jones and Jack Heath signed a non-disclosure agreement with Roustan and one of his companies, York Live, on Oct. 1, 2010 to indicate Markham was “interested in moving forward.” The other 10 councillors, busy with their re-election platforms for a municipal election just weeks away, were not privy to or told about any discussions.

Including, how the arena would be funded.

Raising property taxes was a non-starter. It was a political move that even Scarpitti, who won the last election with 85 per cent of the vote, was unwilling to make. “At one time, there was a discussion, why don’t you raise property taxes? And I said, absolutely not.”

So over the course of 2011, the mayor and senior city staff hammered out a “financial framework” they were convinced could work. Bratty was also involved in the process.

During this period, Roustan approached Hockey Canada to make a pitch to hold the 2015 world junior hockey tournament at the arena, although the project had yet to be disclosed publically.

Scarpitti takes credit for the public-private deal, but admits it hinges on Bratty’s participation. The developer will give the city two hectares of land in Markham Centre to build the arena. He will also guarantee half of the construction costs, around $162.5 million, which will be secured through letters of credit and mortgages on land in Markham exceeding that value. The private partners would also be responsible for any cost overruns.

The city would make up its half of $325 million through parking revenue, ticket surcharges, a lease agreement, extra charges on developers in exchange for higher buildings and densities, and a “special voluntary levy” for developers on new construction in Markham over the next 20 years. They also agreed that GTA Centre LP would design, build and operate the arena, with its own contractors.

The city will eventually own the building — and aims to pass a bylaw to make it a “municipal capital facility.” This classification, if approved, would exempt the arena from development charges and municipal taxes, estimated to be between $500,000 to $2 million a year, according to city staff.

“I would actually call this a private-private deal because there are no tax dollars involved — or very little. There’s no increase in residential property taxes at all,” said Andy Taylor, the city’s chief administrative officer.

But residents and developers admit it is an invisible tax that will be passed on to new homeowners through development fees, and those who plan to attend events at the arena. In the worst-case scenario, Taylor said, if all development were to stop in Markham, current residents could be on the hook for $160/year after five years.

The city is certain that won’t happen. Bratty’s involvement is assurance enough, said Roustan.

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“I don’t think the Bratty family is getting enough credit for all they have done,” he said, adding that Remington will also be paying the voluntary levy on new development in addition to the upfront contributions.

But many believe Bratty is giving so much, because he has the most to gain.

“He’s a smart businessman, he has a lot of land in the area, and so his other land will increase in value,” said the head of a development company based in Markham, who requested anonymity, concerned about repercussions on his projects in the city. “It’s as simple as that.” According to Markham staff, even the two hectares Bratty has “given” the town is in exchange for parkland he already owes the city.

Bratty refused comment on how much money he might make from development around the arena.

Roustan offers a hint: “Between you and me, I wish I was a developer. There’s only upside.”

The challenge in a public-private deal is keeping both sides happy. “I would say it has taken considerable more work and effort,” said Scarpitti, about working on a public-private venture. “I have spent the better part of a year and a half working on this thing, and keeping both sides in the loop.”

After the city and private group completed the financial framework behind closed doors, they passed it to independent consultants for analysis (at a cost of more than $500,000). Yet, the city continued to keep the deal — and the cost — away from the rest of council.

And even today, despite numerous requests and access to information requests, the city has refused to release the consultant reports to the public or even fellow councillors, citing legally sensitive material. Councillors were given brief presentations on the reports in April. Moreover, no element of the arena, including funds for consultants appeared in the budget that council approved earlier this year.

There has also been no tendering on any element of the deal — including how the city secured a partnership with Roustan’s GTA Centre LP. The city says it has a procurement bylaw that allows it to enter into contracts without public tender “where it is in the best interests of the city.”

Moreover, GTA Centre LP, which will construct and manage the building, has formed its own team of architects, builder and consultants for the project without any tendering. That includes one of his companies, which will put in the arena’s ice and refrigeration systems, Roustan has said. It is also unclear how much Roustan’s companies will make from this arrangement.

But the biggest concern for the public is around the city’s plan to pay its share of the $162.5 million back is secure. The city is asking developers to pay a voluntary levy on new construction on top of existing development charges — already the highest in the GTA. But it’s a levy that was enacted without the public process stipulated in the Development Charges Act and legal experts suggest that will make it vulnerable to legal challenge. They also say the levy is unenforceable due to its voluntary nature.

The city says it has kept things secret due to the sensitive nature of commercial negotiations. But in Edmonton, where an arena project is also in the works, the city has tried to keep residents constantly involved through public consultation meetings, surveys and even involvement in the design of the building. In Markham, until this week, it was almost impossible to find information about the arena or upcoming meetings on the city’s website.

“Some things have to be negotiated privately, but if there are substantial changes to what the public knows or what they have seen, we feel it’s important that those be made known to the public,” said Rick Davis, Executive Director, Edmonton Arena District.

“As a public entity we have to be transparent and we have to be very visible, and when you have a private sector private for very good reason, a lot their financial information is proprietary and they are very reluctant to have that out in the public. It’s a very delicate balance.”

Braving the commuter rush hour at Markham’s GO stations takes courage. But for the past few months, residents Karen Rea and Donna Bush from the Markham Village City Ratepayers Association have been pounding the pavement to inform people about the deal.

“Most people don’t know or don’t care,” said Rea, who has become one of the most outspoken opponents of the project. “That’s why the city thinks they can do whatever they want and get away with it,” she said. She has collected 1,000 signatures on a petition urging the city to make the arena privately owned.

A growing number of people in the city are starting to pay attention. Over the past month, ratepayer groups have held meetings on the arena, with some taking an official stand against the city’s involvement. Others are still open to hearing more about it, before taking a position. And supporters of the arena say this is the “most exciting project” to come to the city in years.

“Most of the people I have talked to are not against the arena, but they are suspicious,” said Markham resident Mike Gannon, a member of the Unionville Ratepayers Association, who has written a letter to the Minister of Municipal Affairs and Housing, Kathleen Wynne, asking for provincial oversight.

“It’s just so complicated, they can’t immediately understand it and all they know is that potentially we are going to be on the hook for this thing.”

Some councillors are also undecided, and say they don’t know much more about the deal than they did four months ago. A few are pushing for a city-wide referendum. Others are concerned the infrastructure like roads and limited parking being planned around the arena won’t be able to handle the traffic and congestion in the long-run. Even supporters of the deal are asking for some time to digest it, and an independent peer-review to ensure Markham is getting a good deal.

“If what’s on the table isn’t good enough for the people of Markham, we have to be willing to walk away,” said councillor Howard Shore, a supporter of the deal.

But for some councillors, the final decision will likely depend on the outcome of crucial negotiations currently taking place behind closed doors. In a confidential city document, the city lays out its initial position on crucial elements including: keeping the lease with GTA Sports LP less than 49 years; discussions around naming rights; ensuring the city gets more profits if a NHL team shows up, or putting in a termination clause if a franchise team doesn’t come.

Scarpitti says residents will be given the “essence” of the finalized deal including the lease, but may not see all the details.

In the meantime, the arena project keeps moving ahead. GTA Centre LP submitted its site plan for the arena in a highly publicized press conference in August. Roustan recently hired a venue manager and a food and beverage provider for the arena, and is in talks with the National Basketball League of Canada to house a franchise at the arena. His goal is to have the building open for business in January 2015, just in the time for the world junior hockey championships.

Yet, the project still needs final approval. Councillors will vote on the arena by the end of the year. But some say the project is being pushed through too quickly — and is leaving real public input far behind.

“They already have opening day planned out,” said Jones. “All that says to me is the train has already left the station, and there is nothing we can do to stop it. The process now is just about optics.”

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