My tweets yesterday conveyed the confusion many of us were feeling as we listened to the complex explanations of how Olympic village losses are defined in accounting terms by city manager Penny Ballem.
I still can’t claim to understand all of it. One thing that was pretty clear was that there are two very different ways of looking at the world: the accountants’ way and the public’s way, as I noted also in my story today.
In the end, I felt as though the city manager and everyone at the city would have done all of us a huge favour if they had presented the information like this:
“Okay, people, in the financial statements next week, you will see that we are writing down $48 million on the Olympic village, i.e. subtracting that much from what we originally calculated as the value of the village overall. This is a kind of a technical number and I’ll try to take you through it. But you should understand that this is only one way of talking about the finances of the village. In the bigger picture and in many people’s eyes, the losses should also include the money we will likely never get for the land and it doesn’t include the whole separate issue of the social housing and it doesn’t include the money we spent on public infrastructure ($87 million) that we thought would be paid for by the land sale and now won’t be.”
I think we all could have grasped that and would have avoided some of the questions now arising.
There are still things we don’t know, like the assumptions that the city’s finance department people have made in order to determine what they think the village’s ultimate revenues and losses will be.
I am also still not sure that I understand the column of numbers that was presented on what will appear in the city’s financial statement. And, although I get that accounting is different from public perception, I’d really like to hear from people in the accounting world about whether the city’s calculations could have been done differently.
For the number wonks, I am going to post the information we were given that is going to be in the financial statement, some of which I am really not sure I understand.
Here goes, direct from the handout, with my comments *at the side:
Land cost (incl soil remediation/site servicing fees) + $27 million * This was listed as $35 million in a 2006 report on the village finances by Ken Bayne, but perhaps the $27 million is as of a certain cut-off date?
Deposit on land -$29 million * The downpayment from Millennium
Booked gain on transfered land (receivable) + $41 million * This is the most confusing number to me. I asked about this several times and couldn’t understand the answer. It SEEMS to me like this is the city declaring this is what it thought it would net from the sale of the first 25 per cent of the condos, including the value of the land. If I’m right, then the city is actually saying “Here’s what we thought we would get if we had got the purchase price of the land plus whatever was left over from the sale of the condos after construction costs were subtrated.” In other words, they are acknowledging that they expected to get money for the land. And then later in the column, they write off an amount very similar to this. But am I interpreting this right? Help.
Fortress loan & protective advances + $684 million
Interest/Fees + $72 million
Loan payments received – $202 million
Dec. 31 financial statements $593 million *This is what the city had calculated as the value of the village
Adjustment to realizable value – $48 million
Revalued financial assets $545 million
Infrastructure assets on city’s books (tangible capital assets) $87 million
$632 million *Presumably the new calculation of the value of the total asset. Nothing else was written beside this number.