Municipal politicians sometimes like to say that local government is the most accountable because it's closest to the people.
But the City of Vancouver's growing financial liabilities for the Olympic Village should put that notion to rest.
The situation is looking pretty grim right now for Vancouver taxpayers.
The City of Vancouver could be asked to increase the size of its loan guarantee to New York-based Fortress Investment Group, which earlier agreed to provide $750 million in financing to the Olympic Village developer.
In 2006, the city sold development rights to Millennium Development Corporation for $193 million. Millennium put down a 15 percent deposit--$29 million.
The balance was supposed to come after the 2010 Games, when presumably, about 750 condos would have been sold at premium prices.
The city retained ownership of the Olympic Village site at Southeast False Creek and guaranteed a $190-million payment to Fortress if Millennium failed to pay back its loan.
As everyone knows now, Fortress came forward last year and sought a higher loan guarantee; Vancouver city council agreed in-camera to provide a $100-million loan guarantee. And few people expect the real-estate market will rebound sufficiently by 2011 for Millennium to make a killing on the sale of the condos.
As a result, there is a chance that Fortress will seek an even greater guarantee from the city, potentially turning the $1.1-billion project into a financial quagmire for Vancouver taxpayers.
Here's the problem for the city: it is contractually bound to the Vancouver Olympic organizing committee to complete the Olympic Village by November, 2009.
In return for hosting the Games in 2010, Vancouver guaranteed back in 2002 to provide accommodation for 2,800 athletes and officials at Southeast False Creek.
The site is within walking distance of B.C. Place Stadium, where opening ceremonies will be held.
So why are we learning about all of the financial liabilities now? One reason is because there is no auditor general overseeing municipal spending in B.C.
There is a provincial auditor general, who has been keeping an eye on the Olympic-related financial commitments by the B.C. government.
This office has issued a series of reports, but none with an eye to the financial exposure of municipal taxpayers living in Vancouver.
In September, 2006, for example, then-acting auditor general Arn van Iersel released a report reviewing estimates related to the province's commitments to the 2010 Olympic and Paralymic Games.
It estimated that the third-party costs, i.e. costs to the City of Vancouver, had risen from $137 million to $160 million between 2002 to 2006 for the Olympic Village.
Van Iersel probably took those numbers from city officials and didn't conduct an independent review of the liabilities that existed behind the city's contract with Olympic officials.
In 2003, then-auditor general Wayne Strelioff wrote a report that evaluated the cost of hosting the Olympics. But Strelioff also didn't comment on liabilities that might arise from the City of Vancouver's contract obliging it to deliver an Olympic Village by November, 2009.
If there's one lesson to be learned from this financial chamber of horrors known as the Olympic Village, the provincial government must appoint an auditor general with an exclusive mandate to keep an eye on municipal and regional governments, as well as TransLink.
It's one of the best defences to protect taxpayers from the possibility of similar municipal financial quagmires occurring in the future in B.C.