How often do we delete emails promising "risk-free" money without a second glance? Most of us remember that age-old adage -- anything that sounds too good to be true probably is. Unfortunately, Vancouver's city council appears to be much more gullible that the average person. The Olympic Athlete's Village was presented to Vancouver city councilors as a "risk-free" deal at a time when housing prices were ballooning skyward. Like many things too good to be true, this deal will undoubtedly create big costs -- for taxpayers left footing the bill.

So just how does a "risk-free" deal suddenly turn into a bill roughly equal to a year's worth of city spending?

In 2006, bureaucrats at the City of Vancouver recommended council approve a "risk-free" deal for the construction of the Olympic Athlete's Village by a little-known developer called Millennium Properties Ltd.  Millennium agreed to pay $193-million for the Village land, but put down only $29-million. As part of the deal, the city would keep title to the land until the Village was complete and would not have to assume any financial risk for the Village construction.

Part of what made the deal "risk-free" for the city -- holding title to the land -- seems to have made it impossible for Millennium to get a construction loan from a Canadian bank. Even worse, Millennium was looking for a loan to cover 100 percent of the construction cost. Millennium had, in fact, invested only about three per cent of its own money into the almost one billion dollar cost of the project. Talk about leverage.

The other "risk-free" element to this deal for the city -- no financial involvement in the construction -- was undermined by the agreement the city made with VANOC to deliver the Village by November 2009. Millennium went to the hedge fund market to get a $750-million loan for the construction costs, reaching a deal with Fortress Investment Group. Eventually, even Fortress balked at funding 100 percent of the construction loan and asked for, and got, a $190-million guarantee from the city to continue financing the construction. Because of the delivery commitment to VANOC, city bureaucrats said they had no choice but to provide financial security -- the $190-million in land value that originally made this a "risk free" deal -- to Fortress!

It gets worse. Even after the $190 million guarantee from the city, Fortress stopped funding Millennium when it had cost overruns. The city then spent $100-million to keep construction going. Then city councilors told taxpayers the only alternative at that point was to assume a huge debt to finish-off millionaire condos that may have to be either rented or unloaded at a big discount after the games.

Worse yet, city council went around city taxpayers and got the provincial government to give it a blank cheque to borrow whatever it takes to finish the project, instead of taking the question to a referendum as the city charter dictates. Vancouver property taxpayers are already looking at a possible 13 percent hike in property taxes this year. With the increased debt servicing cost, that hike could be much worse in the future.

The Olympic Athlete's Village financing fiasco is a good example of what happens when governments speculate with other peoples' money. It's easy to talk now about what should have been done. But that doesn’t change reality and won't prevent this from happening again. The lesson here is clear. Municipal officials must stick to zoning, providing core services, and collecting taxes. That's what property taxes are paid for, not to finance real estate speculation by amateurs.  If city councilors want to dabble in real estate, they should do it with their own money and not leave worried taxpayers to pick up the bill for their mistakes.