Live the taxpayer lifestyle

Millennium Water

It’s been less than 36 hours since the confirmation of Millennium Watergate.  Up until Mats Sundin scored his first goal, the Big Owe was the only talk of the town.  The weekend’s most lively conversation has been at the State of Vancouver blog. Michael Geller and VHB were among the all-star contributors, along with someone named LP who pins the village-pillage on an elaborate Gregor Robertson conspiracy.  (In my Westender interview, I blamed Quatchi, the Olympic mascot.)

Politics or not, the city remains legally obligated to build a development that nobody wants, based on a design spec too expensive to sell, for a price of $875-million. To play down the doom and gloom, some are reminding us not to forget that, eventually, the condos will be built and the units will be sold. The end-of-the-day taxpayer loss, pending no more unforeseen disasters, will be less  than $875-million.  The Globe and Mail estimates a $300-million write-off.  VHB, the blogger who proved Rennie wrong, predicts $500-million.

I’m not one for predictions but I’ll say that Millennium Water, if completed, will sell for more than $0 a square foot. So as long as one unit is sold we won’t lose all the money. Still, we will lose and it will hurt. The city is obligated to build and the money it will take is money we don’t have. The cash will be borrowed with interest accruing from day one.

The city’s exposure may be moderated over the long term as it pursues the developer’s assets, and I have no doubt the city will do everything to take Millennium to the cleaners. But this is all very far down the road. It’s not like Penny Ballem and Ritchie Bros. are en route to Peter Malek’s house to “kick some assets.” Even if they did, let’s not pretend they’d find $875-million hidden in an eco-friendly panic room.

The painful truth is that we need the money now and the money will have to be borrowed.  Unless higher levels of government intervene, or Warren Buffett swoops in to be greedy where others are fearful, the debt falls on the shoulders of the people of Vancouver.

25 Responses to “Live the taxpayer lifestyle”

  1. condohype Says:

    Have you seen that photo before? Yes, you did — when I first wrote about the controversy back on October 8. You also may have read part of the posted text from my comment on State of Vancouver. Call it eco-blogging. I love recycling.

  2. buff_butler Says:

    relax…its only about 500$/per person + [% interest] + [incompetence fee]$… think of it as a reverse stimulus cheque 😛

  3. jesse Says:

    I expect the city will be left to wallow in its own crapulence. I wonder what wonderful mix of tax hikes and service cuts will be devised by the council. Perhaps a small counter-cyclical pay hike for their hard work?

  4. Strataman Says:

    I imagine they will cut back on snow plows first. 🙂 Seven are an expensive indulgence for the winter (snow) Olympics.

  5. Jo Says:

    We’ll also gain when this project is finished. Focusing on the area rather than the actual condos, it’ll complete the sea wall, making it the best city trail of its type I’ve seen anywhere. Whether you think that’s worth $200 to $500 each depends on how much you’ll use it and how much of a “big picture” thinker you are. I’ve biked through it recently and even half built it’s a big transformation.

    Long term I think it’ll pay off. There’s no doubt it will improve what is already an excellent trail as well as regenerating a pretty dead area of the city, in terms of attracting people and businesses to the area. Also, anything that adds rental stock is a good think – and as I’m betting most buyers of these units were investors, there will be lots of rentals available like in most of the new condo developments.

  6. VanCityGuy Says:

    The fallout from the games aren’t just the Athlete’s Village. You have to combine it with the costs of the B.C. Place upgrade, the Convention Centre, and the Security costs.

    Not all of these have the city on the hook, but they contribute to what’s looking more and more like a repeat of the 1976 games in Montreal.

  7. blueskies Says:

    I see a forest of fingers pointing in a myriad of directions.
    The guilty parties are furiously digging in their backyards
    for that container of “plausible deniability” tucked away
    for rough times. You couldn’t write a soap opera that is this
    convoluted with so many victims and so few perps.

  8. jesse Says:

    “Long term I think it’ll pay off.”

    I sort of disagree. A bad investment is a bad investment compared to what that money could have been used for. A seawall does NOT cost hundreds of millions of dollars to complete. The issue is that the City thought they were getting something for free and it backfired. This is the exact same argument for overpaying for a house since eventually you will pay off the mortgage, even if it costs a significant portion of your income to do so.

    That said, it’s important to point out that the City has likely significantly over-estimated the value of the land. Say they performed an alternate strategy with a temporary Olympic village and had the land sold off after the Olympics without completion clauses. It could well never have completed like other projects being canceled unless they sold the land for way less than its appraised value. The result is either the City gets another hole in the ground, finds a sucker developer that completes at a loss (unlikely), or they get, say, 50% less for that land.

    The real issue is greed and free lunches and what we have now is a result of that and, even without the Olympics, the City is going to have holes in the ground for years to come due to urban planning gone bad.

    The straight goods is that land that should have conservatively produced $100MM in revenue for the City is now going be an EXPENSE of $300MM+ (likely way more). When you add the two numbers up, that’s a lot of money. I don’t see how that’s a pay off, considering what other things that $ could have been used for.

  9. Tony Danza Says:

    Whether you think that’s worth $200 to $500 each depends on how much you’ll use it and how much of a “big picture” thinker you are.

    $500 per person in the city for a sidewalk around False Creek? Nice try Mr. Rennie.

  10. condohype Says:

    Whatever conceptual frame you need to make this mess more palatable, that’s up to you. It’s probably a healthy choice to keep the blood pressure down. I can’t seriously say I’m OK with this, no matter how pretty the seawall is gonna be. In my big picture thinking, I think of how much $500 per capita would do to help our city’s less fortunate souls.

  11. saskboy Says:

    Why doesn’t the city craft a law that makes it possible to get out of this mess?

  12. crs Says:

    Just when I thought Woodwards was going to be the City’s greatest folly… All of this does make me wonder though, what was the total cost of Woodwards and how much of the cost was supposed to be recovered from speculative pricing? What happens if/when everyone pulls out of the W, who gets left holding the bag? Did the city make any other speculative guarantees?

  13. Jo Says:

    “I think of how much $500 per capita would do to help our city’s less fortunate souls.”

    That’s getting into a debate over where tax money is better spent (usually very subjective). I don’t know about the city politics side of things; I just like what this project will do to that area from an urban regeneration standpoint and reckon the $300m or whatever will be scraped back long-term in various ways.

    Maybe I should worry more about where my tax money is spent but generally I don’t until it comes to election time. Having lived in a number of other cities I find Vancouver’s services to be very good on the whole.

  14. crs Says:

    “Maybe I should worry more about where my tax money is spent but generally I don’t until it comes to election time.”

    Same here, but I think I would have voted very differently, and I doubt I’m alone in being angry about this, if I knew the information presented now. I voted in favor of the capital plans as did many. How can we afford more infastructure spending now? And what does our vote matter anyway if this sort of error, deliberate or not, is possible?

  15. RossK Says:

    crs–

    An excellent point.

    I, also, feel very differently now about the little ‘yes’ boxes I filled in in response to the three ‘borrowing questions’ that totalled $94 million back in November.

    Then again, that’s only a C-note per Lotuslandian…..

    .

  16. dingus Says:

    “In my big picture thinking, I think of how much $500 per capita would do to help our city’s less fortunate souls.”

    I figger 400 million would house 1000 homeless for about 13 years.

    Or finance about 1200 snowplows with crew.

    Or fund 2000 child care spaces for 20 years.

    But, like I say, we have a desperate shortage of luxury condos, so… way to go city council!

  17. j6p Says:

    the population of vancouver proper is about 600 000. i’m not sure how the 500/person is calculated but imo the province or the feds will have to bail this out. it’s way too big for one city to handle. keep in mind, many of the 600 000 that live in vancouver are children and seniors that don’t generate much income.

  18. jesse Says:

    “it’s way too big for one city to handle. “

    Actually it’s not, really, compared to the City’s budget. It will significantly cripple the capital spending account but, as Michael Geller said in the previous post, the actual tax hit need not be huge. The pain will be felt well into the future, directly and indirectly. I would not consider this remotely close to a “too big to fail” cock-up and is yet another reason why compensation money from the province and feds is unlikely.

    The only way a bailout could work is if the City balked at Fortress’s legally questionable gambit and planned to clear out the UBC dorms for athletes instead. At that point the province and federal government would likely have stepped in, to save embarrassment in an election year. But fear not. Vancouver is far too vain to play hardball when its “cosmopolitan” reputation is on the line. What would the other mayors, with their velvet sashes and funny hats, think then? Far more expedient indeed to hide the costs in some account that will spread the pain over many years. That’s one heck of a price to pay for vanity.

  19. patriotz Says:

    Why doesn’t the city craft a law that makes it possible to get out of this mess?

    The city is a corporation, not a Crown entity, and cannot legislate itself out of contractual obligations.

    The province on the other hand can. Right Gordo?

  20. condohype Says:

    There’s no “legislating out” of a signed contract. The city is legally obligated to complete the project because they signed a completion guarantee with the lender. End of story.

  21. crs Says:

    I’m not a lawyer, and I don’t know the details of the contract nor the apparent power of the city/council to sign it, but I beleive that a contract that is signed without authority is typically not binding, instead the unauthorized signor is held personally responsable. Am I wrong or did the voters only agree to 30 million for legacy projects in the 2005 vote? And apparently it was signed in 2002 long before we even voted for hosting the Olympics in the first place. I’m so confused, if they have the authority to do this, why ask us for permission for lessor amounts? And when we are asked, why is it not more clear about what else has been commited?

    http://vancouver.ca/ctyclerk/election2005/capital.htm
    http://vancouver.ca/ctyclerk/election2005/finalresults.htm#Question4

  22. dingus Says:

    The city cannot legislate. It can pass bylaws, as a function of provincial legislation, for certain purposes. There’s no magic wand.

    The administration has the authority to bind the city to the extent authorized by council. Presumably nearly a billion dollars is in excess of that authority. However, once voted it, council can bind the city as it sees fit. And, because of the super sensitive nature of “business” negotiations, it can all be in camera.

    I’ve said it before, and I’ll say it again, democracy just doesn’t work.

  23. patriotz Says:

    There’s no “legislating out” of a signed contract.

    Sure there is. Just ask a hospital worker.

    But it’s something only the Crown can do, not a municipality.

  24. condohype Says:

    Good call, patriotz. But remember, hospital workers launched a Charter challenge and the Supreme Court ruled in their favour. Government power to legislate contract breaking is not absolute. The Olympic Village isn’t a Charter matter though. Well, for the real-estate moguls, maybe freedom of religion. 🙂

  25. buff_butler Says:

    Sorry I was mistaken in my math. I had the 2m people in greater vancouver paying not vancouver proper. With just 600k people its about 1500 per person.

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