Summer from hell, fall from grace

Post by Mike Klassen in

6 comments


CTV's Shannon Paterson puts the Olympic Village problems into perspective

After Globe and Mail reporter Frances Bula's bombshell news from Wednesday, Vancouver city council is in full damage control mode after learning their proposed plan of getting much needed social housing online by November – seven months since the units have sat empty – is still not going forward.

My 24 Hours column, featured every Thursday, focuses on this latest wrinkle in the Olympic Village mess

Last week I discussed the problem facing Vancouver taxpayers over the inability to sell housing at the Olympic Village project. This week the story takes another bizarre turn with the news the city is stuck without a third-party operator of the project’s social- and rental-housing units.

The province was not impressed with the only three applicants who came forward to run the units. Amazingly, the biggest non-profit housing operators in Metro Vancouver all took a pass on the project, citing too many risks attached.

These $500,000-plus social housing units were built in time for the Olympics. Vision Vancouver decided to make half of them market rental, with unionized teachers, police and emergency workers getting first dibs.

Catch the rest of the column online, or pretty much every bus or rapid transit station in Metro Vancouver.

Now Bula has the latest turn on this story – the City is now proposing to take on the $46 million loan guarantee and run these units without the Province's backing. The additional risk to Vancouver taxpayers seems like a big gamble. Bula's report spells it out: 

Mr. Meggs said he didn’t know what the impact would be of the city providing a $46-million loan guarantee on top of the other debt it is carrying on the Olympic village.

“No one’s assessed that at this point,” he said.

The city is currently carrying $1.6-billion in taxpayer-supported debt, triple the level it was carrying in 2006. That debt load, which works out to $2,623 per city resident, which is higher than in most Canadian cities, rose dramatically last February when the city took over the construction loan for the private developer building the 1,100-unit village.

Gulp. Can someone say "downgraded credit rating"? Actually, yes.

Dominion Bond Rating Service did assess Vancouver an AA rating in July, the same level that it was downgraded to last February after the city took over the construction loan for Millennium Development Corp. when its U.S. lender refused to advance any more money because of cost overruns on the project.

Other media are reporting this latest wrinkle in the Olympic Village saga, including the aforementioned 24 Hours, The Province and the Vancouver Sun, CTV News, GlobalTV and News 1130. Undoubtedly as the City of Vancouver takes on more risk for this troubled project, the voices of concern are going to get louder.

As for Gregor Robertson, he doesn't seem to have a clue as to what's going on regarding his mishandling of this project. He told the Sun this morning:

I don’t know why this went sideways

The Sun goes on to report:

Robertson, meanwhile, said he was surprised that only three of the 22 potential bidders who viewed the site in August decided to bid.

“It’s confounding that it’s been slow and hasn’t drawn more operator interest to a brand-new building that should have lower operating costs because of energy efficiencies.”

Mark Townsend of the Portland Housing Society, one of only three brave souls to put in a bid with BC Housing sums it up this way:

It’s a mess-up...

A recent Globe and Mail headline read: "City demands of non-profit housing operators keeping Olympic village empty". It was an ominous warning to Vancouver taxpayers regarding what to expect under Mayor Robertson's new Olympic Village finance and social housing plan:

The controversial city-owned rental units at Vancouver’s Olympic village have been sitting empty since the Games ended in March – and they’ll continue that way for at least two more months.

The city’s complex and unusual demands for future non-profit operators have produced so much confusion and concern that the already much-delayed bid process had to have its deadline extended last week to the end of September.

Non-profit organizations considering whether to bid to operate one or all of the city’s three buildings say they’ve been taken aback by city demands that they turn over any surpluses they might generate.

“The societies aren’t getting anything out of this. The city needs to think through this a bit more because these wouldn’t be reasonable terms ordinarily,” said Bob Nicklin, the executive director of Affordable Housing Societies.

Barbara Bacon, the long-time director at the Housing Foundation of B.C., also expressed concern.

“If you make money, you have to give it up to the city. If you lose money, you’re on the hook for it.”

What has been described as a "summer from hell" for Gregor Robertson and Vision Vancouver, is now turning into a fall from grace with the 2011 election looming only just one year away.

For further background on the facts of how we got into this mess, read our previous feature reports on the history of the Olympic Village:

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HORNBY BIKE LANE UPDATE: CKNW News interviewed Mayor Gregor Robertson on the matter of the increased cost of the lane – now up to $3.2 million.

Gregor Robertson says the new plan has improved passenger and loading zones and signals to allow right hand turns. And that's why the budget has increased a little. "A little," is a price tag jump to 3.2 million up from 2.1.

Back in July our sources were telling us that the proposed cost for this project was going to be at least $3 million. Then the City suggested it would be lower when the controversy stirred up. The City has reported what we've heard all along. Now the Mayor says the higher cost is a result of "right turn signals and loading bays".

So which is it? Was the budget always $3 million and we're getting spun, or have Engineering really come up with more features that raised the cost by over 50%?

- post by Mike

6 Comments

Mike, the following are comments that I posted on Frances Bula's website. I realize that for ideological reasons, this Council will probably not agree with my suggestion, but I feel it is incumbent on me and others who understand the financial situation facing this development to speak out.

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I hate to keep dwelling on this, but I think the city will make a bad situation worse by ignoring the messages coming from the province and trying to ‘go it alone’ with the Portland Hotel Society.

I would like to make it clear that I am not normally opposed to mixing market and non-market housing. As the federal government’s Special Coordinator for the Phase One redevelopment of the South Shore of False Creek, I helped the city achieve its one third low income, one third mid income and one third higher income social mix. As Program Manager-Social Housing for CMHC I oversaw the development of thousands of social housing units, many of which were integrated with market developments. As the President of the SFU Community Trust I helped create a social mix by including both housing for students in smaller ‘suites within suites’ and non-market faculty and staff housing at UniverCity.

However, in this particular situation, I think the time has come for the city to admit that it might be better to accommodate lower income households on the immediately adjacent City-owned sites , and allow some or all of these 126 social housing units and 126 market rental units to be sold as more affordable ownership units.

Priority could be given to those seeking ‘workforce’ housing in the city including firefighters, police officers, school teachers, etc. To differentiate this housing from the market condominiums, the land could be leased, rather than sold.

Over time, as the city’s financial position improves, some units could be bought back and used social housing, if so desired.

I reiterate this suggestion since it would help the city recoup its costs, and maybe even make a small profit, rather than incur over $60 million in subsidies, some of which are being used to subsidize high income people to move into the market units.

According to the staff report that was considered by council last April, the city could make up to $60 million+ by selling the units. That’s a $120 million+ swing between renting and selling.

City staff feared that selling these units would negatively impact the sale of the market units. I would suggest the opposite is true. If the Portland Hotel Society, (which I understand to be the preferred bidder, and which has an admirable track record dealing with the hard-to-house in the DTES) is the selected operator, many potential buyers of the condominium units could be deterred from buying. We are starting to hear this message from many real estate experts and urban commentators. In other words, this type of social housing could reduce the value of the market units.

Another reason why I am so concerned in this instance is that mixing the very rich with the very poor usually does not create a good community. This is very hard to do successfully. I would note that former city alderman Libby Davies (whose judgment and compassion I have often admired) and housing advocate Jim Green supported this view when consideration was being given to housing the very rich and very poor together at Bayshore in Coal Harbour. In the end, politicians from all political parties agreed that a ‘payment in lieu’ was a preferable approach for some of the units, and the Performing Arts Lodge was approved for the balance. This ended up as an award winning solution.

Another reason for selling the units would be to reduce the city’s potential losses on this development. I do not pretend to know all the numbers, but I do know that the city was counting on getting the balance of the $193 million land payment to pay for the cost of the extensive infrastructure and community amenities. While we don’t talk about it, I have been advised by city staff that most, if not all of the city works have gone over budget. The land payment from Millennium was to cover these costs. Now it appears this payment may not be made.

In addition, the city has lent Millennium the money to complete the project. I am advised that the city is not likely to get all of this loan repaid from the proceeds of the sales. The only question is how much are we going to lose. By selling the social housing and market rental units the city to could help reduce potential losses.

(If it is politically impossible for this council to sell the social housing units, then at least sell the rental units. Why should we as taxpayers be subsidizing people to live in them? And we are, since the proposed rents, even at $1600 a month and more, are not sufficient to cover the costs and a nominal return on equity.)

Furthermore, Millennium is having some difficulty renting its 129 market rental units. That’s right. Millennium has rental units that are only 35% leased to date. And the city still hasn’t rented all of its units at 1 Kingsway after 9 months. Why bring more market rental units to market, especially when no one appears to want to manage them.

Some will say that my comments should be ignored since they are just politically motivated. They are not. Rather they are based on four decades experience in the development of market and non-market housing across Canada. They are based on what I think is common sense, rather than political ideology. As I said on the Bill Good Show, I think this Vision Council is often well intentioned, and it has accomplished many good things. But it has made a number of mistakes, and continuing to try and keep these expensive and inappropriately designed units as social housing and market rental housing could be a very damaging and costly mistake.

I therefore urge the City administration and Council to not ‘go it alone’. Please reconsider your April decision in light of the current situation. And if someone tells you that you can’t go back on a pledge you made five years ago to the International Olympic Committee, tell them that the situation has changed. There are some urgent housing needs in the city, and this is the most prudent course of action. I am confident that they will understand.

In summary, in time the Olympic Village will be a wonderful community. But it needs some wise decisions over the coming months, to help this to happen. Let’s start by reconsidering the future of these units.

Thank you, Michael. It's vital that we get a "reality check" as we seem to be sinking in the quicksand. Having Gregor Robertson and Geoff Meggs say "trust us, we'll handle this" just doesn't cut it.

I can't remember a single time I've ever agreed with Michael Geller, but what he writes here makes sense.

The fact that this waterfront luxury project with Olympic prestige couldn't even sell when the housing market was good speaks volumes about the impact of the social housing component. It was wrong to make the commitment to begin with. It would be a total disaster now to stubbornly stick with it and turn it over to the Portland Hotel Society (whose reputation is far more dubious than Michael's plaudits deserve).

A competent business person knows when and how to cut their losses. To reinvest in the same bad concept again is insane.

Michael, thank you for laying out a reasoned, logical path out of this mess.

I too would like to put politics aside on this matter & request the current Council heed Michael's advice on this matter which is key to protecting the City's financial position & to making this project a success in a new way.

I have not had Michael's long & impressive career in helping to provide mixed tenancy housing throughout our province for many years but, I was a member of the False Creek Planning Committee of City Council in 1973 to 74 which planned the successful 1/3, 1/3, 1/3 South False Creek project & set the 20% social housing policy for North False Creek & other major developments in the City. As such & in my architectural practice I have also had considerable experience. In the process I have seen the good & the bad.

Michael's advice is good, please take it.

I'll leave to those I admire like Michael Geller to take the high road and leave the politics out of this. MG has laid out a rational approach that is socially and financially responsible and politically feasible. This council would be foolish to ignore his wise counsel.

But I can't help observe that this inexperienced Mayor won office largely by playing partisan political games (some might say recklessly) on two issues crucial to the city's future success - homelessness and the Olympic Village.

Since then, the city's homeless count has climbed 50%, and the city went from owing $100,000,000 on the Olympic Village to nearly 3/4 of a billion dollars - giving us one of the highest per-capita debt ratios in Canada. It adds insult to injury that the debt was incurred in violation of the city's charter requiring a referendum before taking on new debt.

It's time for this Mayor to stop listening to his ideological financial backers and start listening to the experts on land use and social housing trying to offer him a realistic path out of the mess he's made. The Mayor owes the taxpayers of the city that much at least after refusing to get their permission to borrow this outrageous sum in the first place.

This up on AG's blog:

5) Notwithstanding the poor choice of Millenium Development (as developer of the Olympic Village) by city staff, the NPA and Vision during the last term, the choice of any social housing for that particular site was completely foolish from the outset (thanks to yet another Jim Green induced fantasy). Now we discover that Clr. Meggs (Vision’s designated talking head) is “disappointed” that the province has found unacceptable all three of the potential managers of said segment of the Olympic Village. Really? Why? Why didn’t Geoffy tell us that, in fact, (as has now been confirmed by Minister Rich Coleman) that the province were vetting the potential managers “as a favour” to the city? So, the city kicked up the responsibility to the province, willingly, and knew who these potential operators were, but NOT ONE of them were qualified to manage social housing in a luxury mixed use setting. Isn’t that an issue for anyone? In fact, harm seductionist, povertarian and general anger management treatment candidate (he once called me SEVENTEEN times in one day when I told him after call number one that I was away on vacation with my family) Mark Townsend and his Portland Hotel Society were one of the bidders. Is it possible that Clr. Meggs is disappointed that Vision supporter Townsend didn’t get yet another city venue to pontificate from? (Townsend usually attacks the Conservatives in Ottawa when he’s bored) This drug legalization charlatan has his group, the PHS, housing Insite, the failed shooting gallery that enables addicts and routinely blows a gasket when you don’t write that he falls just short of walking on water. So the Minister demolishes Meggs’ spin. But is there a follow-up? Meggs essentially made it seem that the city were separate from the province through the process. In point of fact, the city had received updates on the process. There’s also more to this…Stay tuned on this one as well.

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