Ah! Another informative diagram from city hall! This one is lifted from a newish staff report and explains the many subtle intricacies of a land deal that executive committee is considering at their Wednesday meeting. (That’s August 15 at 11:45 am.)
And as this conveys almost nothing to me, I can only imagine how meaningless it must be for anyone who hasn’t been keeping tabs on the land development partnership the city has with the Saskatchewan Housing Corporation. Good thing I can fill you in on all the gore splattered details.
Actually the details aren’t gore splattered at all. Sadly. But how else am I going to keep you reading about a land deal without the promise of carnage and bloodshed?
The whiff of scandal maybe? Would that keep you reading?
Well, I can’t offer that either. But if you keep reading past the jump, I promise that there’s definitely something going on here that seems a little shifty at least.
Okay, here’s the deal in short: Way back in the 70s, the city entered into a land development partnership with the SHC (like I said above), where they’d buy land on which they could develop housing at a later date. That agreement itself has morphed over the years but as it stands now, SHC owns a big chunk of land and as it arranges to sell portions off and have them developed, it provides 75 per cent of the profit to the city’s Social Development Reserve. And that reserve money is then used by the city to fund its affordable housing programs — things like development grants and tax exemptions for new affordable housing.
A pretty good deal, I’d say.
But SHC doesn’t want to be involved anymore and is hoping to sell off 238.17 acres of land adjacent to the city (just east of Windsor Park and north of where the Greens On Gardiner is going in). And it wants to sell that land to the city of Regina at a discounted rate.
How discounted? Well, the appraised value is $13.224 million but SHC is willing to part with it for $7.8 million.
If the city buys, it could then turn around and develop that land and earn upwards of $70 million over the next 15 years — depending on how they want to go about that.
Alternately, they could pass on buying the land and let SHC sell it off on the market and earn 50 per cent of the profit or about $6.6 million.
A compromise position would be to buy the land then either sell it off to developers or develop it in partnership with a private company. And that would net the city some portion of the lands potential, fully-developed $70 million.
Confused yet? Allow me to illustrate what’s going on so far with a helpful infographic.
Hope that clears things up.
Anyway. Seeing as $70 million is, last I checked, more than $6.6 million, you’d think the answer to this little city hall puzzler would be obvious….
Buy the land and develop it.
But things are never quite so simple and this is where the weaselry starts.
Take that infographic I kicked off this post with…. the boxes show the different ways the city could handle the SHC land while the arrow purportedly tracks “investment, risk and revenue.” Doing nothing, on the left, is “low” investment, risk and revenue. And going whole hog and developing the land solo represents “high” investment, risk and revenue.
Now, I’ve put together my share of pointless infographics for this blog over the years. So I really shouldn’t be criticizing. But come on… They put investment, risk and revenue on the same arrow?!
Call me crazy, but it is highly unlikely that those things will track together. In fact, my gut tells me that the risks of developing land in Regina right now would stay pretty low regardless of how the city went ahead with developing this land — not just because developing land is almost always profitable to some degree but also because they’re only paying half the bloody appraised value for this land and that works out to a pretty cozy risk buffer!
Meanwhile, I’m also thinking that $70 million figure for potential revenue is pretty freaking conservative. As is the 15 years to develop it.
And you know what makes me think that? Every time Dundee Developments shows up at council to request permission to start construction on a new portion of Harbour Landing, councillors are practically tripping over one another to express how amazed they are at how fast that subdivision is coming along. In fact, it looks like demand is so strong for housing in Regina that Harbour Landing will be finished in about half the time they expected.
And yet, despite this, the report cautions…
While housing demand has been strong in recent years, a downturn could impact the projected development time frames and the revenue could be slower than anticipated, impacting the return on investment.
Even so, what we’re talking about is not a loss. Just slower than anticipated revenue.
What’s more, consider the stadium deal the city’s working on. Where that’s concerned, staff and council are positively gangbusters that we have to go forward forward forward with development and damn the risk profile. Hell, I don’t recall risk receiving much if any discussion so far. This despite the fact that everything I’ve read on the subject of stadium development agrees that nobody is going to make their money back on one of those things. That’s why private industry isn’t taking the project on in the first place.
But here we have a situation where the city stands to make millions upon millions of dollars without much effort and staff have become these nervous nellies suggesting caution.
What the hell?
It’s like this is a Monopoly game where we’re basically being handed Atlantic Avenue through Park Place and we’re wondering if maybe we shouldn’t let the Top Hat have them.
Or maybe we could share them with the Little Dog.
And this infographic (the one at the start of the post, not the one I did) gives any councillor who wants to take the least daring option an out by equating risk and investment with potential revenue. “Oh yes, we could make a lot of money by developing this land,” a councillor could say. “But there are risks involved and the city isn’t in the business of taking on risk. We have to minimize those.”
Unless there’s a stadium involved, that is.
And all that’s on the line with this land deal anyway is a potential windfall for affordable housing in the city.
Oh wait. Not so fast!
Even that may not be on the line. Because while revenue from the development of SHC land has traditionally gone to support affordable housing, the report’s language contemplates something else entirely.
Here are some excerpts. Emphasis is mine…
An option to wind down the partnership is for the City to purchase the land and continue the development of the land to continue the funding source for housing programs. This also is an opportunity to pursue an alternative revenue source for other City purposes. (p 2)
This revenue could be used to continue to fund the Social Development Reserve, but additional revenue could also be used for other purposes. (p 5)
Should the purchase be approved the City would facilitate the land development. This would offer a way to continue to fund housing programs and would also offer additional revenue opportunities. (p 5)
The City has used the revenue from the development agreements with SHC as a funding source for housing programs. If the recommendation in this report is approved, the funding of housing initiatives could continue to come from land development revenues over the long term. Additionally, there is an opportunity for the City to generate increased revenue in the future that is aligned with the Strategic Focus 2012.
Land development has been a strategic choice made by some cities to diversify revenue streams. Land development also can be leveraged to lead to more sustainable development that is inclusive of affordable housing. (p 7)
So no. If the city buys this land, it does not look like it’s planning to use the revenue from it to fund affordable housing. Not exclusively, anyway.
And if you need more of a smoking gun, there’s the fact that to purchase this land, staff are recommending that they use $7.3 million earmarked for the Social Development Reserve and then….
… the City would be obligated to set aside $7.3 million of any future revenues derived from the development of these lands to fund Social Housing initiatives. (p 6)
In other words, they’re going to poach $7.3 million from an affordable housing fund to buy land. Then they’re going to develop that land and use the revenue generated to pay back the money that was supposed to be used for affordable housing in the first place.
Ack. I’m sorry. Usually, when you start a sentence with “In other words…” what follows should make something really convoluted more clear. I’m pretty sure I failed at that.
What I’m trying to say is, by using $7.3 million in housing money to buy land that’s supposed to be used for housing then using the revenue generated off that land (the revenue that’s supposed to be used for housing) to pay back the housing money that was used to buy the land means that housing winds up short $7.3 million.
In other words, housing gets the shaft.
UNLESS! You never had any intention of using the revenue from land development to fund affordable housing. Then housing gets whatever dribs and drabs are usually thrown at it. And we’re all 7.3 million none-the-wiser.
Clear?
No?
Great! Infographic time….
Of course, I could just be paranoid. Right? And I’m sure when I start asking questions this confusion will all get cleared up and I’ll realize how the city is handling housing in good faith.
In the meantime, here are a couple other items from the report and then I’ll shut this down.
First, if you think the city would never in a million years turn down a chance to buy land that they could make a profit off of, there’s this bit about how the SHC wanted to sell the city something called the “North West land” back in 2008….
In report CR08-122, City Council was advised of the notification by SHC of intention to sell the North West land. City Council approved the decision to not exercise the option of first right of refusal and instructed that SHC be advised to proceed with the sale of the North West land holdings on the open market. SHC has not yet sold either the North West or South East lands that are subject to the land holding and development agreement. (p 4, emphasis mine again)
So, just four years ago, a council that was substantially the same as this one turned down a chance to buy land from the SHC. And as a result, that land sits unsold, undeveloped and idle and thus not relieving any housing pressure in the city and not generating any extra property tax revenue either.
I’d double check this to see what went down but for some reason CR08-122 isn’t online anywhere. I can find CR08-121 and stuff up in the -129 range. But CR08-122 and the council meeting it was discussed at are just a blank on the city’s website.
Strange.
(But probably just an oversight and not a conspiracy.)
Anyway, the report concludes with the Communications section and contemplates a next step for city hall….
Consultation with the development industry will occur to identify the opportunities and to inform how the City intends to proceed with the development. (p 7)
In other words, we’re going to ask the Top Hat and the Little Dog what we should do with our property.
And that’s how Regina plays to win at Monopoly.