Saturday, April 17, 2010

The cost of the Olympics: The report to Council

On Tuesday, Vancouver City Council will receive a report from the City Manager on the costs of putting on the Olympics. This report really confuses me, especially when some councillors want to turn it into a bit of a political football….Councillor Meggs has stated ”there was no budget control under the previous administration”.

When I first read the report, I thought it seemed almost a bit mischievous.

I would invite everyone to review this report and tell me that they agree that all the listed costs are truly ‘Olympic related’.

For example, is it really appropriate to identify the $64.5 M spent on the renovation of the QE Theatre and Playhouse as part of ‘the Olympics Bill’? These are works that have been in the planning and design stage long before Vancouver was awarded the Olympics. There may have been an ‘incremental cost’ associated with accelerating the completion date, or building a certain feature, but these are not Olympic works.

What I would find helpful is a breakdown of the expenses into different categories that clearly separate the one-time Olympic expenses that were incurred and will never be recovered or offset; as compared to expenditures on infrastructure which will be recovered from land sales, etc. (The Olympic SkyTrain station and SEFC shoreline walkway and District Energy system would fall into the latter category).

I appreciate that there are some things where the cost might be split….Granville Mall upgrade comes to mind here…some costs were incurred just for the Olympics; others were incurred to improve the street for the coming decades (although I’m still very saddened by the decision to use plain ‘broom-finished’ concrete, rather than a more pedestrian friendly material down the centre of the street.)

My interest in such a breakdown is to better understand how much really was spent on the games, how much was really spent on long-term legacies; and how much was invested in lands in anticipation of future recoveries.

With respect to the latter, I was astounded at just how much appears to have been spent on the SEFC infrastructure….shoreline, parks, community facilities, etc. And how do the expenditures compare with the budgets? Unfortunately I do know some of the answers…many of these components went well over budget since the city thought it had sold the land to Millennium for such a high price a few ‘over-runs’ to improve the quality, etc. wouldn’t be the end of the world.

Well, we may never see all that land payment. Indeed, some have told me we may not see any more of the land payment…indeed, some ‘black-hat people’ worry that we may not even get all of our ‘up to $969 M market loan’ back.

If we don’t receive the full loan repayment and balance of the land payment, the Property Endowment Fund is going to take a terrible hit, with potential long term ramifications for the city’s credit rating and financial planning. It is for this reason that I am urging the Mayor and Council to be fiscally responsible when it comes to the future of the Olympic Village social housing. I know this will be a difficult political decision, but it is not a difficult financial decision. We should cut our losses.

Miro Cernetig, the Vancouver Sun columnist agrees, and wrote a column last Monday urging the Mayor to reconsider the future of the social housing. However, Miro's recommendation was for the city to hold onto the units and rent them out and make a profit. Unfortunately, Miro's calculator must have been broken because there is no way the city can rent these units at rents that will even come close to covering the costs. It's a sad reality. Below is a letter I sent to the Sun following Miro's story that was printed on April 19th. The Sun also printed a letter on Mr. Cernetig's column from Laura Stannard, a housing activist for whom I have a lot of respect, which urged the city to rent the units as social housing regardless of the costs. Here's my letter:

Miro Cernetig's Opinion column on the future of the Olympic Village social housing deserves a careful read by Mayor Gregor Robertson and his Council. Cernetig quite rightly notes that at a reported cost approaching $500,000 per unit, excluding land and future subsidies, these housing units have become simply too expensive to keep as social housing.

However, I cannot agree with Mr. Cernetig's suggestion that the city retain ownership and rent the housing as market rental units, and expect the rents to cover the costs. The numbers will not work. Even at a very low interest rate, Vancouver taxpayers will have to continue to subsidize the rents for many years to come. And for whom? People who are lucky enough to get to the front of the queue.

Instead of renting the units at a loss, I believe the city should recover its costs by selling some or all of these units as 'affordable ownership units'. I do not agree with Mr. Cernetig's 'real estate experts' who claim the city cannot recover its costs through a sale. On the contrary, there would likely be a very significant demand. To minimize direct competition with Millennium's sales program, the land could be leased, rather than sold, and other conditions could be put in place.

The SFU Verdant housing development is a model for this approach. Why do we care how Millennium does with its sales? Because they need to pay back the money owed to the city for the construction loans and the land payment.
One final consideration. While we often talk about these units as 'social housing units', in fact they never were. That's right. Only half of the units were ever intended for very low income households. The balance were to be leased at the lower end of market to non-income tested households.

For all of these reasons I urge the Mayor and Council to do the responsible thing, even if it may appear to be a tough political decision. The city should offer these units for sale to Vancouver police officers, firefighters and other mid-income people who work in Vancouver and want to live close to work. Sadly, with all the focus on the homeless, far too many other households who are being priced out of the city are being ignored. My solution would still allow for a broad social and income mix, and the city can start planning more cost effective social housing on its lands immediately adjacent to the Olympic Village.

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