The provincial government dropped two bombshells on Halifax council Tuesday. The deal in the works for the new convention centre proposed for downtown includes two provisos: that the city exempt the new convention centre from property taxes, and that the city buy the existing World Trade and Convention Centre. Either or both proviso could kill the project.
Both costs come on top of the costs first detailed on thecoast.ca/bites: construction costs of $159 million would be split between the three levels of government, with the federal government paying $46 million, with the province and city each paying $56 million. The city and provincial portion would be financed through a 6.9 percent loan, with payments amortized over 25 years. With annual operational and management expenses of $2.9 million for the convention centre, the city and province would each pay $6.5 million annually for 25 years.
Economic impact projections provided by the firm Gardner-Pinfold for Trade Centre Limited, the crown corporation that operates the existing convention centre, say that, thanks to the new convention centre, city property tax revenues will increase by $3.5 million annually—reflecting new taxes from the convention centre and the hotel and office tower associated with it, as well as from increased assessments to nearby propoerties. That $3.5 million in increased tax revenue only partly offsets the $6.5 million costs, leaving the city with a net loss of $3 million annually.
City staff has yet to conduct an independent analysis of those figures, but the Gardener-Pinfold projections assumed that the city would collect taxes on the new convention centre. Without that assumption, the city would lose an additional $1.2 million annually, for a total loss of $4.2 million each and every year, for 25 years.
It’s anyone’s guess what buying the existing WTCC would cost the city, or how much it would cost to convert it to other uses.
Without exception, councillors said they would reject the proposed deal outright, if they had to vote on it Tuesday. Several accused the province of setting council up as the fall guy—the province is giving the city an impossible proposal, and so when council rejects it, provincial politicians can blame the city for the loss of the convention centre. Other councillors saw the proposal as merely a negotiating tactic, and hoped some compromise could be reached.
Council directed staff to research the costs and continue negotiations, and the entire issue will come back before council November 9. The Coast has been covering this in great detail at thecost.ca/bites.
This article appears in Oct 14-20, 2010.
So many bombs went off today it was crazy.
On top of the two mentioned above, the Province also demanded that operating losses on the second convention centre be split 50/50 with the province. Currently, the annual operating loss is split but the HRM share is capped at $800k. With current operating losses running at $1.8 to over $3m a year and we can only imagine what a facility three times the size will lose … or as Mr. Ferguson describes it “require as an operating subsidy” above the beyond the current ballooning and biased costs capital, financing and maintenance.
And to my mind the biggest bombshell was that after all this there is a serious movement to push this forward without any public consultation on the design, vision, process or economics.
All with a timeline of less than three months before Rank’s price quote is off the table.
This is typical for Halifax
The Canadian Federation of Independent Business says Moncton, N.B., and Charlottetown are the most business friendly cities in the Maritimes.
The organization’s annual ranking of the top 100 entrepreneurial cities put Moncton in the 22nd spot and Charlottetown in the 26th.
Halifax was listed in the 89th spot.
Read more: http://www.cbc.ca/canada/nova-scotia/story…
John Wesley– that’s correct. In essence, the ongoing public subsidy will be shifted from the province to the city. But let’s not double count it– the property tax exemption will be about $1.2 million a year, which is about where the subsidy is. True, anything above that will be split between the two levels of government, presenting yet another hit to the city… I guess the question becomes, Will TCL perform anywhere near the level they put out in all the projections? I’d say no (that’s coming up in part 4, probably later today).
But, regardless, it’s hard to see how the province and city are “equal partners” when, even in the best case scenario, the entire subsidy is paid for by the city, not the province.
Ha ha ha, It’s so interesting. It’s like watching street hustlers play a shell game in New Orleans.
Here’s my take on it.
The Loss from Operations that I described below is the ongoing loss that shows up on the financial statements of TCL. You can see on their website that the accumulated loss from the fist 25 years of operation is around $42m. Any real company would have been out of business long long ago but TCL is a very special kind of company. It is what I would call a Vampire Company.
Now, any company planning to go forward with a new venture would have to take these financial statements and project them in to the future: revenue, expenses, promo forma balance sheet. Either the TCL has not done this work or they have done it and are keeping the financial projections secret because through all this money talk no one has offered or asked what the continuing Loss from Operations would be. The Coast might consider asking that question. My reasonable business assumption in the absence of any evidence to the contrary would be that a facility three times the size of the current would lose three times as much.
To your point, this is not double counting the proposed tax exempt status. The property taxes do not show up on the books of TCL. Property taxes are paid by the building owner. This is one of the reasons PNS might not want to own the building but in doing so leaves Rank (not TCL) responsible for property taxes. This is the cornerstone of the proponents pitch about how there will be a benefit to Nova Scotians.
Now the tax “ask” is coming from PNS but what they did not say out loud yesterday is that the tax exemption is for Rank, not PNS or TCL. Therefore the property tax exemption is on top of any loss from operations (or operating subsidy as Mr. Ferguson calls it) and further undermines the capital case information put forward. It improves the bottom line of Rank not TCL.
We got a glimpse yesterday of the Capital Cost loses we are facing. HRM is now calculating the Public Cost after waiting years for TCL to do the work. But it needs to be said that we are still 100% in the dark regarding Operating Costs. TCL has been asked and offered nothing on this. It s is more secretive and cagey than the CWG by far.
I encourage you to ask for the pro forma financial projections for TCL for the next 5 years under the new plan. It would be a revelation.
On a related note, “increased assessments to nearby properties”. Is that right? It’s a hell of a thing when good news for the city is increased property taxes on downtown businesses…as if those operations on Argyle, Sackville and Prince need extra taxes.
How much will the property tax be when some of those businesses, disgusted with higher taxes and maybe not so happy with increased shade, decide to relocate?
The city’s urban commercial rate is roughly $3.25 per $100 of assessment. Presumably a $500M construction cost (Convention center + hotel’s, etc) will result in an assessment of about $500M. This works out to $16M+ in annual tax revenues…
The outrage at the proposed tax exemption for the CC is a HRM smokescreen. Just another way for HRM to get money out of provincial taxpayers.
HRM doesn’t garner property taxes from the Library, the Sportsplex etc.
The CC is only slightly different because it is privately owned and leased to a government entity which results in HRM & PNS paying the property tax through lease payments and the taxes flowing solely to HRM.
HRM will collect 1% of the construction cost., on the whole project that is a cool $5,000,000.
HRM has already collected 1.5% deed transfer tax twice on the property, once when the Hreald was sold to the Keating interests and again when it was resold to Rank.
HRM has collected significant property taxes for several years on a) an empty building, and b) a vacant piece of land.
HRM will collect a 2% tax on all rooms in the hotel including the additional rooms sold as a result of the new CC.
If HRM believes the CC is a great asset for the municipality and is prepared to pay 33% of the cost surely they believe the CC will increase business in the hotel industry and therefore garner more revenue from the 2% room tax.
If HRM believes the CC is a great asset for the municipality they must also believe that it will generate increased business and an increase in property values and increases property taxes.
The economic studies have been available for several months anf HRM staff or a consultant have, for some unknown reason, been unwilling or unable to quantify the various tax flows to HRM. This reflects very badly on Mayor Peter Kelly who should have ensured he and the staff had the information for the council meeting.
A rough calculation gives property taxes on the CC of $4,900,000 a year and if the cost of operating C is split evenly between the province and HRM then we can assume that HRM has its knickers in a knot because of $2,450,000 a year of taxes will not be paid by the province if the exemption is in place. The other $2.45 million is a wash for HRM.
The HRM hissy fit is just juvenile theatre.