One of the most bizarre arguments in favour of the proposed convention centre is that it will increase tax revenues.
“Generating perpetual tax revenue for the federal, provincial and municipal governments, a new convention centre will help fund valuable provincial infrastructure like roads, schools and hospitals,” says an online petition, echoing sentiments expressed by any number of politicians, business groups and others in support of the proposal: building the convention centre will increase future tax revenues, is the line.
I say this argument is bizarre because even a cursory look at the expected tax costs and tax revenues shows that the convention is a net tax loss for governments—it’s a huge money loser. None of the supporters have dared place costs and revenues side-by-side for simple comparison, perhaps because if they did, the truth would be glaringly obvious; instead they obfuscate, promising big future revenues for “roads, schools and hospitals,” even though in actuality building the convention centre will result in less money for roads, schools and hospitals, not more.
To demonstrate my point, I’m going to use figures that are untrustworthy—I’m going to show in a future post exactly how and why these figures are untrustworthy—but for the sake of argument only, I’m taking the figures provided by Trade Centre Limited, the consultants hired by TCL and the provincial government. That is, I’m using numbers that convention centre supporters themselves rely on to make their case.
Let’s start with the costs, which are spelled out on the TCL website:
As infrastructure minister Bill Estabrooks explained when the bid was rolled out earlier this month, it is hoped that the federal government will contribute a one-time payment of $46.7 million. As for the remaining construction costs:
His department’s breakdown calls for amortized payments of $10.4 million to cover the developer’s construction costs, and then another $2.9 million to the developer for operations and upkeep of the three-storey facility. The proposal would have those costs split between the province and the city.
These are exact numbers. The city and province will collectively pay $10.4 million + $2.9 million, for a total of $13.3 million, or $6.65 million each annually, for 25 years.
Now let’s look at expected tax revenues, and compare the revenues to these fixed costs.
The provincial tax hit
According to the 2010 Supplemental Gardner Pinfold Economic Impact Assessment, a document prepared for Trade Centre Limited and used by supporters to argue for the new convention centre, by year 10 of operation the expanded convention centre will generate (page 7) “$40 million in provincial total direct and spin-off taxes above the net present value of taxes generated associated with the current WTCC operating at the baseline level of events over the 10-year period.”
That’s an average increase of $4 million annually in provincial tax receipts, created by an annual expenditure of $6.65 million in provincial tax expenditures—a loss of $2.65 million each and every year.
Understand that the expected tax receipts number is the total tax receipt projection, from all direct, indirect and spinoff economic activity, all new income taxes and all new sales taxes—there’s no “extra” not being counted. Also understand that I’m being extremely—overly so, really—generous, in that I’m not at all including the annual provincial subsidy for convention centre operations, which now floats anywhere between $1 million and $5 million annually, and will likely increase with a larger convention centre. So the $2.65 million annual loss to provincial tax coffers is an impossible best case scenario. Still, all the same, that’s $2.65 million less annually going to “roads, schools and hospitals”—using numbers that convention centre supporters themselves use to sell the thing.
The city tax hit
Using the very same documents, we see that the tax hit to the city of Halifax is even greater.
According to the 2009 Gardner Pinfold Environmental Impact Assessment, (pages 4 and 5):
Estimating property tax potential from this new facility is difficult to do in a theoretical way. To illustrate the scale of taxes, we have compared hotel properties and office buildings in the Central Business District. The Prince George Hotel generates almost $600,000 in annual property taxes. The convention hotel will be about double the size in terms of rooms with an estimated 400 rooms that will generate a higher average rate. This suggests the hotel portion could generate HRM in the order of $1.2 million in tax revenue.
The office tower component will also generate tax revenue. The larger office facilities in the Central Business District currently, such as Purdy’s Wharf and Maritime Centre, generate between $1.2 and $1.5 million in taxes. The new office complex will have similar square footage and could be expected to generate at least this level of tax.
We estimate the convention facility itself will generate more than double the current Trade Centre, which pays about $600,000 in municipal taxes.
The new convention facility will generate additional business for downtown establishments. In turn, we expect this incremental commercial activity to improve the real estate value of properties in the vicinity of the new convention centre. Based on a review of assessment data in the area, bounded by Brunswick Barrington Blowers and Duke tax rate increases attributable to assessed values increasing by 10% and 25% respectively, would be in the order of $150,000 to $350,000.
Based on this report, the best case scenario is an increase in annual city tax revenue in the following amounts:
Hotel: $1.2 million
Office Tower: $1.5 million
Convention Centre: $600,000
Nearby increase in assessments: $350,000
Total: $3.65 million/per year.
That increase in city tax revenue of $3.65 million annually comes at a tax cost of $6.65 million annually, for a net loss of $3 million, each and every year for 25 years. That’s $3 million that won’t be spent on parks, on police, on fire protection, on road repair, on transit or on other needed municipal services.
Again, I’m being extremely generous in these calculations, because I didn’t include the annual city subsidy (last year it was $570,000) of Trade Centre operations into the calculations and, with a larger convention centre, that number will likely increase. Neither did I touch on what will be a tremendous cost to the city: the purchase of the existing World Trade and Convention Centre and its conversion to city offices. Neither did I take out the tax receipts on the supposed office tower, even though I very much doubt that portion of the complex will ever be built.
Best use of tax dollars?
So, between the provincial tax loss of $2.65 million annually and the city tax loss of $3 million annually, we’re talking about a total tax loss of $5.65 million each and every year for 25 years, leaving less money for other important and needed government services. And remember—I’m using Trade Centre Limited’s own questionable numbers, and being extremely generous in every calculation. As we’ll see in future posts, the true figure will likely be much, much greater. Maybe several times greater. Maybe even, I fear, an order of magnitude greater.
But taking the $5.65 million annual loss at face value, as the figure that convention centre supporters themselves are using, I can’t help but ask: Is this the best we can do for downtown Halifax?
What else could we do with that kind of money? We could simply use it to reduce the commercial property tax rate downtown, making it more attractive for companies to place offices downtown and people to open businesses there. Or, we could use it for infrastructure improvements, building the parks and streetscapes called for by HRM By Design. Or, we could start a business incubation fund for new small businesses locating downtown. No doubt, readers will have their own suggestions.
But one thing is clear: Suggestions that the new convention centre will increase tax coffers could not be more wrong.
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This article appears in Oct 14-20, 2010.
The provincial government offices in the current WTCC building. Will they be staying, as tenants of the City, or will they be moving into Rank’s new office tower? If they plan on leasing offices in Rank’s building, then some of their rent $ will be going towards Rank’s property taxes paid to the City. So, in the end, some of this wonderful new property tax revenue will actually come from public money, no?
Think of the irony of the NDP government now asking for all departments to look for places to cut their budgets.
This is such simple analysis. Why can’t “staff” working for the provincial and HRM government do the same simple math and get us out of this mess?
It’s grade school math. Oh wait, maybe that’s the problem.
“Speak the truth, and speak it often, and speak it come what will, or those that did the wrong they did will do the wrong thing still.”
My grandmother in Stallarton used to rhyme this off all the time.
I know that if Tim’s wrong about the Convention Centre the world is awesome; taxes will be going down, the downtown will be booming; roads and hospitals and schools will be built, happy days will be here again.
The sad truth is no one in the princely proponent’s camp thinks the ‘nays’ are wrong.
They love the notion that the ‘nays’ are right. From the self-interested proponents perspective us being right is the best case scenario. If we’re right and this gets done and is the wrong building in the wrong place at the wrong time, if it hurts productivity and makes the community less livable, if it drains the economy and increases debt, then the dollars discussed this week will just be the tip of a very large ice sculpture at a VERY big party. And we will help them throw it and wish them the best of luck and thank them for their efforts even when they fail.
Hundreds of millions will be spent doubling down, trying to fix the holes, marketing, promoting, buying business, soothing the scandal’s irritations, improving and expanding management. TCL execs… all the DBE’s (downtown business elites) will have to spend the next 25 years jetting around the world, attending conferences about how to have successful conferences, wining and dining, making ‘contacts’. It will be awesome. At home they’ll have to throw parties, arrange junkets, dinners and ‘events’. For them the dream of a Leisure Economy will come true. Their “work” will be cut out for them. We know this story very well in Nova Scotia. We’ve seen it a hundred times and we’re still cleaning up tar ponds, paying down the debt and nursing the hangover from previous parties.
In this sense you can not doubt the proponents sincerity or fidelity of purpose. From their perspective everything they are saying is perfectly true, doubtlessly true, literally a “no brainer”. When they use that phrase they are absolutely correct in every regard. The problem is many in Nova Scotia mistake these pinstriped people for our leaders; the ones who have OUR best interests at heart, modern day Joe Howe’s working to improve Nova Scotia. The truth is that they are not accountable to the people of Nova Scotia; they don’t have a mandate to help us at all. They are not our leaders; they are bureaucratic professionals, professional professionals and they’ve been around for a thousand years.
We have to stop mistaking them for someone who gives a damn. The bullshit rhetoric of “Halifax is dying and if you don’t support this plan you don’t love Halifax” is not helping. Let’s agree on one thing. We all love our friends, our homes and our families. To suggest otherwise is unserious and unhelpful.
The proponents – It’s not their problem if there is no ferry in Yarmouth or clean drinking water in a home in Sydney. It doesn’t make a difference to them what the debt is, how bad the kids are at math, if we burn down every last tree or how long it takes to see a doctor in rural Nova Scotia. Though they are the main source of unproductive instability in our economy they are saying “let us succeed” and in doing so you will reap the benefit of the scraps from our table: stability if nothing else.
It’s been an argument of princes since before Niccolò Machiavelli first wrote about them in 1513.
We should know better, but there is always a new generation of princes, self-interested hucksters ambitiously barking for a larger piece of the only pie they can see around these parts – the easy money – our government tax dollar.
Every disinterested voice is screaming no. And the government would rather farm out the democracy to “professionals”. It just doesn’t work that way.
Hey Halifax,
If you had 160 million dollars to finance a revitalization of the downtown core, how would you spend it?
Include ideas, initiatives, organizations, and whatever all else, you would support – and why you think they’re important. We can create a strong strategy incubator, just by putting our thoughts out there, to oppose a lump sum expenditure on one convention centre – with a diverse and comprehensive proposal in its place!
Speak up, Halifax!
How would YOU strengthen the economy, create a sense of community, foster a safe environment?
Email submissions to halifax.ideas@gmail.com and spread the joy – forward this on to your friends and fellow citizens.
Lets collaborate and create a proposal for Halifax that will blow a 160 million dollar bid for a convention centre out of the harbour water! And usher in a new downtown core full of improvements we can feel good about.
Aargh. Stop Convention Centre now. Stop.
But Bruce Devenne stated in The Chronicle Herald…
“Meanwhile Mayor Kelly combines with our Premier Darrell Dexter (who has vanished once again in the face of possible controversy) to spend $500,000,000 (half a billion tax dollars) to build a convention centre that will wind up being owned by private business.”
TIM! GET YOUR NUMBERS STRAIGHT!
Bruce says that the Convention centre will cost half a billion tax dollars! How could you miss that?????
Then again, Devenne was the guy that stated that a royal visit would cost NS “well in excess of 1 billion dollars”!
I’m not for the funding formula of this centre, but the minute “LOOK AT ME!!!” Devenne gets involved, well it is never a good thing…
In true council fashion, SECRET MEETING REGARDING THE CC! I can see why, it’s not like the cost has been divulged or the location of the CC….
If they backdoor this cocksucker in, I predict people going postal this time!
Add in the building permit revenue of $5,000,000 if the whole development goes ahead. And then deduct the decision by Armour Group to delay construction of hotel officees on the waterfront for at least 5 years if the Rank deal, and it is a rank deal, goes ahead.
There will be no provincial or federal income taxes for 10 years because of depreciation charges. Ask Centennial Group if their 1 year delay of the hotel condo waterfront devlopment will be further delayed by the Rank Inc proposal.
Finally, having a CC under the hotel gives the new hotel an advantage, it will generate more room nights than without the CC, yet there is no deal to capture a share of the room revenue other than through taxes – big mistake.
It’s amusing to Smee how “the money” is being argued over and redirected.
HELLO, there is no money!
We can’t even balance current revenue with current expenditures let alone begin to think of a way to pay down our massive dept.
People (us) are suffering, some of us don’t get 3 square meals, don’t have a place to lay our heads, some live in fear, depression, with addiction, sickness, illness, degradation of body and soul!
Get a grip on the reality!!!!
First the province wants HRM to buy the old Centre, now they don’t want to pay municipal taxes on the new one. Methinks I know how they are going to finance this white elephant. On the backs of the HRM taxpayer!!! Fuck then DD says he expects HRM and the Feds to pony up their share. Hopefully Kelly has the guts to say “Up yours”.
To answer the question, “What else could we do with that kind of money?”:
Build a multiple ice surface complex in downtown. It’s a well-known fact that the HRM is lacking ice surfaces. And I’m not just talking about hockey. I’m talking figure skating, curling, ringette, whatever. Now imagine such a complex in downtown bringing in hoards of people daily. People who will undoubtedly eat at restaurants and do some shopping. What to do with it in the summer? There’s summer leagues, hockey schools, figure skating training camps, teach tourists to skate, etc. Plenty to keep it running.
Looks like Toronto is already ahead of us on this one:
http://www.insidetoronto.com/news/cityhall…
The proposed new convention centre is another nail in the coffin to the Citadel Hill view which is important for more than aesthetics [though aesthetics are important]. View = tourists, tourists = money. How will visitors see us as a city if we give priority to filling [with taxpayer money] the pockets of a few already rich people in return for an ugly blot on the harbour view?
Tim Bousquet is entirely correct to probe the underlying economics of the convention center proposal. He’s entirely incorrect, however, in the numbers he produces to make his case in this article. He bases his case in this article on the figure of $40 million in direct and spinoff-taxes to the provincial government taken from the table on page 7 of the Gardner Pinfold supplementary report. Actually, this is only half of the tax revenue indicated in this table. Bousquet neglects to mention that this scenario also projects $39.8 million in direct and spinoff revenue to the federal government for a total of $79,878,448. In any event, these are the wrong figures from wrong table to use since it reports the results of what is called “Scenario 1”, namely the “Baseline Activity Maintained at Existing WTCC Over 10-Year Time Period” (note the word “existing”).
The correct information to use if that from the table on the previous page (page 6) which reports the results of the Scenario 3 analysis ” Projected Events at Proposed New WTCC Over 10-Year Time Period” (note the word “new”). The results of this scenario show direct and spinoff-taxes to the provincial government of $85,624,730 and direct and spinoff-taxes to the federal government of $85,162,969 for a total combined revenue of $170,787,699.
Using the incorrect data Bousquet then argues, “That’s an average increase of $4 million annually in provincial tax receipts, created by an annual expenditure of $6.65 million in provincial tax expenditures—a loss of $2.65 million each and every year.” If one used the correct data ($8.56 million in annual provincial revenues) it would (under Bousquet’s simplified analysis) yield a profit of $1.91 million “each and every year.” ;->
In fact, for reasons much too lengthy to discuss here (watch for a forthcoming publication on this) neither of these simplistic projections is correct.
As for tax revenues to HRM, in my view Bousquet is correct in drawing attention to the very meager revenue stream that this proposal has for the city. It is certainly too early to discuss this in any detail since the province in its initial offer to HRM has requested an exemption from paying municipal property tax (the major revenue stream to the city). It is not correct (as Bousquet has done) to incorporate the hotel and office tower taxation of the Rank Inc. Nova Center complex into an analysis of the convention center economics. The two are really separate projects, the former requiring no public investment. The Rank complex will either get built (with the WTCC II in it, or not), or not, and hence generate tax revenue, or not, but those revenues (whatever they will be) are not part of the financial analysis of the convention center proposal.
Att Matthew Lothar
I said that the royal visit to open the CWG in Melbourne cost them $3,000,000. Of course I don’t expect you to use accurate figures after all you’re one of the minority trying to dupe the taxpayers inti supporting this kind of crap