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Friday, October 28, 2011

Opportunities that drop from the sky

The EPCOR deal was the first but not the only sole source deal to come before council on Monday night. The second, the Tricar parking garage, was treated more favourably by council.

At its meeting earlier in the week, the Finance and Administration Committee (FAC) had wanted a bit more information from staff, especially on the legal aspects of a sole sourcing deal.

Tricar, having completed one highrise rental building across from the John Labatt Centre and being in the process of adding some high end condos next door, was interested in getting some support for constructing a parking garage between them. After all, in putting in the residential buildings, it had eliminated some 400 parking spots on the site and their tenants would certainly want a few spots to store their cars.

It was not the first time there had been discussions with Tricar’s Joe Carapella; a couple of years ago there had been talk of a P3 parking garage but the Downtown Parking Committee, chaired by Controller Tom Gosnell, had not seen fit to bring Carapella’s proposal to council. It just didn’t fly.

But, with a new council at City Hall, why not give it another go?

Tricar provided an unsolicited offer to council to lease 300 spots at $2600 per spot per year, adding up to about $33M over the lifetime of the proposed agreement of 25 years. Staff estimated that after revenues from the user fees, the taxpayers would have to cough up half a million bucks a year. City treasurer Martin Hayward said it was a conservative estimate.

On Monday, Hayward updated the members of the FAC. The offer had come forward unsolicited; there had been no request for proposals.

No wonder. Council hadn’t even discussed a need for a parking structure nor had it included anything for it in the budget for the following year.

The purchasing by-law is pretty specific about the conditions under which the city can ignore going to tender. Although some on council saw this offer as a once in a lifetime opportunity, the fact was that there was another player in the market. Shmuel Farhi, London’s biggest property owner and the city’s landlord in nearly all of its leased properties, also had a number of proposals, not identical to Tricar’s, but certainly a possibility since council had not specified what it was looking for.

There followed a discussion about what council could legally do. “Can we, as a one-off, can we make that kind of decision?” the Mayor asked of city solicitor, Jim Barber. The city solicitor referred him to a confidential legal report. “You can rely on Mr. Hayward’s advice,” he responded. Hayward had not recommended going with a sole source offer; he wanted a competitive bid.

Dale Henderson expressed concern. Spending $10 to $20 million over the next 25 years was a lot in the absence of any parking policy. Hayward noted that the city wouldn’t have to upfront the money but Tricar would be expecting a return on its investment in the neighbourhood of 6 to 7% per year. “People aren’t in business for free,” he pointed out. He estimated that leasing would be about $5M cheaper than building independently. Whether that took into account the value of the building at the end of 25 years was not discussed.

Paul Hubert wanted to see a business plan, although he was aware of claims by the Covent Gardens Market operator Bob Usher that 180 people were waiting for monthly parking permits.

Jeff Fielding urged the committee to do a proper study, but others were concerned if this was a matter of urgency.  “What is the time-frame?” Nancy Branscombe wanted to know.

Carapella was in the audience. He indicated that he thought council wanted the spaces for the National Figure Skating Championships in 2013, in which case they had to get on with it.

Branscombe thought that was a silly way to do business. For her the question was, are we going to subsidize downtown parking and how do we fund it?

Fontana thought time was of the essence. Here was a great opportunity and the builder couldn’t be expected to wait for 6-8 months. Yes, there had to be a business plan and a parking strategy but as to funding, the city could add 25 cents to meter parking and increase parking fines.

Joe Swan had no doubt that additional parking was needed downtown but he was reluctant to bypass the bidding policy, fearing liability.

Ultimately, they decided to go ahead despite the reservations of staff. Administration was directed to (a) start the negotiations with Tricar, (b) develop an appraisal of the offer and a business plan, (c) get a report back for budget purposes, and (d) to prepare a long-term parking strategy. Finally, (e) they relegated the offers from Farhi to the circular file.

That was the recommendation that went to council.

Having barely recovered from the discussion on EPCOR, few were inclined to engage in protracted debate. Matt Brown wanted to know if the matter was really time-sensitive. Carapella hadn’t indicated that it was, apart from his belief that the spots were required for the skating competition. But others suggested that there were construction timelines to be met; Carapella couldn’t wait indefinitely. It had to begin by the end of March for sure. Brown voted no to all but the last two clauses.

Baechler voted no to all. She pointed out that Tricar had already been subsidized to the tune of $4.5M in waived development charges and there was no council resolution on the need for additional downtown parking, subsidized or otherwise.

Orser was in favour of all of it. He knew that with the massive injection of taxes from the Tricar developments, paying for the lease wouldn’t be a problem. He may have a point although there have been policies for the downtown to phase in assessment in order to encourage development. Whether that would still apply in the case of these buildings, I’m not sure.

Nancy Branscombe, despite her reservations about “opportunities that drop from the sky”, voted for all the recommendations, noting that it still had to go to budget, the money still had to be found. She agreed that there is an immediate need for parking and that the additional 300 spots would provide some breathing room until a long term strategy could be set.

Other objections included Joe Swan’s no vote to (b) and Denise Brown’s rejection of (a). But the ayes won the day.

And so, the taxpayers of London will subsidize the parking fees for downtown office workers unless council decides to implement higher meter rates and parking fines. In that case, it will be the shoppers in the downtown subsidizing the office workers.


Anonymous said...

speaking of liability, if something terrible happens to someone and/or someones vehicle that's parked in this lot can The City of London be sued?

Over55Carol said...

Just think what the outcome would be if we did not have a mayor devoted to zero tax increases!

Anonymous said...

The best opportunities that drop from the sky in London come courtesy of pigeons and mayors who know what's best for us in the back rooms at London Hydro.

"Hey, don't worry about it, I'll sell it to council, no problem. Let's just get the deal done."

Anonymous said...

This seems like a haphazard, off the cuff, scatterbrained way to do business. In the absence of a thought-out policy, how can there be any assurance of fair and consistent treatment of the various individuals or companies that want to do business with the city?

Or any assurance that the city's best interests are being served?

Or even faint hope that council members are not giving in to the undue influence of lobbyists?

This decision of city council reminds me of Canada's continued presence in Afghanistan - the only reason we're there is to appease the Americans for not joining the Iraq war.

Poor Joe lost on Epcor, so we'd better give him the parking deal.

anon one

colin hendry said...

I believe in miracles--especially when it falls from the sky. I also believe that our society is built on mutual benefits from deals that are considered and passed. It is unfortunate if every time an idea comes forward we claim that it belongs to Joe or Joni or Dennis. Cant we treat them all as ideas to be carefully considered and enacted after careful consideration? $2.5 million sounds like a cheap parking garage to me, what am I missing?

roderic brawn said...

I wonder if council will be so generous to improve LTC service to downtown.

Cracked Cement said...

$2.5 million?

Gina wrote: "Tricar provided an unsolicited offer to council to lease 300 spots at $2600 per spot per year, adding up to about $33M over the lifetime of the proposed agreement of 25 years. Staff estimated that after revenues from the user fees, the taxpayers would have to cough up half a million bucks a year. City treasurer Martin Hayward said it was a conservative estimate."

And at the end of the 25 years, the City of London owns nothing.