Friendly Update, City Hall: Fantastic Tales From The Southeast Lands

This Week at City HallWell… it’s about friggin’ time.

Back in the fourth quarter of 2012, city administration was supposed to bring forward a report about what to do with the Southeast Lands. Should we sell them off? Should we partner with someone to develop housing there? Should we build some new neighbourhoods there ourselves?

And we finally got an answer to those questions at an executive committee meeting on Wednesday. That would be in the first quarter of 2015. So… seeing as it’s not three whole years late, I’ll consider it basically on-schedule.

Good thing absolutely nothing particularly interesting to do with housing happened while we were waiting

Phew!

For those wondering where exactly in the schedule we are, exec committee’s Wednesday decision edges us closer to the right-hand end of this infographic:

theshaft

I put that graphic together back in 2012 (based it off a city-made graphic) when council was deciding whether or not to buy the Southeast Lands and as you can clearly see, we’re still in the shuffling money around part of The Shaft and haven’t quite gotten to that point in the future where all that land deal stuff is forgotten.

You remember that land deal, right? No? Well, if you need a refresher there’s this post here, “Is It Just Me Or Is There Some Weaselry Afoot?“, or you can carry on past the jump…

First off, here’s the super quick, Twitter-suitable backgrounder on the Southeast Lands:

We’ve been sitting in this Limbo state ever since: 238 acres richer and no idea what council’s going to do with it.

To city hall’s credit, once they got around to making a decision, they went with the riskier, higher-return option. YAY, team! Specifically, they opted to work with a contracted land developer to develop the Southeast Lands, thus capturing most of the potential profit for the city.

Here’s that option laid out in the context of that infographic above as it was originally prepared by city administration’s artists division:

investmentriskdiagram1

Now, when I saw that figure back in 2012, I predicted that, for sure, the city would go with a Joint Venture — that is, partnering with a development corporation and splitting the profits 50/50. I mean, look at how scientific that chart is and how much of it is occupied by “Joint Venture.” They rotated a curly bracket 90 degrees for “Joint Venture.” That’s real commitment.

How could you not go pick it?

Plus, that was one of the options local hero Harvard was championing at Wednesday’s executive committee meeting. Based on the post-meeting coverage (warning, otherwise fine coverage spoiled by HORRIBLE autoplay video) and the live, in-meeting Tweets coming from the Leader Post’s crack-a-jack new city hall scribe, Natascia Lypny, it seems the esteemed, hometown development corporation felt that city hall’s participation in real estate would distort the market. What’s more, they argued that, considering these are dark, uncertain economic times, administration’s profit estimates were too optimistic. So, why bother?

I wasn’t there but apparently the response from council was: a.) The Southeast Lands represent less than five per cent of the developable land in Regina so the city’s impact on the market will be negligible; and, b.) There’s money to be made in real estate, even now.

Of course, a Joint Venture wasn’t Harvard’s only suggestion. They didn’t just show up to executive committee to say, “Why don’t you let a private development corporation get a bigger taste of that sweet Southeast Lands action? <cough>callme</cough>”

No. They also suggested that city council could say screw it and avoid all the hassle of “building neighbourhoods” and “selling houses” and “earning profits” by reconsidering the option to sell the Southeast Lands to some private development corporation <cough>likemaybeHarvard</cough>.

Hate to break the news to Harvard, but that idea’s a total non-starter. When the city bought the land in 2012, the deal they inked gave the province right of first refusal should the city decide to turn around and sell the land off.

In other words, if we try to make a quick buck by unloading the Southeast Lands, we’ll be handed back the same $7.7 million we paid for them. And there’s no guarantee the province will give us a share of the profits when they sell them at current market rates.

Our hands were tied. We had to do something with the land. And in their wisdom, council chose the route that’ll squeeze most of the value out of it.

You’d think that this would make me happy. That I’d finally be doling out undiluted kudos to our municipal authority.

Alas, it’s not to be. I still have a list of concerns and questions, problems and rants. Here’s two…

1. WHAT HAPPENED TO THE LAND BANK IDEA? Executive committee’s decision to bring in a contracted land developer happens against the backdrop of an administration report recommending council establish a Municipal Land Development Corporation [MLDC] — this would be a city-owned operation that would act at arm’s length from council and be in the business of developing the city’s land.

And it’d be a for-profit venture.

The corporation would start out working on projects like Hawstone, Riverside, and Parliament & Queen. It would also cover two major projects associated with the Regina Revitalization Initiative: the Railyard Renewal Project and the Taylor Field Neighbourhood.

And, of course, it would also handle the Southeast Lands.

Together, those three marquee projects — Railyard, Taylor Field and Southeast Lands — will transform the city. It’d be a hell of a start for a nascent Municipal Land Development Corporation.

But, when the recommendation went before executive committee in September, they voted to send it back to administration for some reason. The report is scheduled to come back to committee in the first quarter of 2015 — so, like, really soon.

And prior to the Wednesday exec meeting Councillor Fraser championed the Municipal Land Development Corporation idea on his blog and then he tried to postpone the committee’s decision on the Southeast Lands until after they had a chance to revisit admin’s MLDC recommendation.

Seems a logical request seeing as the fate of the MLDC and the Southeast Lands are intertwined. However, no one voted for his motion.

I can’t say I’m surprised.

Whenever Mayor Fougere has been asked about ideas like a Municipal Land Development Corporation, he’s been… how shall I say?… less than enthusiastic. And this party pooping continued after executive committee’s Wednesday meeting when he was quoted in the Leader Post,

“I’m not sure there’s an appetite to have a land development corporation,” said Fougere.

I have to wonder, what segment of the population exactly Fougere has been polling that he can be drawing conclusions about our appetites?

Councillor Fraser wants an MLDC.

Administration — those experts on the city’s payroll who’ve been looking at this issue for over two years now — certainly seems to want an MLDC.

I want an MLDC.

Beyond people like… oh, I don’t know… Regina’s land developers, Regina’s real estate tycoons, Regina’s construction magnates… beyond all those people (beyond the Queen City plutocracy, I mean) I’d be very surprised if even five per cent of the rest of the city has ever thought about a Municipal Land Development Corporation, let alone formed an opinion about its various advantages and drawbacks.

So… asking if there’s an appetite for an MLDC in Regina is like asking if there’s an appetite for figola. Most of the city doesn’t even know what figola is so they have no idea how delicious it is nor how well it goes with cappuccino.¹

Lucky thing for Fougere that this MLDC idea only started percolating in late 2012 and never appeared on anyone’s radar during the election. And here it is popping up in the middle of council’s term. It’s likely to pass completely unnoticed by the bulk of the city.

And that’s too bad. Because, in my opinion, this is a HUGE issue.

An MLDC is one of those innovative, long-term revenue tools we keep dreaming about. (And it’s one that isn’t a tax.) It could be a legacy for this city that will MAKE US MONEY — unlike the new football stadium which is only going to cost us.

Fraser does a pretty thorough job of laying out the benefits of an MLDC on his blog — and it’s fairly brief too (sorry, not my forte).

Our mayor, on the other hand, counters that the city isn’t an expert in land development and that that isn’t our core business.

Yeah. Well, that happens when you fail to hire any experts on a subject.

And as for core businesses… I’ve never really been clear on what Regina’s core business is supposed to be exactly.

Collecting property taxes and fixing roads? Surprised I have to break the news to our mayor, but that hasn’t been working out so well for us. He might want to reconsider what he counts as core.²

Also, how can he strike land development (read: building a city!) off the list of a city’s core jobs, but then include building a pro-sports stadium?

It makes no sense to me!³

Now, to be fair, on the surface there’s nothing about Wednesday’s decision that should make me any more pessimistic about the Municipal Land Development Corporation vote than I already was. In fact, if we do set up an MLDC, it would be able to hire contracted land developers to develop land. In other words, they’ll be empowered to contract out jobs just like council wants to do with the Southeast Lands.

However, what I don’t know is whether or not by initiating the process to hire a contracted land developer for the Southeast Lands we’d be precluded from incorporating the Southeast Lands into an MLDC’s inventory of properties.

Wow. That was a hell of sentence. Let me try again…

Okay, so we’re going to start hunting around for a dude to handle the development of the Southeast Lands for us. We’ll sign a contract with him and say, “Go make us some money, dude.”⁴ If, a few weeks later, we decide to set up a Municipal Land Development Corporation, can we then turn around and say to the dude, “Dude, you’re working for these dudes over here now”?

I don’t know the answer to that question. I’d be asking it if I was in Regina at the moment.

Regardless, by voting to hire a contracted land developer to handle the Southeast Lands, I think council is pretty clearly signalling that it doesn’t have an appetite for a Municipal Land Development Corporation.

I think what they’re saying is, “Yeah, we could set up a Municipal Land Development Corporation. We could put together this local organization that will lend stability and transparency to our land development endeavours. We could do that. But we’d really rather keep doing these rinky-dink, one-off deals. That’s our core business.”

So yeah, I’m not hopeful that we’ll see a Municipal Land Development Corporation. Turfing that idea is more in keeping with their pattern of shopping out the business of city hall to a succession of private contractors— see my October post about the innovation deficit at council titled, “Edmonton Gives Good P3 And So Can You.” (Wait… that was the rejected title.)

2. WHAT HAPPENED TO THE HOUSING TALK? We bought the Southeast Lands off the province so long ago it’s easy to forget that there should be a whole lot more discussion of affordable housing surrounding this deal.

Some background: We technically bought the land from a crown corp, the Saskatchewan Housing Corporation. And until 2012, the deal was that they would develop the Southeast Lands and we’d get 75 per cent of the revenues. All that money would get put into our Social Development Reserve.

That’s the reserve that funds our housing programs, like all the grants and tax rebates we offer for the construction of new rental units.

Then, in 2012, the SHC decided to get out of the land development game and sold us the Southeast Lands for $7.76 million. So, until that moment, the Southeast Lands represented an upcoming windfall for the Social Development Reserve [SDR]. And at the time, figures like $70 million in profit were being thrown around.

The profit estimates have increased substantially since then.

In the hands of the SDR, we could use that money to accomplish something monumental to benefit the people who need affordable housing in Regina.

So what happened to this potential bonanza for our housing fund?

Well, the thing is, I’m looking through report EX 15-5 “Development of Southeast Lands” and I’m not seeing a single reference to the Social Development Reserve.

I just did a PDF search. My computer isn’t finding any reference either.

The two of us also couldn’t find any evidence that the city might be planning to use some of the development revenue to support housing projects.

Actually, we’re not entirely certain from this report where the money earned off the Southeast Lands is going end up. This is the best clue I could find in the report…

If approved to proceed, the land development revenue will help achieve the following City policies:
a) Official Community Plan Goal Revenue Sources
• Ensure revenue growth and sustainability
b) Official Community Plan – Community Priority
• “Achieve long term financial viability” – search out new ways to generate revenue to ensure the City has the financial resources to meet customers’ needs
c) Strategic Plan 2014-2017
• Objective 1.1 under ‘Direction 1: Manage Growth’ – “Revenues are optimized to support sustainable growth.” In particular, the percentage of revenue from nonproperty tax sources can be increased if revenue from land development is pursued.

Other Implications
This is an alternative revenue source that is within the city’s authority to act on without being reliant upon a more senior level of government providing authority. This can provide significant corporate ability to fund projects with considerable one time costs.

I do seem to recall that back in 2012, there was a lot of talk about using the Southeast Land revenue not just to support housing but also for other infrastructure needs. Never did get a sense of what percentage they foresaw would go to one and what to the other.

I suspect, the Social Development Reserve must be feeling a little unloved at the moment. Under the old regime, the 75% of the revenue from the Southeast Lands that the city received was housing money. Now, we have no idea what if any money at all will go to that priority.

But I guess you can argue that once we took possession of the land, it became ours to do with as we pleased — we can blow it all on potholes, parties and German paving stones.

Except that wasn’t the intent.

Back in 2012, once the Southeast Land deal went through, I interviewed Tim Gross, the executive director of housing development for the Saskatchewan Housing Corporation. I asked him about what SHC was hoping Regina would do with the Southeast Lands revenue.

Me: When that was done [selling the Southeast Lands to Regina], in the back SHC’s head, was this done to help the housing situation in Regina?

Gross: We had offered as a right of first refusal and we were clearly of the understanding that the profits from the development of that land would be used to support their housing reserve.

I imagine a lot of people are going to be backpedalling pretty fast from that statement. But it seems clear from this that the provincial government, through its crown, SHC, made this land available at a discounted price to provide us with a revenue stream for housing programs.

Remember, there was a pretty significant affordable housing crisis lurking in the background of this land deal. Regina’s council was responding to it with a lot of high-minded talk about how housing was the responsibility of the provincial and federal governments. They kept pointing out how they didn’t have the resources to deal with a social problem like housing. And council indicated that the programs the province had brought forward were insufficient and they called for a significant investment in affordable housing.

And then, they got one: The Southeast Lands, a massive chunk of property worth tens of millions if handled properly. It was something that could fund housing grants and tax breaks for many years if rationed properly.

(And, hey, if it became the foundation of, say, a… oh, I don’t know… a Municipal Land Development Corporation, maybe that seed could grow into a sustainable, long term, revenue-generating engine into the distant future.)

Now, I get that maybe some will think that setting aside between $60 million and $140 million⁵ for housing at this time would be overkill.

(UPDATE 11am: Just to make sure I’m doubly clear on this point… There were no legal strings requiring money from Southeast Lands development go into the Social Development Reserve. My point is the money would have gone into housing under the old plan. Now we don’t know where it’s going to go.) 

People are telling me that since I’ve left Regina we’ve gone from a “hot sellers’ market” to a “housing glut.” And the latest report from CMHC has Regina finally hitting that magic three per cent vacancy rate for rental.

I’m guessing that the housing crisis has been declared solved, eh?

Two things:

First, I’d be very surprised if having a “housing glut” also means we have a surplus of affordable housing. From what I’ve read and from interviews I’ve done, I understand that the supply of truly affordable housing tends to lag behind the supply of market-rate housing.

Second, sure, maybe we’ve waited long enough that the housing crisis corrected itself. But that doesn’t imply that we’re prepared to deal with the next one. Because there’s going to be a next one.

There’s always a next one.

Unless you prepare well in advance to make sure there isn’t.

And that’s why we should probably keep our Social Development Reserve stupidly well funded.

Now, I don’t know… maybe $140 million is too much to put aside for housing. Maybe liberal punks like me shouldn’t be demanding that every penny be put into building apartments and townhouses for low income families. But that doesn’t change the fact that the money we’re going to earn off the Southeast Lands comes with commitments and expectations. It was always headed towards the Social Development Reserve. It’s supposed to develop a better Regina for the society of people who live here.

Be a shame to see it frittered away or have it disappear into some general fund so that’s its impact is diffuse and forgotten.

Ultimately, this gets to another reason I’m in favour of a Municipal Land Development Corporation: the accountability that would bring.

This isn’t the first time the city has had to get land developed. Windsor Park was an SHC project on land jointly owned with the city and it was completed through a contracted land developer — just like the Southeast Lands plan. And we’re currently developing other neighbourhoods such as Hawkstone.

But as far as I can tell, we’re doing all of this work through these little, ad-hoc arrangements. And that makes it more complicated when you’re trying to follow the money.

And if I learned one thing from my journalism education (which consisted of several viewings of All the President’s Men), it’s that you should always follow the money.

Wrapping up…

I could go on. But it’s very late here. (Go on like this: How is it that administration has a concept plan for the Southeast Lands and will be ready to get grading work started this year? I haven’t seen this concept plan. Have you seen this concept plan? This is a project on city land backed by public funds. Shouldn’t we see a concept plan before shovels are in the ground?) [UPDATE: Crack-a-jack newshawk at the L-P, Natascia Lypny, pointed out via the Twitters that the Southeast Lands were part of a Southeast Regina Neighbourhood Plan consultation on Sept 14. So, like, 10 days after I left town. You can see it here, in the cellar of the city’s website behind a sign that reads, “Beware of the leopard.”)

I think the thing I want to end on is just that the Southeast Lands are public lands. We paid for them. And we have a chance to build something with them of lasting impact. We can build a neighbourhood there that showcases the vision for our city that emerged from the Official Community Plan consultation.⁶ And with the money we raise from this development, we can fund an awful lot of worthwhile projects.

I think this is a big deal. Here’s hoping people are paying attention.

 


FOOTNOTES

¹ Figola is a traditional Maltese dessert served around Easter. Just had a slice with my cappuccino.

² Many cities have Municipal Land Development Corporations or something like them. Saskatoon, for instance. And last I checked, their tampering with the primal forces of the real estate market hasn’t caused the ground to open up and swallow their city.

³ Regina Exhibition Association Ltd, aka REAL, the company that will manage and maintain our new stadium is a corporation that’s wholly owned by the city but operates at arms length. Kinda exactly like what the proposed Municipal Land Development Corporation is supposed to be. The takeaway from this? That a municipal corporation is a good idea if we’re going to LOSE money on a stadium. But a bad idea if it stands to MAKE money in real estate. It’s logic from Bizarro World!

⁴ I intend that to be read as a non-gendered “dude.” But come on, who’re we kidding. It’s going to be some guy. Or a team of guys. It’s a guy-heavy “dude” is what I’m saying.

⁵ The city hired GP Rollo & Associates to study the Southeast Lands. They estimated the city could net between $64 million and $139 million by developing the lands through a contracted land developer.

Look, I’m no fan of sprawl. And I get that the Southeast Lands are on the edge of the city and thus will be expensive to service and maintain. But this project is clearly going forward whether it’s managed by the city or a private developer. IF city administration is able to follow through on the idealistic notions in the OCP when they’re guiding the design on this, then I suspect we have a better chance of getting a worthwhile, complete community than if we left this project in the hands of private developers who’ve shown time and again that they’re incapable of pulling that off. But I could be totally wrong about this.

Author: Paul Dechene

Paul Dechene is 5'10'' tall and he was born in a place. He's not there now. He's sitting in front of his computer writing his bio for this blog. He has a song stuck in his head. It's "Girl From Ipanema", thanks for asking. You can follow Paul on Twitter at @pauldechene and get live updates during city council meetings and other city events at @PDcityhall.

14 thoughts on “Friendly Update, City Hall: Fantastic Tales From The Southeast Lands”

  1. The MLDC thing will never happen, because it does against the grain of Fougere and his cronies. They have no intention of helping CoR make money that they or their buddies could be making.

  2. Sorry, I had a sprawling moment there.

    “I’m guessing that the housing crisis has been declared solved, eh?”

    While you’ve been away, everyone stopped talking about it. If no one brings it up, it’s not a problem anymore.

    In reality, only expensive ~$200,000 homes are built in Regina, and they all require massive utility bills each month, so there’s no affordable places to buy that can be spoken of. Now, if 700 square foot homes were built with no furnace (geo and solar heating with super insulation and heat/air exchanger ventilation), and electrical generation built-in, with composting toilets, and they cost somewhere less than $180,000 (which should totally) be possible, we’d pull a great many people out of poverty. There’s probably no appetite for that either, since fewer than a few dozen people talk about that in this city.

  3. Where do people who buy expensive homes even come from? If you look at wage stagnation, it’s amazing anyone young has the coinage to pony up on a $350K new build…I mean, I know a record number of youths are getting down payment cash from their comfy boomer ‘rents but come on? Is it really that many? No one was ever going to front me 5% on a $300K home. Not until enough relatives died, anyway.

  4. I think there are a significant number of people who can pony up $350K. You certainly aren’t usually getting a brand new detached house for that anymore though – you’re looking at a townhouse, a condo, a duplex or a small older home likely in need of significant repair in that price range (although prices have come down a bit, so you have more options now than you did a couple of years ago when we were looking for something in this price range). It’s all the $500-750K houses that I can’t figure out who can afford? It seems like they are building WAY more of those than there could possibly be people who could afford them in Regina and I seriously wonder how they could possibly retain their value. A 20% drop is going to be a far larger number in a house like that and if the economy isn’t doing great then there’s going to be even fewer people who can afford to pay that even at a 20-30% discount. And if you only put 5% down you’ll be upside down in your mortgage quite quickly, possibly unemployed and trying to figure out what the heck to do with your crazy big house that no one can afford to buy off you.

  5. Barb: “Crackajack” is an acceptable alternate spelling of “crackerjack.” I recall reading it somewhere. Probably in an old-timey comic. I went with “crack-a-jack” because I thought it looked cuter.

    Regardless, it was a legitimate stylistic choice and I’m hurt — HURT — that you’d think I’d screw something like that up. I admit my writing can be sloppy at times and I welcome the extra set of eyes scanning for errors.

    But this time, you’ve WOUNDED me!

  6. Paul: it is indeed a variant, but I’m rather surprised that a writer for an alternative paper would go for cureness. Leave that to the Sunday-supplement mediocrities.

    Wounded you? Bollocks (var. ballocks, and even occasionally bollix)!

  7. A writer for this alternative paper would. Haven’t you noticed the obsession with kitten videos? Cute is house style around here.

    It won’t be long before Steve changes the name from Prairie Dog to Snow Ponies…

    … or Huggy Wombat.

  8. “Cureness”?!? I actually typed “cureness” and didn’t get a correction??

    Or, “Sweet Snakes”…

  9. Paul – So Happy to see you!!! Hope you and Family are happy in Malta, you are so lucky to be there. and not here. I have read your take on the mess our city is in, in fact have read it several times and will read it again. The most sense I have heard in about a year. (how long have you been gone??) Anyway, won’t bore you with spelling corrections (who cares, as long as I understand what is said) all I care about is content. You have given us plenty to think about. Thanks for still caring. You will be back when???
    sd

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