Shafting Federal And City Taxpayers At Brighton Beach
We are starting to get confirmation of my theory of a multi-level Governmental partnership notwithstanding family feuds. Money paid by the Feds to the City to be used by the City for Schwartz and Estrin fees is nice evidence.
Why would the Feds make money available to the City to pay for fees that were used supposedly to fight them. Because they never were used for that purpose! You and I were suckered, dear reader, into believing that we were fighting the big, bad, old Senior Levels. No way. It was all part of the anti-Ambassador Bridge theatrics and the drama to stall off the process according to a pre-determined time-table.
Too bad the Governments could not pre-determine that the economy would not collapse meaning a reduction in traffic and the end of P3 financing. The best laid plans…
$34M for 94 acres in an area that mini-Gord said the “dirt that was virtually worthless 25 years ago” while the Lear plant site where the East End Arena is now located with the building on it and more land was purchased for a tiny fraction of that amount.
Don’t you find it really strange?
The Star set us all up some time ago by saying that the value of the Brighton Beach property that the City sold to the Feds was around $50,000 per acre or about $5M for 100 acres. Yet when the property was sold for $34M, there was no gloating or “Eddie is the master negotiator” or whatever else one would normally expect from the sycophants and lapdogs.
To the contrary, mini-Gord dampened our enthusiasm and told us
- “Feds, city negotiate fair deal
The $34 million Ottawa will pay Windsor for 94 acres of land for a new bridge plaza wasn't the huge windfall for city taxpayers it has been made out to be.
Mayor Eddie Francis was almost giddy about the sum when the deal was announced this week…
Opponents of the Detroit River International Crossing project immediately denounced the price as obscene, an unjustifiable payoff, etc., etc.
Yeah, $34 million is a lot of cash for dirt that was virtually worthless 25 years ago. But don't let the federal taxpaying side of you try to beat up on the city taxpayer part: The boring truth is, both sides got a fair deal in the transaction.”
When Eddie is “giddy” one would have expected him to say something that would prove to us that he is smarter than all of us put together.
But it is worse than that. The Star tells us:
- “$34M Brighton Beach land sale brings $3M profit”
The city will end up $3 million ahead after all the bills are paid with the $34-million cheque it received from the federal government to buy Brighton Beach lands for a new Windsor-Detroit border crossing.
Dating back to the 1980s, the city has spent about $25 million to buy dozens of residential and commercial properties totalling about 94 acres in the city's far west end. The lands were purchased to create an industrial park and buffer zone for the Brighton Beach power plant.”
Come on, when it is put that way, it is a loser of a deal isn’t it. Only a $3M profit for land this valuable and absolutely required for the DRIC crossing. What kind of negotiating is that by our Mayor? No wonder that Eddie is so silent.
Of course, Eddie and the Feds have to downplay now the vast over-expenditure of money precisely because of the Auditor General. As I wrote previously, the other 100 plus acres that still need to be purchased from landowners in the area, how many of them were shrewd investors, plus the land along the DRIC corridor have escalated in value dramatically by the exorbitant price paid. Of course, the people in Delray are celebrating too with the windfall they are about to receive from the American Government.
Equal treatment remember!
Yes, dear reader, let me explain how it IS possible to blow hot and cold with the same breath. Believe it or not, Eddie’s deal shafted Windsor’s taxpayers and Federal taxpayers at the same time. Where is the accountability for our money?
Not possible you say. If the deal was great for Eddie, then the Feds got shafted. If it was great for the Feds, then Eddie, and Windsorites, got shafted. How could City and Federal taxpayers both lose together on the same transaction? Let me show you.
Let’s look at Brighton Beach. As I quoted above:
- “Dating back to the 1980s, the city has spent about $25 million to buy dozens of residential and commercial properties.”
Back in ancient history in 1991 as an example, and mini-Gord should know about this because he wrote the story:
- “City Council has agreed to sell a parcel of industrial land on the Detroit River for less than half the price required under a city land sale policy.
In a closed-door meeting on Monday, council agreed to sell the 19-acre parcel on Sprucewood Drive for about $500,000, even though a city policy on cost recovery requires it be sold for $1,121,000…
"Council decided it would be prudent to sell the land because there are no other buyers and because it's an adjacent piece of land."
That certainly was not the case here since the Feds absolutely needed the property. Sure they could have expropriated it, but after Mirabel Airport, I doubt if they would.
Interesting, there was a “city policy on cost recovery” back then. I wonder if that policy exists today and were Councillors told about it? What did the Report from Administration or the Mayor or from whomever tell them about property values so they could make an informed decision?
Or did they sell the land in the same manner that they bought the arena land?
- "Coun. Joanne Gignac, a member of the arena steering committee, said she had no idea what Fahri originally paid for the land. "The ($4 million) was a price council thought was reasonable," she said. "We then included the property on Riverside Drive. Rather than pay (more) cash."
What would cost recovery be for this parcel? Here is one approach…take the amount paid and figure out what the City could have earned in interest if they just put the money in the bank for 25 years from the mid 80’s until now. At 6% interest, compounded annually the amount is just over $107M.
And Eddie and Council only sold it for $34M, a $73M difference that taxpayers are out! Windsorites lose again!
This approach is a legitimate one since mini-Gord told us that:
- “the feds made the city prove every dime of value: Every transaction for every piece of land dating back to the official start of the land assembly in 1994 had to be documented. Interest was calculated on the price paid for each parcel.”
I have no idea why 1994 was picked nor the interest rate chosen.
So you say, the Feds got a huge bargain. A $107M parcel for about 1/3 the price. Not so fast, Grasshopper. What a property may have been purchased for and the passage of time does NOT necessarily mean that the property is worth the asking price. Just ask the people during the real estate melt-downs who walked away from their homes since their values plunged 40-50% or more ie their mortgage amount was higher than the property value.
The 19 acre parcel was purchased for $26,000 per acre. Using the magic of a compound interest calculation again, the land should at least be worth around $79,000 per acre.
Remember Stephen Waque, the City’s Toronto Expropriation lawyer who said:
- “the price tag was arrived at after a gruelling set of negotiations in which Ottawa was determined to pinch pennies.”
Let’s agree with him and double the price because of the
- “plottage value," a real estate principle which holds that two 30-foot lots worth $30,000 each aren't worth $60,000 when sold together; they're worth more. How much more depends on cost of assembly and other factors.
"The same principle applies with even greater force when you put together 100 parcels," Waque said. "Part of the magic the city was able to provide ... was 300 parcels as a package along with the road allowances."
The Feds should on this basis have paid about half of what they paid.
But even that may not be proper because the Star told us the going rate for parcels of land like this was $50,000 an acre. So the Feds paid almost 7 times what it was worth.
- Hot---Windsor received a fraction of what we paid out plus interest
- Cold---Feds overpaid dramatically
For the City, understanding the deal is easy. Just remember the Mady garage failure, the Cleary give-away, the Keg parking, the East End arena lease, the Canderel sub-leases, the bus terminal deal, the MFP settlement. Just add Brighton Beach to the list of poor negotiating.
I don’t understand it from the Federal perspective at all. For that, I’ll let the Auditor General of Canada do her investigation.
There just has to be more!