To sell or not to sell

By Craig Spence, June 2012

An unsolicited offer to buy City-owned land has highlighted the absence of guiding policies for land disposal in Victoria.

Perhaps the most important piece of real estate for the City of Victoria to identify as it considers policy around the sale of City-owned lands is the office at Number One Centennial Square where the whole process of land disposition and acquisition is supposed to be managed.

There’s a lot of interest in locating that sanctum after it was announced April 30 that the City would consider an offer by the Ralmax Group to purchase four parcels on Harbour Road (see map on page 20), just north of the Johnson Street Bridge. The land in question is currently home to several Ralmax-owned companies, including Point Hope Maritime, United Engineering, Island Plate and Steel, and Harjim Industries, as well as several other non-Ralmax businesses.

Ralmax presently leases three of the four parcels from the City for $250,000 per year, a rate that jumps to $750,000 per year in 2016 in an agreement that runs until 2045. The company has been in negotiations with the City to lease the fourth parcel, 203 Harbour Road, which includes part of the approach for the new Johnson Street bridge.

News that the City was open to Ralmax’s offer triggered a controversy over when and how disposal of publicly-owned property should proceed, the second time this year that disposal of City-owned land has become a public issue. In January, an agreement to sell City-owned land adjacent to Reliance Properties’ proposed redevelopment of the Northern Junk property (1314 Wharf Street) on the east side of the Johnson Street Bridge was in the news. In that case, it was made public that the previous council, at an in camera meeting in January 2010, agreed to sell Reliance roadway and boulevard adjacent to its proposed development. That agreement side-stepped recommendations made in 2006 for the disposal of City-owned “Surplus City Highways.” Moreover, the decision to sell property to Reliance was made even before the pedestrian connections to the new bridge had been finalized (they have since changed) and it was made 11 months before a referendum on the bridge project was held. The agreement with Reliance had been kept secret for two years.

So the City’s announcement that it was now considering an offer from Ralmax for the Point Hope lands immediately generated a substantial amount of heat. Councillors Ben Isitt and Shellie Gudgeon were so upset by what they considered an out-of-the-blue deal sprung on an ill-prepared council that they convened their own town hall meeting at Fairfield Community Place May 9.

Many questions were raised at that meeting about the Point Hope offer, questions critics say should be captured as part of a checklist of benefits and trade-offs considered whenever City-owned land is sold. Why, for instance, sell properties that are leased for the next 33 years? Why forgo the long-term control over future developments in the Point Hope area by giving up the City’s status as a major property owner?

Even if the City hasn’t provided answers, there are some pretty obvious arguments that would favour a sale of its Point Hope lands. Its Official Community Plan calls for a working harbour “south of the Point Ellice Street Bridge and north of Swift Street;” Ralmax says it wants to invest and expand its Point Hope operations. Would ownership of the site strengthen that resolve?

As well, the site is thought to be heavily contaminated after years of marine-industrial use and it could cost the City millions to remediate. Ralmax owner Ian Maxwell has suggested the risk to the City of the cost of a cleanup goes away if it sells to him.

Even if Maxwell’s plan to expand Point Hope Shipyard fell through and he decided to sell the property at 203 Harbour Road for residential development (the OCP seems to allow that since it’s south of Swift Street), the City could still come out a winner. That property’s current assessed value is only $695,000 and generating little tax revenue. A dense residential development there would not only meet the regional objective of densifying the core and the City’s goal of a more vibrant Downtown, it would mean higher tax revenues.

If those are the kinds of considerations that are motivating the City’s consideration of the Ralmax offer, it isn’t saying. Still, Councillor Lisa Helps, the only elected official other than Isitt and Gudgeon to attend the Fairfield meeting, denied the Ralmax offer is being conducted in a back room. She pointed out that the reason the offer was in the public realm was that council voted unanimously to “rise and report” on it. “This actually isn’t being negotiated behind closed doors because we are all here tonight talking about it,” she said.

Of the approximately 100 people who showed up at the Fairfield meeting, not one spoke in favour of selling the Point Hope properties. Most lambasted the City for not having coherent policy on acquiring and selling land, and for not managing real estate holdings effectively. “The use of the word ‘surplus’ is what is really most telling,” said one speaker. “It tells us that we don’t need it, right, and it’s exactly the opposite with public lands, I think. There’s nothing surplus about it.”

Alice Albert called the sale of publicly-owned lands like the Point Hope properties a case of “short term gain for long term pain” that will limit development and planning options in the future. “I really believe that we need a mixture of industrial along with housing—affordable housing—and I’m opposed to the further sale of any public lands for any reason in Victoria.”

Isitt and Gudgeon intend on taking suggestions made at the meeting and drafting a policy which they will present to council. “We can take the beginnings of a policy to the council table and debate it with our fellow councillors, and hopefully move it forward,” Gudgeon said after the meeting.

One of the things their draft policy is sure to embody is the sentiment that only when there is a land acquisition and disposal strategy in place—one that ties into Victoria’s Official Community Plan and Economic Development plan—will the City be able to make informed decisions about strategic holdings like Point Hope. “For me to agree to sell the lands I need a much stronger case,” Isitt said, adding, it’s not good enough to have a potential buyer appear at City Hall and offer to buy a property that doesn’t even have a “for sale” sign posted on it.

 

Councillor Geoff Young, appearing on behalf of Mayor Fortin at the regular Mayor’s Open Door a week after Isitt and Gudgeon’s meeting, agreed the City of Victoria needs a strategy for managing its land holdings. But he cautioned against an approach that would involve acquiring large tracts of land for long periods of time as a means of achieving goals that can be met through Victoria’s authority to approve zoning and issue building permits.

“I think the City is one of the worst landlords, and we’ve done enormous harm by a desire to hold onto property by a process that is driven solely by political considerations,” he said, citing the City’s Inner Harbour waterfront properties between Broughton and Humboldt streets as the “most notable instance of a failure.” “Basically those lands have been sterilized for half a century from any productive use—any use that would add to the vibrancy of the city,” he said.

There are pitfalls to cities owning land, Young said, and the best of intentions can go awry when politicians and City staff fall into them. Disposing of even small parcels becomes problematic, because neighbourhoods are extremely sensitive to changes in the designation or use of land. This has led to a patchwork of property holdings in “bits and pieces” throughout the city, much of it unused or inappropriately used.

With larger, strategic lots, the civic-owned land-trap becomes even more paralyzing because the City is in the position of being property owner, zoning authority and project approver all at once. Young said that puts it in a situation analogous to a conflict of interest and means the City faces the brunt of public reaction because no private developer is involved in rezoning and development applications. Young blamed that political reality for the under-utilization of the City’s Inner Harbour lands. “Using what should be a vital amenity for Victoria—with a waterfront walkway, and shops and residences and businesses—as asphalt-covered parking lot is an indictment of our City council in my view,” he said.

On the other hand, opportunities to provide new amenities are being missed, he said, because the City is not poised to acquire lands strategically. He pointed to the long-standing objective of creating a “mid-block” trail from Cecilia Ravine Park across Washington Avenue to Balfour Avenue, which would improve access via Maddock Avenue to Cuthbert Holmes Park in Saanich. To do that the City would have to buy back-to-back residential properties, hive off the portions needed for a public trail, then resell the remaining land.

“It would be a significant amenity, it would link with the Galloping Goose and would be a very good amenity for pedestrians and bicycles,” he said. “We’ve nudged at that objective for many years, for more than 20 years I think, and the City has never managed to be sufficiently alert to purchase back-to-back properties and then cut off a pedestrian right of way.”

While he may disagree with Isitt and Gudgeon about what strategy, policy and procedure should look like with regard to the disposal and acquisition of civic lands, Young acknowledged that the City needs a framework for making decisions. Planning for parks, walkways and infrastructure all require strategic land acquisitions and disposals.

 

Examples of municipal policies that dial in the big picture are not hard to find, said Island Transformations President Irwin Henderson, delivering a presentation to the Fairfield meeting. He pointed to three common features that represent “best practices.” When disposing of City-owned lands, policy should require: independent, expert appraisal; a public process; and consideration of multiple means of transacting property sales including public tender, auction, lottery, land exchange, and call for proposals.

BC’s Community Charter, the legislative framework most municipalities including Victoria work under, sets out rules for disposal of properties. Direct sales of properties to individuals or companies are permitted, but a statement on the Ministry of Community, Sport & Cultural Development web site recommends that land be sold through public offer, not by direct sale to individuals. It also suggests councils have policy in place to ensure that is the case. “Councils may want to start with a policy that all property should be offered for sale by public offer unless there are strong identifiable reasons to make an exception,” the Ministry suggests.

Victoria does not seem to have a comprehensive policy in place for managing its land holdings. “Staff manage the properties in terms of administration of leases, divestiture and acquisition, as directed by City council.” said Communications Director Katie Josephson. “All strategic considerations and decisions related to the acquisition or sale of lands are made by City council.” But who, specifically, has overall responsibility for managing the City’s property holdings was not clear.

And information about the City’s holdings seems sketchy. A map of City-owned properties—which Isitt and Gudgeon said they had not seen before it was requested by Focus—could not be broken down into holdings that are parks and other civic facilities as opposed to those that are available for lease, rent or sale. The market value of civic property holdings was apparently not available—all the City could offer was the “historic purchase price” of its lands: about $132.4 million. A database of City-owned properties lists 442 entries, but aside from addresses, property type (land or strata), folio number, and property number, it doesn’t give any information. An exact figure could not be provided about the total area of land owned by the City.

Said Gudgeon, “When I make a good decision, it’s because I’ve got the right information and the most accurate information balanced in front of me. So I think what I’m lacking in the decisions, once they have been put in front of us, is that it’s not fulsome information. Not enough information is being provided to council for us to make these decisions.”

At the Fairfield meeting it was pointed out that Victoria is not “land-rich.” It cannot afford to sell off holdings, as it has in the past, without adequate consideration or consultation. Isitt agreed there needs to be a change in the City’s land management practices, starting with Point Hope. “There’s not a huge surplus of City land. In terms of non-park, non-school lands, the Point Hope parcels are some of the most sizable holdings that the City still has,” he said.

Craig Spence is a freelance writer and novelist with a 30-year background in community journalism and communications.