Buyout the 'right thing to do'
City to proceed with Niven contract closure
Yellowknife (Apr 12/00) - As expected, city council has voted to end the public-private partnership to develop residential lots at Niven Lake.
In a 6-1 vote Monday night, council members approved an administration motion to meet with the city's partners on April 19 and proceed with closure. The companies, Volker Stevin Contracting Ltd., Reid Crowther Engineering and M.M. Dillon Ltd., had already asked the city to proceed with closure.
The vote ends a five-year effort to rework how Yellowknife develops building lots. The 1995 contract was designed to share the "risks and rewards" of development, but a clause allowed the private partners in the so-called "P-3" pact to get out if sales didn't meet expectations. The development came on stream just as the economy began a nosedive, from which councillors believe Yellowknife is now starting to emerge.
Only eight of the development's 26 first-phase lots have sold - including two in the last month - and a second phase of 18 lots developed in 1996 still need a lift station before being brought on line.
Under the closure clause, the city is expected to have to come up with $3 million to pay its partners for costs they've incurred so far. The city would have to borrow that money and will ask the minister of municipal affairs to approve the loan and exempt the city from seeking ratepayer approval.
Most councillors considered it a good business deal for the city.
Coun. Robert Slaven called it "the right thing to do at the right time."
"That $3 million is already in the ground," said Coun. Cheryl Best, adding she believes the city's economy is starting to turn around and the lots will be needed soon.
As well, by buying out the partners, the city ensures all potential profits from the development go right back to the city.
Mayor Dave Lovell said the lots are a good investment because Yellowknife needs room to develop.
"If Niven Lake wasn't there today, this council would be at the point of bringing (the development) on line today."
After the meeting, he said some developers have approached the city about buying up Niven lots at a discount, but predicted that lowering prices will not be needed for them to sell.
There were words of caution during the debate, however, as councillors Dave McCann and Kevin O'Reilly aired concerns about the lack of public input on the potential borrowing of $3 million and the merits of a public-private partnership.
Although he supported the motion to enact closure, O'Reilly said the city has to proceed with caution when it comes to land development.
"There are a few things we've learned (from this)," said O'Reilly.
"P-3's have to be gone into much more carefully. The rush to try to bring in private entrepreneurs to subsidize capital costs in the long run increases overall costs.
"This is an example of a P-3 gone wrong," said O'Reilly, who added the city must take care to take a "more realistic" view on economic growth and population projections.
Lovell and others disagreed that the Niven contract didn't work, and insisted that the public's interest was well protected.
"I think P-3's do not generally work in favour of the public, but in this case, I object to it as a 'P-3 gone wrong,'" said Lovell.
McCann was the only councillor to vote against the buyout, expressing concern about the lack of ratepayer approval.
"A big chunk of cash is involved," said McCann. "When it's a big outlay of cash, ratepayers would like a chance to discuss it."
Lovell said ratepayer approval is a moot point because the city is bound under the development contract to come up with the money.
Even so, McCann was concerned about taxpayers' "exposure" because the city is counting on lot sales to pay back the loan.