Purchase of Manitoba Hydro Transmission Corridor Lands

City-Council-Meeting

Here’s a brief summary of my position and how I voted at the June 15th, 2016 City Council meeting regarding the purchase of the Manitoba Hydro transmission corridor lands for the Southwest Rapid Transitway (Stage 2) and Pembina Highway Underpass Project:

  • I support rapid transit and strongly believe the City of Winnipeg has a responsibility TO ASK the Province of Manitoba to act in an expeditious manner to establish and commence a binding process of mediation/arbitration to fairly and equitably resolve the value of the Manitoba Hydro transmission corridor lands.
  • Even though the purchase of the land is less than 1% of the anticipated project costs, I am very concerned about the precedent which the valuation of the land sale is setting for the City of Winnipeg.
  • Both the City and Province are obligated to act in the best interests of the public, and to protect the public interest of taxpayers.
  • There needs to be a process of oversight at the Provincial level to ensure that with the actions of Crown Corporations, the public good and public interests are duly protected.

At the Council meeting, I was one of five individuals who did NOT support the Report of the Standing Policy Committee on Property and Development, Heritage and Downtown Development.  And to be clear, this vote was for the following motion:

  • The Purchase and Sale Agreement for the acquisition of a portion of the Manitoba Hydro (“Hydro”) transmission corridor, for the Southwest Rapid Transitway (Stage 2) and Pembina Highway Underpass Project (“Project”) in accordance with the terms and conditions set out in Schedule “A” as shown on the attached Misc. Plans for the maximum purchase price of $19,000,000 or $20,400,000 (depending on the selection of alignment Option A or B by the Proponent) plus G.S.T.

This motion passed with a vote of 11 to 5, as follows:

  • The 5 individuals who voted against the motion are:  Councillors Lukes, Dobson, Gillingham, Schreyer and Wyatt.
  • The 11 individuals who voted in support of the motion are:  Mayor Bowman and Councillors Allard, Browaty, Eadie, Gerbasi, Gilroy, Mayes, Morantz, Orlikow, Pagtakhan and Sharma.

AMENDMENT TO MOTION

At the Council meeting, I presented an amendment to the above motion, which was seconded by Councillor Wyatt.  However, the amendment (see below) was defeated by a vote of 12 to 4, as follows:

  • The 12 individuals who voted against the amendment are:  Mayor Bowman and Councillors Allard, Browaty, Eadie, Gerbasi, Gillingham, Gilroy, Mayes, Morantz, Orlikow, Pagtakhan and Schreyer.
  • The 4 individuals who voted in support of the amendment are:  Councillors Lukes, Wyatt, Dobson and Sharma.

Amendment to Motion

Motioned by Councillor Lukes; Seconded by Councillor Wyatt

WHEREAS the City of Winnipeg Council and Manitoba Hydro cannot agree on the valuation of the Hydro transmission corridor lands for the Southwest Rapid Transitway (Stage 2) and Pembina Highway Underpass project;

 AND WHEREAS Manitoba Hydro is a Crown Corporation and its lands cannot be expropriated;

AND WHEREAS Manitoba Hydro as a Crown Corporation has the power to acquire, take and expropriate lands;

AND WHEREAS with great power comes great responsibility to act in a fair and equitable manner and in the best interest of the public;

AND WHEREAS there should be a process of oversight at the Provincial level to ensure that with the actions of Crown Corporations, public good and the public interest is protected;

THEREFORE BE IT RESOLVED:

  1. That Council suspend any decision on acquiring the Hydro transmission corridor lands and lay over indefinitely the Report of the Standing Policy Committee on Property and Development, Heritage and Downtown Development dated June 7, 2016 entitled “Acquisition and License of a portion of the Manitoba Hydro transmission corridor for the Southwest Rapid Transitway (Stage 2) and Pembina Highway Underpass Project” (the “Original Report”).
  2. That the City request the Province of Manitoba to act in an expeditious manner to establish and commence a binding process of mediation / arbitration to fairly and equitably resolve the value of the Hydro transmission corridor lands, which process must be binding on both the City and Manitoba Hydro and must include a binding requirement for the land purchase and sale to close at the mediated / arbitrated price.
  3. That upon the establishment of said process  the City proceed with the project and set aside $20.4M in cash or letter of credit on account of a maximum purchase price to allow the mediation / arbitration to run in parallel with the project construction.
  4. That in the event the Province of Manitoba declines to establish a binding process of mediation / arbitration as requested, Council consider the Original Report at its next regular meeting, or any such special meeting called for this purpose.
  5. That the Proper Officers of the City be authorized to do all things necessary to implement the intent of the foregoing.

 

This is a complex issue with many perspectives, and I would like to thank the Winnipeg Free Press for covering this story (see below).


Hydro land deal unjustifiable

 

According to Manitoba Hydro, it’s just business.

Strip all of the mind-numbing technical details of the real-estate appraisal, and the allegations and counter allegations of bad faith, and that’s Hydro’s excuse for forcing the city to pay $20.4 million for 16 acres of land needed for the completion of the southwest BRT corridor. Council approved the deal on Wednesday.

All in all, it’s a pretty sad excuse. This is a deal between two levels of government that is unjustifiable in almost all respects. One that will punish taxpayers when all is said and done.

How did we get into this mess? A review of key facts and dates is essential to understanding the truth of the matter.

Hydro and the city agreed to perform an initial appraisal that valued the land at $12.7 million. However, the appraiser wrote the fair market value down to $4.6 million after considering the value of adjacent land, the use of the land (transmission corridor) and its lack of access to major traffic routes.

Unhappy with that value, Hydro sought a second appraisal that pegged the value at $34 million, arguing that the initial value ignored several important material issues. After some negotiation, it agreed to reduce that price to $20.4 million. Like a child being confronted with a nasty but necessary dose of cough syrup, council held its nose and choked the deal down.

Where did things go wrong? The city admitted it did not have an agreement with Hydro on the specific appraisal methodology. That lack of consensus appears to have laid the groundwork for a deal that forced the city to pay more than four times what it originally thought the land was worth.

Is Hydro fleecing the city, or is the utility just getting what it’s due for a valuable parcel of land? Let’s work backwards and examine some of the claims made by both sides.

First, there is Hydro’s assertion the land is worth $34 million. On a per acre basis, that would make it among the most expensive real estate in the city, which it is most certainly not.

This view is substantiated by some excellent work by Free Press city hall reporter Aldo Santin, who surveyed commercial appraisers and confirmed the $34-million pricetag ($2.1 million per acre) is completely out of whack with market prices. Fully serviced commercial or industrial land on a major traffic corridor can fetch, industry sources said, up to $1.5 million per acre; a recent sale of Hydro transmission corridor land to Manitoba Housing in the Waverley West development fetched about $200,000 per acre.

The conclusion: Hydro’s concerns about the inadequacies of the first appraisal are completely overshadowed by the gratuitous valuation in the second appraisal. This is less a case of Hydro seeking fair market value, and more a bargaining ploy to wring a windfall from the city.

Next, let’s look at Hydro’s strategy after obtaining the second appraisal. While claiming the land could be worth $34 million, it nonetheless agreed to reduce the valuation to $20.4 million. Hydro’s willingness to quickly abandon the second appraisal is a classic bait-and-switch strategy; shock the city with a whacky valuation and then retreat to a more reasonable number that allows Hydro to claim it is acting in good faith.

Hydro is employing classic real-estate negotiating tactics in a bid to game the city and jack up the sale price of the land. And if this were “just business” as Hydro has asserted, it might be acceptable. But this is not a normal business transaction, and both the city and the utility should acknowledge that taxpayers are holding the bag on both ends of this deal.

First, the province has committed $225 million to the BRT project, easily one of the most ambitious and expensive infrastructure projects in the history of the capital city. It is tragic irony that a provincial Crown corporation would employ a strategy that will only serve to drive up the cost of a project that is already heavily cost-shared by the provincial government.

Second, rapid transit must be viewed as part of the province’s overall environmental strategy. Getting more people out of their cars and into a modern fleet of buses moving on a dedicated transitway is one of the most effective ways of reducing this province’s overall greenhouse-gas emissions.

You want more irony? Currently, Hydro delivers the province’s energy efficiency programs, including financing and incentives to convince Manitobans to insulate their homes and update their heating systems. Considering the environmental benefits of BRT, it makes more sense for Hydro to sell the land for $1 as its contribution to a cleaner, more efficient city.

There is little doubt that Hydro and its CEO Kelvin Shepherd are only trying to obtain the best return possible on the sale of this land in the interests of serving their ratepayers. Hydro is struggling to cover multiple billions of dollars in costs for new transmission and generating assets in an electricity export market that is cursed by low prices. Given all that, it makes sense for Hydro to count its pennies.

However, in almost all respects, this is penny wise and pound foolish. The taxpayer benefits of rapid transit — both from an infrastructure and environmental perspective — completely trump Hydro’s need to maximize its return on the sale of this land.

If Hydro was involved in a deal to sell the land to a private party, it might be able to justify its tactics. But it’s not.

This was a deal that drove up the cost of a major public transportation amenity, a project underwritten by taxpayers at the federal, provincial and local levels. If Hydro had only acknowledged that its ratepayers are also taxpayers, this deal would no doubt have worked out differently.

dan.lett@freepress.mb.ca    Read more by Dan Lett .

 

 

Twitter link:  http://janicelukes.ca/?p=6309