This afternoon, city auditor general Larry Munroe will release his long-awaited report on the Washmill underpass fiasco. Munroe tells me that the report will focus on the inner workings in City Hall, and how a project initially estimated to cost $8 million ballooned in price to $18 million. I expect Munroe’s report will include explosive new details.
But while it’s important to document a monumental screw up in city government, let’s not forget the first rule of journalism: Follow the money. It’s impossible to ignore the large apartment blocks that have been built and are still being built just east of the underpass since it was approved—clearly, with the underpass now providing easy access to the Bayers Lake Industrial Park, there’s a market for apartment units so close by. So I’ve wondered: Who has profited from that construction?
I can now answer that question: a major beneficiary of the Washmill underpass was Clayton Developments, which suddenly found its extensive land holdings to the east of the underpass, in the westerly stretches of Fairview, had value as development property. In the several years after the Washmill project was approved, Clayton sold off over 37 acres of land to several other development companies, which in turn have built the apartment blocks. Clayton’s take: considerably over $10 million in cash.
To back up, let’s quickly summarize how the underpass came to be built.
➡ An underpass beneath Highway 102, connecting Washmill Court in the Bayers Lake Industrial Park to Main Avenue in Fairview had been a vague idea for many years, but it was first proposed in a formal manner in the Governor’s Lake Transportation Study prepared by the consulting firm SGE Acres for the city and the province in 2003. That study primarily concerned transportation issues that would result from full development of the area, adding 33,000 new residents and much commercial development, especially in the BLIP. Said the report:
The extension of Washmill Court will provide either one or two lane capacity in each direction, depending on the cross-section selected for the final design. The overall strategic goals of the improvement will be to provide additional access to the Study Area while distributing traffic from Lacewood Drive. Through the provision of additional access and providing a linkage to the Mainland North area, it supports new development both inside and outside the study area. [emphasis added]
While the 2003 study showed the Washmill underpass, the study was looking at transportation demand at full development over the next 20 years. Washmill was not intended to be built immediately, or even soon.
➡ The Washmill project was placed on the city’s capital project list, which covered all conceivable projects anywhere in HRM that could be built over the next 25 years. In March, 2009, the Washmill project was projected to cost $5.8 million.
➡ In 2009, the federal government announced the stimulus program, including $87.75 earmarked for HRM. The money was matching money, dependent upon the city and province each putting up similar amounts. The federal money came through two different pots of money. The first was for large projects, over $7.5 million, that had a long construction time-line and didn’t need to be completed until 2015. City council elected to put the new library and the new ferry in this category. Both were subsequently approved by the federal government and built. No problem.
➡ The second pot of money was for smaller projects that had a tight timeline—they had to be finished by March 31, 2011. This pot of federal money total $35.4 million, and in April 2009 city council voted to put the entire amount towards the four pad arena in Bedford. As I wrote later that year:
City officials had previously decided on the four-pad project over the objections of a PC-connected group (including then-PC MLA Len Goucher) who were building a private ice surface on Duke Street in east Bedford. Goucher’s group “borrowed” (without repayment) $1.5 million from the previous PC provincial government. Their ice surface is covered by an inflated “bubble” purchased, used from Ontario—which, I’m told, raised safety concerns in the HRM building department.
The four-pad application went into Infrastructure minister John Baird’s Ottawa office and, contrary to Peter Kelly’s April assurances, was rejected—without documentation. “We don’t get anything in writing to formally tell us that they’ve turned down our application, or why,” HRM finance director Cathie O’Toole tells me. “It typically comes as a phone call.” The city had already contracted out construction of the four-pad, and so the entire $35.4 million cost will unexpectedly be shouldered by city taxpayers.
The very day the city broke ground on the four-pad, October 14, the federal Atlantic Canada Opportunities Agency, which falls under Conservative MP Peter MacKay’s oversight, announced that it was giving $2 million to Goucher’s Bedford arena project.
The four-pad arena was subsequently funded entirely through city debt.
➡ Thus rejected, city council met again, and decided to ask that $2.66 million in sidewalk projects on the Halifax peninsula be funded. But:
Recognizing that Baird’s office amounts to a “black box” of decision-making—applications go in, but no explanations come out—council also sent in the entire HRM capital project list—a sort of billion-dollar “wish list” of what’s needed over the next 25 years. Deciding which capital projects to fund with limited city resources is a tough political decision, a big part of the reason we elect councillors.
Sure enough, Baird’s office rejected council’s preferred list of projects, and cherry-picked items off the capital project list. Council hadn’t asked for it, but stimulus funds will now buy a new $10 million interchange on the Bicentennial Highway for a third entrance into Bayers Lake [the Washmill underpass project].
It’s worth noting that Baird’s office also rejected the peninsula sidewalks, and instead funded a $3.5 million sidewalk project in Sheet Harbour, the one bit of HRM that sat in Peter MacKay’s riding.
➡ Somehow, the estimated cost of the underpass was suddenly estimated to cost not $5.8 million, but $10 million. I can find no basis for the change in cost, no engineering studies. Under the rules of the stimulus funding, while the costs of the projects were split three ways between the city, the province, and the federal government, all cost overruns would be the responsibility of the city. Perhaps the newly appearing higher figure was an attempt from city staff to insulate itself from cost overruns; if so, it badly miscalculated. Maybe Munroe’s report will shed light on this.
➡ Munroe’s report will detail how a $10 million project became a $18 million project. I won’t go through all that here, but I wrote what I knew about it back in 2011, here. I also suspect that I’ll need to further explain how city staff has artfully, but deceptively, tried to scale the true costs of the project back to something like $14 million. They aren’t. But more on that another day.
Who benefitted?
Let’s return to the original question: Who benefitted from Washmill underpass? On the west side of the intersection is a handful of properties owned by none other than Joe Ramia, the builder of the new convention centre downtown. I haven’t looked at those properties in detail, however, partly for time reasons but also because it’s not clear that Ramia or the other nearby property owners directly benefitted. Their buildings already existed, and by simple virtue of being in the business park, they already had lots of advantage.
More interesting is what happened east of the underpass, that area that stretches from the highway to Main Avenue. Before the underpass was built, there were the CBC radio towers and a few small commercial parcels, but the vast majority of the area was vacant land, and most of that had been owned by Clayton Developments since as far back as the 1970s. Some other parcels have long been owned by Halifax Water. Here’s a map of the area, with parcels indicated:
I’ve compiled the following timeline, noting the most recent sale of each parcel in the area. Sale amounts did not become public record until 2011:
PID 41177387
442 Washmill Court
4.15 acres, owned by Halifax Regional Water Commission
acquired from James and Geneva Coughlan in 1955.
PID 41177395
Halifax Water owns 12.42 acres
PID 41177403
Hlifax Water owns 30.89 acres
PID 40541682
Washmill Lake Drive, 5.29 acres
Long owned by the city
PID 00338350
Long owned by CBC
PID 00338228
Assessed at $163,400 commercial
55 Washmill Lake Drive
Long owned by Myrtle Marie Horwill
PID 00338210
Lot N-3A Geizer Hill Road
1,797.8 square meters, assessed at $58,100 commercial
owned by Byblos Development Group, since 2005
PID 41245259
610 Washmill Lake Drive
2.25 acres
Assessed at $16,740,000 residential
October 12, 2007—Byblos Development Group sold to 3148700 Nova Scotia, president is Wadih Fares
2009: Washmill underpass project approved
April 15, 2010: Clayton Development submits the first of two subdivision maps making its subsequent sales of land possible:
PID 41093071
6 acres
110 Greenpark Close
April 21, 2010— Clayton Developments sold to Parkside Realty Limited
PID 41318593
112 Greenpark Close
6 acres
April 26, 2010, Clayton Developments sold to 3245030 Nova Scotia, W. D Properties Limited
PID 41245242
650 Washmill Lake Drive
2.04 acres
Asssessed at $1.28 million residential
June 15, 2010—Byblos Development Group sold to 3245544 NS, president is Wadih Fares
PID 41280637
15 Bently Drive
1.33 acres Assessed at $14,007,000
August 31, 2010—Byblos Development Group sold to W.M. Apartments. Sales price was $1.8 million
June 6, 2014—W.M. Apartments Limited sold to TC Core GP In, partner of Rescore Equities Inc. Sales price was $40.65 million
March 7, 2011: Clayton Developments submits the second subdivision map:
PID 41331174
0 Washmill Lake Drive
8.08 acres
assessed at $3.86 million residential
March 30, 2011—Clayton Developments sold to 3233520 NS, Parnassus Limited, president is Patricia Poulsen. Sale price was $4,127,500
PID 41342403
50 Grandhaven Blvd
8.59 Hectares
March 31, 2011—Clayton Developments sold to Cosmos Developments Limited. Sale price was $7.2 million
PID 40550774
460 Washmill Lake Drive
23.5 acres assessed at $3,241,100
August 17, 2011—the CBC sold to Septra Incorporated, signed by Joe Ramia. Sale price is listed at $0, which might be a mistake.
PID 41342395
22 Vitalia Court
8.75 Acres assessed in 2014 at $6,483,000
September 12, 2011—Clayton Developments sold to 3256552 Nova Scotia, Arbor Vitalia Courtyard Properties. Sale price was $1.61 million.
No evidence of impropriety
The records show that almost immediately after the Washmill project was approved, Clayton Developments went to work subdividing its holdings and selling off its property. Just over 25 acres were sold for $12.9 million, and an additional 12 acres were sold for an unknown amount. These properties were quickly developed, assessments soared, and thus tax receipts as well.
Is there anything wrong with this. It’s true that Clayton representatives are a regular presence in City Hall, but the decision to build Washmill underpass was not made in City Hall. On the contrary, city councillors didn’t want the project to be placed on the stimulus project list.
It appears that decisions about what to spend the federal stimulus money on were highly politicized at the federal level, but I can find no connection between Clayton Developments and federal officials: Neither the company nor its officials show up on campaign contribution lists for the Conservative Party or for Baird or MacKay. Clayton is not known to be connected to any party.
Moreover, it’s important to note that Clayton has held the property in question for decades, paying property taxes on it all along, and no doubt just in the normal course of business the company would have sold it or developed it whenever the opportunity arose. Certainly the opportunity arose when the underpass was built: suddenly it made sense for the property to be sold at big profit.
So far as I can determine, Clayton Developments is simply the lucky recipient of decisions made elsewhere.
A lot of good research and interesting perspective. I don’t mean to defend Council’s decision, and I’ll be very interested in the audit, but I think there is a bigger picture than the money made by Clayton Developments. In terms of calculating Value for Money, I’ll offer two points.
First, by building the road and opening up this area to development, not only does the land value increase, giving the city additional tax revenue, but as well the city gets 1.5% of every sale from deed transfer tax. Following your figures on just the known sale prices, that’s around a million $ so far.
Second, there is a considerable amount of land owned by Halifax Water, remainder lands from the original watershed lands for Halifax. As this land is now cut off from the reserve water shed by the Bi-Hi, and thus no longer of value as watershed, it may well be declared as surplus to Halifax Water’s needs. If that happens, the sale of that surplus land, now more valuable, could offset some of their considerable expenses for infrastructure upgrades.
And all of that is in addition to the value of the additional roadway in alleviating the traffic congestion in Bayers Lake.
What strikes me is the partisan nature of decision making at the federal level. Of course there has always been some but the Build Canada Fund took it to a new level. This is one snapshot of one small city -what happened with the billions across the country?
A disproportionate amount of the stimulus money went to Tory ridings. The Herald and the Ottawa Citizen did a joint investigation on this back in ’09. I can’t find the original article any more, but I found this PDF version:
http://http-server.carleton.ca/~dmckie/Tory%20ridings%20the%20winners%20from%20stimulus_Ottawa%20Citizen.pdf
What bothers me about all of the development up there (a “neighbourhood” above mine) is the seeming complete lack of public space/parks. No park space when there’s all of that condo/apartment development? How is that possible. There are some grand vistas up there, are they all to be dominated by apartment towers? I think it is scandalous (an overused word these days for sure) that there seems to be no new public spaces in that area.