Council preview: It looks like the Shaw Group is over-charging for the Purcells Cove Backlands

At tomorrow’s meeting, Halifax council will take up a staff recommendation to purchase the Purcells Cove Backlands:

On April 26 2016, The Shaw Group and Nature Conservancy of Canada (Shaw/NCC) presented a proposal to Regional Council for HRM to acquire lands (subject lands) located in Purcell’s Cove for an Urban Wilderness Park. Staff has been completing the necessary analysis on the proposal and discussions with Shaw/NCC. A high level summary of the current proposal include:

• HRM would acquire an interest in 379 acres. 170 acres would be conveyed to HRM by deed and 209 acres would be via a 99 year lease with the NCC.

• The Shaw Group is proposing a final sale with 30% down payment on April 25, 2017, with the balance of the purchase price payable in two 35% installments in April 2018 and April 2019.

• The full 379 acres would be managed as Category 2 protected standards as prescribed by the International Union for the Conservation of Nature, in perpetuity.

• HRM would be responsible for maintenance and park improvements for the entire 379 acres.

• A long-term management plan would be developed jointly between NCC, HRM and a community stewardship committee to provide overarching programming and park management direction.

• Shaw Group has proposed an endowment fund for NCC programming and infrastructure improvements for the site.

I detailed the background on this issue here, and I still see the purchase as problematic. It’s not that I’m against protecting land or the backlands specifically; rather, I don’t like former CAO Richard Butts’ questionable involvement in this process, or the way Allan Shaw — evidently in alliance with billionaire John Risley — could just waltz right into council chambers and get the politicians and bureaucrats to roll over for him.

Still, the issue isn’t optics or distrust of billionaires, but rather: Does this purchase make sense?

There is a tremendous opportunity for Halifax, which is touched on by the staff report:

The subject lands are located on the Chebucto Peninsula, which is approximately 55,500 hectares in size. Approximately 33,000 hectares or appropriately 59% of the area is designated Open Space and Natural Resources within the Regional Plan. Within the Chebucto Peninsula and adjoining area, there are several large government owned large-scale protected areas and parks which provide public access to large open space areas with nature components, including:

a)  Blue Mountain-Birch Cove Protected Wilderness Area;
b)  Five Bridges Wilderness Area;
c)  Western Common Wilderness Common;
d)  Terence Bay Wilderness Area; and
e)  Long Lake Provincial Park.

There are also other government owned (crown) lands that are not designated as protected areas, but that are accessed by the public (Attachment D). From this perspective, the acquisition of the subject lands is viewed as an opportunity rather than a parkland need as there is considerable other protected wilderness lands and other crown land in the immediate and larger contextual area that is readily accessible.

Attachment D is this map:

It would be wonderful if we could protect all of that land. If so, as the Halifax urban area grows, we’d have an extensive network of inter-connected wilderness areas, passive parks, and other protected areas just minutes from downtown, exceeding any other near-urban wilderness in North America. It’s almost too much to hope for.

But note that as designated on the map, the Blue Mountain – Birch Cove Lakes wilderness is just the government-owned land in the wilderness, and not the full boundaries of the proposed park. As I’ve written before:

I fear a grand deal is in the works: the city will buy a much smaller piece of land in Blue Mountain – Birch Cove Lakes (essentially, not the lakes at all), allowing the Annapolis Group to develop the area around the lakes, while the “savings” are shifted towards buying out (with the help of the Nature Conservancy) the Clayton Development lands  in the Purcells Cove backlands. The city then announces that it is buying two wilderness areas for the price of one. Councillors get to say they are protectors of nature. The Annapolis Group gets to make a gazillion dollars in profit by developing the Birch Cove Lakes, and Clayton Developments makes another gazillion dollars by selling the Purcells Cove backlands. John Risley, who is presumably bankrolling the Nature Conservancy, gets a giant tax write-off. Win-win-win-win, as they say.

Except.

Except such a deal devalues the Blue Mountain – Birch Cove Lakes Wilderness to a stump of its originally envisioned glory, Clayton gets millions of dollars for speculating on land that had zero development rights, and the city buys one wilderness area (the Purcells Cove backlands) that doesn’t need protecting because it isn’t zoned for development and doesn’t buy another wilderness (BMBCL) that actually does need protecting.

Privately owned land in both the proposed Blue Mountain – Birch Cove Lakes park and in the Purcells Cove Backlands are protected from immediate development — all that land designated as “urban reserve,” meaning that city council can’t entertain an application for subdivisions until at the very earliest 2031. We could do nothing until then, and the land would be protected. After 2031, a future council could decide to allow development, but it wouldn’t be required to.

Up until Shaw showed up in council chambers, the Purcells Cove Backlands were on the back burner, and staff was paying active attention to negotiating purchasing the land in the proposed Blue Mountain – Birch Cove Lakes park. But since then, the situation is effectively reversed: all staff’s energies have gone into negotiating the purchase of the backlands from Shaw, and the BMBCL land is in limbo. (Staff has been directed to pursue a purchase of the BMBCL land, but it’s not clear that any action will be taken any time soon.)

But if council approves the purchase from Shaw, we’re not going to get the entire backlands either. Here’s a map outlining the entire area and the proposed purchase:

If the purchase is approved, the city will only get that lime green-coloured parcel, and not even all of that — the city would get just 170 acres of the 379-acre parcel. The remaining 207 acres will be purchased by the Nature Conservancy of Canada, but we’re not told at what cost. (Evidently, the 99-lease of the NCC lands to the city will have no cost.)

The bottom line here is: Is it worth it?

Just how much will we be paying Shaw for the backlands?

On that question, the staff reports says:

Property Valuation

An appraisal, which is an opinion of market value of the subject property, was conducted by Turner Drake & Partners Ltd. for The Shaw Group. As part of the negotiation process, HRM would conduct an independent appraisal to assist staff in ensuring fair market value is achieved through the property value negotiation.

Details on the proposed purchase price are outlined in the Private and Confidential report. It is recommended that the information outlined in that report not be released until completion of negotiations and execution of a purchase and sale agreement and a separate lease agreement.

That’s right: the proposed purchase price is secret.

I understand the need for secrecy in most real estate purchases. City council doesn’t want to tip its hand as to the maximum price it would be willing to pay for a property, because the seller would simply demand that price. With secrecy, council might be able to negotiate a lower price and save taxpayers money. That makes sense.

But secrecy in this instance makes no sense at all. Shaw’s offer to the city isn’t quite a “take it or leave it” offer, but it comes close — the city charter requires the city to pay no more than fair market value for the property, and so now we begin a battle over assessments. Secrecy serves no purpose besides keeping the public in the dark.

It’s therefore impossible for citizens to know if the proposed purchase is a good idea or not. We can’t weigh the monetary costs of the purchase against the value of the wilderness and — more important, by my way of thinking — the lost opportunity in the Blue Mountain – Birch Cove Lakes area. Every nickel paid to Shaw is a nickel not available to buy out the private companies who own land in the full proposed BMBCL park boundaries.

The staff report does, however, give some hint as to the scale of the purchase price of the backlands:

Funding for parkland acquisitions is allocated from Parkland Development Reserve Q611 which has a current balance of $5,020,174. Regional Council has directed the acquisition of a number of parcels for parkland and wilderness areas from this reserve as well as potentially allocating funding in 17/18 in the amount of $1,000,000 from the reserve for the development of the Baker Drive lands. With the proposed three year payment structure, it is unknown at this time whether the balance in the Parkland Reserve would have sufficient funding for the payments as other previous commitments are finalized. Therefore, beyond the reserve, additional funding may need to be considered during the annual budget process to meet all of the commitments.

Budget Summary, Parkland Development Reserve, Q611
Balance in Reserve, August 1, 2016: $ 5,020,174
Projected Revenue to March 31, 2017: $ 191,438
Commitments to March 31, 2017: $(1,594,979)
Projected available balance, March 31, 2017: $ 3,616,633

As I read that, the purchase price is somewhat more than $3.6 million, and probably significantly more. And again, that’s for just 170 acres of the 379-acre parcel, or about 45 per cent of the Shaw land, which is only about half the privately held portion of the backlands.

Assuming that the city is going to buy 170 acres of the Shaw land for $3.6 million and that the NCC values their portion of the land (the other 202 acres) at the same rate (either through a tax write-off or purchase), then the entire 379 acres is being valued at just over $8 million, although I should note that the Turner Drake assessment paid for by Shaw hasn’t been made public.

The owners of the adjoining parcels will no doubt use the Shaw purchase price to value their properties, so if the city is going to buy all the land in the backlands, it will cost something on the order of $10 to $15 million.

Shaw bought its 379 acres in August 2011 for $4,704,221 on speculation, hoping that it could get the city to change the zoning of the property and run utilities by it. It lost that bet; in May 2014 council deadlocked on a vote to open the land up for development. Until 2013, the Shaw land was assessed for tax purposes for $3,371,500, but after council’s 2014 decision, the assessment for property tax purposes was dropped 55 per cent, to $1,512,200. Shaw’s annual property tax bill on the property is now $18,298.

I can’t say for certain, because the numbers aren’t public, but it sure looks to me like Shaw is about to take the city for a ride.