Remember when the federal Tories got in so much trouble for low-balling the cost of new F-35 fighter jets? At first they said the jets would cost $15 billion. Then it turned out they had failed to mention another $10 billion in costs.
It was a clear example of politicians and officials who really, really wanted something, and didn’t want taxpayers to realize how expensive it really was.
The auditor general of Canada harshly criticized the government for the lack of transparency in its accounting.
Let’s now talk about a different project: the City of Whitehorse’s big new $55-million megaplex, which involves two major new municipal buildings and a budget unprecedented in our city government’s history.
The press release the city put out earlier this week said the “total project cost for new Service and Operations Buildings is $55 million.”
Note the words “total project cost.”
First, does the $55-million figure include financing costs for the $29 million in financing the project requires? A quick look at an online mortgage calculator suggests that a $29 million loan, at 4 per cent and amortized over 20 years would require $13 million in interest costs.
That would be a substantial additional cost to taxpayers.
Second, does it include all the consulting costs associated with managing the project? There were eight consulting firms involved in planning the project. How much were their fees? Does the $55 million include those fees plus more fees for such firms going forward?
Third, does the $55 million figure include the $1.5 million figure mentioned in council documents last week for furniture, equipment and art? Or is that not part of the “total project cost” publicized?
By the way, city policy is to spend the equivalent of one per cent of the total budget on art. A $550,000 collection of Whitehorse art would certainly be impressive. It would make the new city headquarters building in effect into the biggest art gallery in town. Hopefully it will be open to the public to view.
Fourth is cleanup costs. The mayor recently told the Yukon News that the blue building on Fourth Avenue was “littered with asbestos.” A wide variety of petroleum and chemical products have been used in the shop there over the years.
How much will it cost to remediate all the surplus city buildings before they are sold? I can’t find a firm estimate in the business case. Is it included in the $55 million, or will we only find out the real number when the buildings are sold in a few years?
Remediation is not cheap, and all this talk of asbestos and chemicals raises a question: could cleanup costs be in the millions of dollars? Low millions? High millions?
To its credit, the city has not counted the revenue from the sale of its old buildings into the business case. It might be possible that the buildings will sell for more than their remediation costs, in which case the $55 million figure would get lower.
But if you believe remediation is that cheap, I have some land near the old oil refinery in Marwell I’d like to sell you.
Fifth is the downtown fire hall, which will be demolished for one of the new megaplex buildings. The city says the fire department is doing a strategic plan. “If it is determined that (a fire hall) is still needed in the downtown core the city will consider all options.” Does that mean that after the megaplex blots out the current fire hall on Second Avenue, the city might have to spend millions on a new downtown firehall?
It’s kind of a big question.
Finally, what else don’t we know about?
To sum up, the “total project cost” according to the city’s press release is $55 million. But does the real cost also include tens of millions extra in interest, consulting fees, furniture, equipment, art, asbestos and chemical remediation costs (net of subsequent land sales), and a new downtown fire hall?
Curtis told the News that the “business plan is airtight.” I don’t know many investors who would consider a business case airtight if it had unknown land remediation and extra fire hall construction costs remaining as large unknowns.
Remember that we are on the hook for this project. The city isn’t getting a billion dollars a year from Ottawa that can smooth over any mistakes like the Yukon government does.
Someone from Ottawa might accuse our mayor, council and administration of F-35 accounting. To clear up any concerns on this, they should re-issue that $55 million press release with a full depiction of the true “total” costs on this project.
My trust in them has been sufficiently shaken by the communications to date on the megaplex, that I also think they should not sign another contract on this thing until they have made their case and put it to a public vote.
Disclosure: I own a house in Whitehorse and pay property taxes. My family uses facilities like the Canada Games Centre that may be affected if the megaplex negatively affect other city programs and services. And I am a user, donor or board member for four of the eleven community groups negatively affected by the city’s recent decision on property tax grants for community groups (and this column is my own opinion and does not speak on behalf of any of them). I also volunteered on the mayor’s campaign in the last election.
Keith Halliday is a Yukon economist and author of the MacBride Museum’s Aurore of the Yukon series of historical children’s adventure novels. You can follow him on Channel 9’s ” Yukonomist” show or Twitter @hallidaykeith