Yukonomist: Whitehorse taxpayers — Brace for impact!


Whitehorse taxpayers should adopt the brace position.

You’re in economy on the flight to New City Hall. The mayor and six copilots are chattering in the cockpit and — just like in the movies — no one is listening to the junior copilot when he points ahead at a rapidly growing black shape and says, “Hey, are we flying straight into Mount Cost Overrun?”

I’m referring to City Councillor Ted Laking’s suggestion that it might be a good idea to pull up and circle around for a second try at the runway on our new City Hall. He pointed out in December that the budget for the project had grown from $9.7 million in 2014, to $18.9 million in 2019, to $24.6 million last March, and to $26.2 million as of this paper going to press.

The reason you should brace for impact is that we don’t know what is going to emerge from the fog when they open the contractors’ bids later this year. With a steel shortage, a labour shortage, and the word “inflation” filling the headlines you can take a guess which way the costs will likely go.

In other news, the City declared a climate emergency last year. A substance abuse emergency was declared last week. I believe affordable housing is officially merely a crisis, but it probably seems like an emergency if you are one of the dozens of Whitehorse residents just evicted from the Chilkoot Motel.

With so many other priorities out there, $26.2 million plus future overruns seems like a rich price tag for a two-storey building with some office space and a waiting area for bus passengers.

Let’s switch from airplane crash metaphors to fantasy fiction. How about this scenario?

The people’s representatives realize the project has gone awry. Instead of plowing ahead, they first review how many City Hall staff they can fit into the big new Operations building. Then they open a creative new bidding process for First Nations development corporations and local real estate developers. The lowest bidder gets to build and operate whatever space is needed on the City Hall lot for 25 years. At the end the City gets the building for a dollar. The winning bidder also gets to build two or three extra floors of housing on top — a mix of affordable and market-priced apartments or condos.

In this fantasy world, the condos help cover some of the costs and the City saves millions of dollars while creating some new centrally-located housing at the same time.

Supporters of the project don’t want to take the time to do something like this and, instead, want to push ahead with the current plan.

Some supporters argue that a capital city like Whitehorse needs a prestigious monument to house its municipal government. But isn’t a better monument to a great city that its mayor and city council work in utilitarian spaces and more money is spent on much-needed public services?

Others have argued that the new city hall should proceed since its wood-fired heating system will be better for the climate than fossil-fuel heat. But this isn’t much of an argument for the current design since a new $13 million building could be heated with biomass as well as the $26 million one on the drawing board.

Another argument put forward for steaming ahead with the current costly design is that a big chunk of it is being paid for by the federal and territorial governments, and these funding agreements require the money to be spent by March 31, 2024.

This argument is also weak. Government projects get delayed all the time. Yukon officials are regularly on the phone with their federal counterparts asking for — and getting — delays and changes to program details. If this were not the case, projects like the Dempster fibre line and Resource Gateway mining roads wouldn’t appear across so many years in this newspaper’s archives.

Have the mayor, our territorial minister responsible and our MP been on a zoom call with the federal minister to ask for an extension to make sure we get the project right? If so, please share the read-out where the federal minister said, “Hey, you may be worried you’re building a white elephant, but I insist you spend our money by the deadline anyway.”

More fundamentally, we also have to consider our interest in spending the money we get from Ottawa wisely. Some old-school individuals might even say this was a responsibility. As our Alaska friends found out with the “bridge to nowhere” controversy, proceeding with questionable projects just because they are funded by the national government can be risky in the long run.

What do the people in Ottawa who send us the money think when their media scanners produce stories where Yukon politicians seem to be saying, “We wouldn’t pay for this project if it was our own money, but since the feds are paying the freight we might as well let the tax dollars rip.”

If this was a new corporate head office project for a well-run company, the board would already be insisting that management produce some Plan Bs.

Cynics expect that city council will give the project a perfunctory debate then wave it through with further meaningless promises to sharpen pencils and watch out for taxpayer interests. By the time the next cost overrun stories hit the media, the project will already be under construction and unstoppable.

The good news, such as it is, is that a crash into Mount Cost Overrun will not be fatal for our city’s finances. Spread over 25 years and a growing population, the impact for most people will be limited to some bruising on their property tax bills.

But there will be other major, though less visible, negative effects.

The alternative housing and climate infrastructure that could have been built with $26 million and counting will be impossible to see, since they won’t exist.

The project may even make the housing crisis worse. The law of supply and demand suggests that dropping a large construction project into an already overheated construction market will cause costs to go up for everyone else building houses, apartments or other buildings. Higher property taxes than otherwise needed for a decade or two will not make housing more affordable.

The one thing I can predict for sure is that our politicians will make more statements about being fiscally responsible and making fact-based decisions, and the other 30,000 residents of Whitehorse will roll their eyes.

Keith Halliday is a Yukon economist, author of the Aurore of the Yukon youth adventure novels and co-host of the Klondike Gold Rush History podcast. He is a Ma Murray award-winner for best columnist.