National And Global Issues Threaten City: STANKOVIC

A Blog About Vital Ottawa Issues

Dan Stankovic is an Ottawa consultant and former municipal public servant in economic development and housing.

On March 28, 2024, Ontario Premier Doug Ford announced a New Deal for Ottawa, also more formally called the Ontario-Ottawa Agreement.

One of the themes presented in the Agreement relates to Ottawa’s unique challenges as the nation’s capital. These unique challenges then establish the rationale for identifying and supporting specific commitments including funding from the province (and federal government).

The unique challenges faced by the nation’s capital, as identified by the city in the agreement, include the following: national security and related public safety issues; implications related to the dominant presence of the federal government, and its impact on the downtown economy, and; the city’s role “serving geographically and economically as an important gateway to Quebec and Eastern Canada”. The agreement identifies several specific issues brought about by these challenges:

• Changed commuting patterns on the part of the federal public service and private sector with the resultant decrease in economic activity especially in the downtown core;
• Increased homelessness and mental health issues which, together with the above have “dimmed the vibrancy and vitality of downtown Ottawa”;
• Increased concern over safety particularly in areas near Parliament Hill and key tourist areas like the ByWard Market, and;
• Required investments in infrastructure to support a growing population and economic growth in a “wide, interconnected geographic area”.

The agreement then identifies several commitments specific to Ottawa’s unique challenges as follows: a public safety program for the downtown core to include increased police presence and alternative crisis and event (e.g. protests) response approaches; housing and social support for the homeless including refugee and asylum seekers; major connecting routes improvements including the Highway 416-Barnsdale interchange and the Kanata North (Bus Rapid) Transit; upgrades to rural roads; investment in water and wastewater infrastructure to support new housing construction, and; office-to-residential conversions of surplus federal office space in the downtown core.

Without any background rationale provided in the agreement, it is unknown why some of the commitments fall under unique challenges as the nation’s capital. For example, all Canadian cities and downtowns are facing serious homelessness challenges including refugee and asylum seekers. There is no evidence provided that these issues are more challenging for Ottawa simply because it is the capital. Furthermore, the commitments related to capital expenditures on connecting routes and rural roads or with water-wastewater infrastructure don’t seem to have much to do with being a capital city and more to do with reducing the financial burden placed on the city in meeting the “normal” needs of a growing metropolitan city.

There is also nothing in the agreement that deals with supporting or enhancing the role of Ottawa as a gateway to Quebec and Eastern Canada, possibly because it has no role in reality except perhaps being closely integrated economically, socially, and politically with Gatineau. What would have been more practical is having the province get behind Ottawa in supporting the proposed federal government high-frequency (speed) rail corridor between Quebec City and Toronto and making sure the city is connected more so with Montreal than Toronto. Similarly, improving international air linkages and investigating how the City can work with the federal government and the 130 foreign embassies located in the nation’s capital would also strengthen Ottawa’s gateway position, particularly from a global perspective in terms of being the capital city of a G7 nation.

Instead of seeing Ottawa as a gateway to Quebec and eastern Canada, rather examine how the city can be part of a more economically integrated region consisting of eastern Ontario communities. One would think the Province would also be interested in such an initiative because eastern Ontario, excluding Ottawa, has historically lagged behind the rest of southern Ontario in terms of economic development.

This leaves only two commitments that can be truly described as being unique challenges to Ottawa – the conversion or repurposing of federal office buildings into residential (or other) uses and public safety but associated with protest demonstrations and cybersecurity.

Even though office conversions are occurring in most large Canadian cities due to largely remote work, it is a unique challenge in the case of Ottawa because of the overwhelming presence of the federal government in the downtown commercial real estate market concerning both Crown-owned and leased office spaces.

The same also applies somewhat to security and safety but this issue is, at least to me, the most interesting one in that the growing number and intensity of protests that are happening reflect the increasing polarization in our society, the increasing danger and political turmoil throughout the world, the strengthening support behind the extremist and localism movements and the threats to democracy. The key questions here are how are these national and global threats and trends going to impact the future structure and operations of the federal government and, in turn, on the nation’s capital – issues that are more unique to Canada’s capital city than what the city thinks.

April 18, 2024

Why Do Development Wonks Forget Feds?

If the essence of Ottawa as a major metropolitan centre is being the capital of Canada, why are local economic development practitioners ignoring the federal government?

The dominant presence of the federal government and its role in the national capital have far-reaching and complex implications for the City of Ottawa affecting its economic, social, and physical landscapes. The influence of the federal government on Ottawa’s downtown and overall economy has become most apparent during the COVID-19 and post-pandemic years.

The current issue is different from previous doomsday scenarios triggered by federal government spending and civil-service cutbacks in that the impacts are now structural in nature altering Ottawa’s economic bedrock.

Two important strategic policy documents have been recently published in response to the emerging economic challenges in the post-pandemic era. In January 2024, the (Ottawa) Downtown Revitalization Task Force, spearheaded by the Ottawa Centre MP Yasir Naqvi, released its report entitled Envisioning A Great Downtown. The strategy was to provide a visionary and transformative action plan for the downtown core.

The second report comes from the City of Ottawa’s Economic Development Strategy and Action Plan approved by Ottawa City Council on last month. Both strategic documents have one common feature.

The federal government is effectively missing from any policy-thinking. For example, both strategies place a high priority on partnerships between all stakeholders (business, community, and government) to get behind the economic revitalization initiatives. Yet, the most important potential partner, the federal government, had no input into the formulation of the strategies.

In fact, the task force report has an underlying anti-federal government basis. The report seems to see the federal government as the cause of all the ills being experienced in the downtown.

Longing to go back to the good old days, the task force report envisions the downtown returning to a neighbourhood before the automobile invasion and the concentration of monolithic federal government buildings – back to a time before the federal government office development pushed out workers, immigrants, and other residents and displaced or demolished cultural communities and assets such as theatres, music halls, hockey arenas and so on.

The report even goes back to the days of Jacques Greber and his 1950 plan for the National Capital Region and the planning policies of the National Capital Commission during the 1960s which led to a car-centric downtown and its dense office environment to the detriment of a broader urban diversity. The report further states that “if the federal government is stepping away from much of its presence, it leaves the field open for the city’s citizens to reclaim that space and build a neighbourhood that serves the city” suggesting that the growth of federal government jobs in the downtown did not serve the city.

Interestingly, both the downtown core and the adjacent Centretown neighbourhood experienced relatively strong gains in population between the 2006 and 2021 Census years. The 2021 population numbers were also almost identical to 1951 levels hardly an indication that people are abandoning the downtown area.

There was also an interesting statement made by Stephan Dery, the assistant deputy minister at public services and procurement Canada in 2023 that even before the pandemic, about 40 per cent of federal office space on average was under-utilized, empty or dormant at any point in time. The under-utilization could be due to holidays, sick leave, training or meetings in other cities etc.

The 40 per cent would approximate a hybrid working environment where civil servants work at home two days in a five-day work week. Therefore, by maximizing the government’s portfolio along with more efficient use of space, under-utilized buildings can be disposed of and converted into more productive (non-government) use while maintaining roughly the same number of civil servants working downtown in flexible office accommodation.

Such a perspective is a more positive one compared to the “doom and gloom” vernacular found in the Downtown Task Force report for example. The City’s Economic Development Strategy also says little about the future of the federal government and what implications it might have on jobs, office-space demand, downtown revitalization, and so on.

Instead, the 2024 strategy falls back on the same priorities of the past. For example, the Strategic Priorities in 2024 are very similar to the ones prepared in the Discussion Paper titled “The Economy” for the New Official Plan in 2019, before the COVID-19 pandemic. Both papers write about encouraging economic diversification, supporting high-technology clusters and entrepreneurs, improving transportation connections, attracting skilled labour, linking city projects with economic development objectives, and so on.

Even the 2024 Strategy’s emphasis on developing partnerships and collaboration, a key theme also in the task force report, is a continuation of the focus in the previous economic strategy “Partnerships for Prosperity” approved by city council in 2010. The 2024 strategy does include the additional priority of revitalizing the downtown because of the impacts resulting from the pandemic and in particular the trend towards hybrid/remote work and the reduction of the federal government’s real property footprint.

However, the strategy provides no real insight into the potential role and impacts the federal government may have in the future of the downtown. There is no argument that Ottawa, as well as other Canadian cities, are facing a different future when it comes to economic development challenges. Perhaps it is easy to blame the federal government for much of the economic woes especially in Ottawa’s downtown core because of its dominant presence.

But the emerging economic challenges go beyond just empty office buildings and civil servants’ hybrid work arrangements. I will get into more specifics on what I think these other challenges and potential opportunities facing Ottawa as the national Capital are in Part 2 of a future post.

March 3, 2024

Where’s The Money For A New Downtown?

One of the most frequently used words in the recent report released by the Downtown Revitalization Task Force is “incentivize”.

However, the report does not go into Incentive specifics. Would it be financial assistance such as property-tax forgiveness and the waiving planning fees such as development charges or incentive zoning such as height-and-density bonuses or parking reductions?

In the report’s “priority actions”, 61 measures are recommended. Of this total, 12 actions include the verb ‘incentivize’ ranging from supporting cultural, sports, and entertainment activities, promoting technology and knowledge-based businesses and entrepreneurs.

As well there are “high-growth innovative commercial activities”, increasing affordable housing opportunities especially family oriented residential units including the conversion of office space into residential use, the rehabilitation of heritage structures and the development of vacant spaces.

What’s missing? How much will this cost over the next five years. Meanwhile, the city must deal with other significant budget spending challenges and shortfalls including projects such as Lansdowne Park and LRT, improving services like public transit and police protection plus infrastructure maintenance such as road repairs. Continuing inflationary pressures also place political limits on property-tax increases.

On top of the incentivize-driven recommended actions, the report also contains several initiatives that also have potentially significant cost implications such as enhancing pedestrian and cycling connectivity, launching a downtown promotion program, developing strategies for arts and culture, a science and technology innovation hub, establish a “beautify your neighbourhood” program, pilot an innovative waste management program and much more. The plan also provides little detail on how the priority actions will be implemented. As noted above, the report is also basically silent in explaining what type of incentives could be used to stimulate investment.

The plan also has major but unknown financial cost implications for the city on its budget which will go beyond the three-year time-frame. For example, Montreal is setting aside a $1.8-billion plan for the revitalization of its downtown core over 10-years. Calgary’s highly successful downtown office conversion program was introduced in 2021 with an initial investment of $45 million which was followed by an additional $108 million.

Another issue not considered relates to the impact of the conversion or removal of office space on the municipality’s property-tax revenue. The city should be concerned about this. Still, undoubtedly, a net reduction in commercial office space due to conversion into residential space or the establishment of more parkland and open space, for example, will lead to a net reduction in property-tax revenue.

Still, the report does recognize that the city’s three downtown wards account for more than $350 million or about 20 per cent of the city’s total property-tax revenue in 2019. The report sees the downtown’s property-tax contribution as one of the two reasons “why the downtown matters.” The high percentage is not surprising given that the commercial and institutional uses are concentrated downtown. Commercial property taxes (which would include the federal government’s payments-in-lieu-of-taxes) for example accounted for 60 per cent of the total 2023 property taxes collected in Somerset Ward.

The report correctly emphasizes that there needs to be a collaborative, coordinated approach to finding solutions to the challenges facing Ottawa’s downtown involving all levels of government, the private sector, social and non-profit organizations, and individual citizens. Still, based on the report’s list of priority actions, the primary focus for leading the revitalization is the City of Ottawa which itself is confronted with serious budget challenges.

There is still considerable work required to develop a feasible financial plan to implement the recommended initiatives.  Despite the call for urgent action by the report and other organizations such as the Ottawa Board of Trade, the municipality lags behind most other major cities in North America in developing a downtown revitalization strategy.

And it is not known yet what other initiatives will be brought forward in the soon-to-be-announced downtown strategy from the Ottawa Board of Trade which might add more financial expectations from the city.

Feb. 8, 2024

It’s Not Your Lansdowne Anymore

Ever since the city purchased the agricultural fair grounds in 1883 for a permanent park, Lansdowne has been regarded by the citizens of Ottawa as a historical jewel, a valuable, untouchable community asset and a grand public meeting place.

As if to remind city council members of this historical importance, there is a short sentence found on page 10 in the executive summary of the staff report dealing with the revised Lansdowne redevelopment which states that “Lansdowne belongs to the people of Ottawa.”

However in reality, Lansdowne Park today no longer belongs to Ottawa’s citizens as it has in its past.

The decade of the 1990s was the key time marking the beginning of permanent change which ultimately led to the situation we find today in terms of the public-private partnership with Ottawa Sports and Entertainment Group and the redevelopment of Lansdowne Park. After several years of neglect in maintaining on-site assets together with the financial sinkhole that the park became, city council even voted to tear down the derelict Aberdeen Pavilion built in 1898, a national historic site, and the 1914 Horticultural Building in 1991. Frank Clair Stadium was also slated for complete demolition soon after when there was no longer a CFL franchise nor any real interest in getting one.

Without any clear strategic direction over its future, city council then decided in 1996 to see Lansdowne Park as a year-round “economic centre” and to seek out private sector partners in its revitalization. After several mis-steps, this critical decision eventually led to what today is commonly referred to as Lansdowne 1.0 and now potentially Lansdowne 2.0.

The transition of Lansdowne Park to an “economic centre” has been driven primarily by private, profit-motivated and not community-based priorities. Specifically, the desire on the part of OSEG’s founding partners to bring back professional football at Lansdowne Park after obtaining a conditional CFL franchise agreement in March 2008. That led to an unsolicited Lansdowne Live proposal from OSEG. In 2010, council approved to proceed with sole source negotiations with OSEG and the rest is recent history.

The following provides some examples of how Lansdowne Park has changed from a public meeting place belonging to all Ottawa citizens to an economic centre driven by the private sector.

• A significant amount of the public space at Lansdowne Park has been commercialized or privatized during the 1.0 phase through the development of retail, office and residential (condominium and rental) space with more to come in the proposed and revised 2.0 concept. The commercialization of public space into a major mixed-use development was supported by the city to generate revenue from the sale of air rights and apply it to the cost of building the new sports facilities.

• As more land was devoted to private commercial and residential space, the public and open space was reduced in size. In Lansdowne 1.0, the park footprint shrinks down to the size of a lawn rather than a Great Lawn.

• The ability to afford the purchase or rental of the residential units at Lansdowne Park is limited only to the wealthier households. It is estimated that a household would need a total income of $140,000 to rent a relatively small two-bedroom condominium in one of the two existing towers – The Rideau at 1035 and The Vibe. In addition, the 10-per-cent  affordable housing requirement which was part of the initial 2.0 plan has been completely removed in the updated concept after city staff acknowledged that the affordable housing targets could not be achieved as part of the redevelopment. Moreover, 3/5 of the total 25% of total revenue resulting from the sale of air rights that would have otherwise been allocated to the housing reserve fund for affordable housing according to Council approved policy was diverted to partially offset the City’s redevelopment costs.

• If the City truly wants the revitalized Lansdowne Park to become a city-wide destination for its residents, significant improvements in its accessibility are required especially with respect to public transit. A recent city survey found, for example, that the largest mode for visiting the park by far was walking or biking indicating that most of the visits come from nearby neighbourhoods including the touristy downtown area.

Lansdowne Park has lost its historical place as a valuable community asset to profit-motivated commercialization of what was once untouchable public space. The city had no money to sustain Lansdowne Park, so it sells one of its jewels to pay for fixing its infrastructure to accommodate sports-focused private-sector investors, leaving the city again with no money as $419 million is added to its debt load.

Oct. 31, 2023

Bad Time For Sens Arena Subsidy

Here we go only a few days after the Senators sale was finalized – the new owner, Michael Andlauer is already looking for public handouts to build a new downtown arena.

It might or might not be at LeBreton Flats. Get ready for the onslaught of claims on how stupendous the economic impacts will be as a result of the new arena and how it will save downtown Ottawa in the post-pandemic era.

In TSN 1200, Andlauer observed that: “It’s not one of those things [the $900 million cost for a new arena] where you can go into your pocket and … (find) some spare change here.”

He uses the public-private partnership (oh no, not another P3) in Edmonton involving the 20,000-seat Rogers Place built in 2016. The Oiler’s owner Daryl Katz put in $153 million of the $600+ million cost for the new downtown arena. The City of Edmonton picked up the rest including $92 million from other levels of government, $125 million from a ticket surcharge and $138 million from lease revenue.

Meanwhile, the Oiler’s value has skyrocketed increasing almost three-fold from $445 million in 2016 to $1.275 billion in 2022 according to Forbes. In comparison, the value of the Ottawa Senators increased from $355 in 2016 million to $800 million in 2022. Maybe the Senators franchise value will also skyrocket like it did in Edmonton with a brand new downtown arena and a young winning hockey team but what will the City get out of any P3 deal?

Calgary followed a similar P3 approach for the future replacement of the Scotiabank Saddledome at total cost of $1.2 billion ($800 for the hockey arena). Calgary Flames owners (the Calgary Sports and Entertainment Corporation, not to be confused with the Ottawa Sports and Entertainment Group), will contribute $40 million up front and $326 million in (tax deductible) lease payments over the next 35 years. The City of Calgary adds another $537 million and the Alberta Government with $330 million. The franchise value for the Calgary Flames increased from $410 million in 2016 to $855 million in 2022 while playing in the  – a similar range to the Ottawa Senators.

It is useful to note also that for both Edmonton and Calgary, there were previous deals that were reached between the hockey team owners and the cities but failed to be finalized partly because of rising construction costs resulting in rekindled negotiations around cost sharing formulas.

Based on a rough extrapolation of the Edmonton and Calgary P3 models, the City of Ottawa could be possibly looking at around $400 to $500 million in funding – a big pile of money especially in light of the LRT travesty, the huge investments to the Lansdowne Revitalization project and competing revenue demands for affordable housing, infrastructure repairs and upgrades (roads, bridges, sewers, sidewalks etc), OC Transpo deficits etc. etc. The Province of Ontario has also expressed no commitment to providing funding especially given the LRT situation.

This is not a good time to be looking at more private sector subsidies. One would think that Andlauer would be familiar with the controversies faced today by Ottawa’s City Council when it comes to financing projects while at the same time announcing a P3 deal involving more public subsidy.

Like Katz in Edmonton, threats of moving the hockey team to another market could be part of a long and bitter fight.

Oct. 2, 2023

Building Tax Subsidies Must Be Reviewed

A recent publication of The Heart of Orléans (the Business Improvement Area along St. Joseph Boulevard) The Beat magazine, Orleans East-Cumberland Councillor Matt Luloff congratulated himself for working hard to get the $1.3-million property-tax subsidy for a proposed development at 1280 Trim Road approved by city council.

The councillor also noted that this approval by the majority of council members, came despite the efforts by some “ideologically driven councillors and the mayor’s office” to review and dismantle the Integrated Orléans Community Improvement Plan (CIP).

I am not sure what the councillor meant by being ideologically driven but the council-approved $1.3 million property tax subsidy is an example of why a review of the Orléans CIP and all the other related CIP programs is urgently needed and, if necessary, dismantled. The redevelopment consists of your typical suburban auto-oriented commercial strip mall with single-storey retail buildings on a property where up to six storeys are permitted. The real estate sell-sheet even describes one of the three proposed buildings as having “the only drive-thru on the drive-home side of the street” plus “ample on-site parking”.  The site plan also shows a long queue of cars around the drive-thru building-unit.

In short, there is very little in the proposed development that supports the goals and policies contained in the recently adopted Orléans Corridor Secondary Plan and the Official Plan in terms of compact, walkable (15-minute) communities or high-density development around and near transit stations and along corridors. The only real rationale presented by staff and the property owner is that the owner-developer paid too much for the land and the proposed development would not happen without the $1.3-million property tax grant. The property owner’s willingness to pay for ‘overpriced’ land in order to build something some below its market potential should not justify providing a property tax grant subsidy.

There is also no apparent reason for accelerating this CIP application before the program review was finished. The proposed development offers little that could be described as innovative in terms of both urban design and land use. As mentioned above, it is hard to find anything about the project that supports the Secondary Plan. In addition, I don’t think the goal of the city-wide CIP program is to dismantle the Orléans plan but instead to enhance it. Given the multi-millions of property-tax-grant dollars awarded over the past couple of decades, such a review is prudent – not ideological – in light of recent city revenue stresses and emerging competing but critical social and environmental priorities.

City staff also stated in its report that the CIP grant is still conditional upon “demonstration of compliance in the Orléans Corridor Secondary Plan through an approved site plan, to the satisfaction of the general manager of planning, real estate and economic development.” This statement is an odd one in that this compliance check should have also been part of the CIP application review or if it was, then the CIP approval would simply lead to a rubber-stamping of the site plan. It is worth noting that the general manager also manages the staff responsible for the CIP program and would have therefore signed off on the CIP report.

Finally, the city’s online lobbyist registry shows two meetings on the subject of the 1280 Trim Road development proposal. The first was held on February 14, 2023 between Luloff and the property owner’s planning consultant. The second one is more interesting and was held on April 20, 2023 between Jeff Polowin who is a well-known lobbyist around city hall, and not only the Ward councillor Luloff but also nine other councillors all of whom were part of the 18 votes approving the application at city council. A pretty big political crowd for a relatively small suburban development. The meeting was also listed under the more generic and somewhat innocuous title of economic development not 1280 Trim Road.

It is not obvious what economic development opportunities were discussed as there are not many associated with the proposed development. The types of anticipated economic activities are typical of businesses located throughout Orléans along commercial roads like St. Joseph Boulevard or Innes Road and in business parks as they tend to serve primarily the local population. Like the existing commercial development across the street known as Trim Social, also built by the same developer/property owner, the proposed development would likely happen without the property tax subsidy unless, of course, one can justify it because the owner paid too much for the property. The anticipated uses also have a minimum impact on supporting a balanced community in terms of reducing outward commuting or on supporting the Local Production and Entertainment designation in the Secondary Plan.

Sept. 9, 2023

Tax Grant Brings Little Return For City

If the city is prepared to approve a tax-grant incentive of $1.3 million to encourage the redevelopment of a property, the proposed project should at least contribute to community goals.

If you thought that, you would be wrong.

Those goals are contained in the Orléans Corridor Secondary Plan. But at 1280 Trim Road, city council approved the property-tax grant on July 14 under the Integrated Orléans Community Improvement Plan.

The CIP was established to stimulate the redevelopment of property, encourage highest and best use, create new jobs and support pedestrians and encourage healthy vibrant streets.

The property is about 700 metres from the Trim LRT station and it involves the construction of three one-storey commercial buildings totalling 1,565 square metres. The developer also indicated during a July 4 public meeting at the finance and corporate services committee that he has five letters of intent from prospective commercial tenants including restaurants, a physiotherapist, a dentist, a pharmacist and a car garage.

The site plan prepared for the property owner for marketing purposes, is not unlike any typical low-rise, car-oriented commercial strip plaza. It provides ample parking spaces and even shows a queue of cars surrounding one of the three buildings, presumably at a drive-thru.

It seems obvious that the development has little relevance to city policies to encouraging a “more liveable, sustainable and healthy urban form that is compact, transit-oriented and highly walkable”.

The prospective tenants also don’t appear to have much to do with creating a robust economy except perhaps the restaurant tenants unless they end up being fast-food take-out operations. All of the five tenants can be found throughout Orléans and in most strip malls. The attraction to locating at 1280 Trim Road has more to do with the population growth in surrounding communities and less to do with proximity to light rail.

Is a single-storey development of a typical car-oriented commercial strip plaza, the “highest and best use” of the property given that city planning encourages six-storey buildings and more density on land near the transit station?

It is also useful to note that the applicant is also the developer-owner of another similar but smaller retail plaza, known as Trim Social, virtually across street from 1280 Trim Road, which was built in 2017 and without a property-tax grant even though the previous CIP program was still in place.

So the $1.3-million property-tax grant ends up being nothing more than a subsidy to the developer with minimal public benefits in return or moving forward city planning goals.

Aug. 6, 2023

Council Lost On Bullet-Train Proposal

The construction of a high-speed rail between Quebec City and Windsor has been the subject of numerous feasibility studies and considerable debate for at least the past half century.

The concept has recently been reinvigorated by Transport Canada’s announcement that VIA HFR (a subsidiary of VIA Rail) has been charged to manage the project procurement process that hopefully will lead to a modern high frequency (not necessarily high speed) rail service between Quebec City and Toronto (not Windsor) including Ottawa.

Municipalities all through the corridor as well as various boards of trade, including the Ottawa Board of Trade, have formally endorsed VIA Rail’s high frequency rail proposal. On the other hand, some municipalities have gone even further advocating for a high-speed rail corridor. On February 20,2023, the City of Montreal’s Council approved the motion of supporting the development of a high-speed train instead of a high-frequency train between Quebec City and Toronto.

The rationale behind the motion was that a high-speed rail would have enormous leverage effects for the economic and cultural development of major cities located along the corridor and would increase the attractiveness of Montreal and its economic, cultural, commercial and tourist relations with other cities as well as contribute greatly to the revival of downtown Montreal.

City of Toronto Council followed shortly supporting Montreal’s support of high-speed rail approving its own motion in March 2023. Oshawa City Council also adopted a motion supporting Montreal earlier in February 2023. The mayors of Quebec City and Laval as well as the Province of Quebec have also followed up with support. It is clear that a high-speed rail is preferred over high frequency rail amongst not only municipalities along the Quebec City – Toronto corridor but also transportation experts and economists.

However, Ottawa City Council appears to be glaringly missing from all the enthusiasm not only around high-speed rail but also VIA’s current high frequency proposal in general. Perhaps the ongoing serious issues around the new LRT has anesthetized council members with concepts around high-speed and high frequency. Or perhaps there is a sense of complacency in that Ottawa will be a key part of any rail corridor that is eventually built by default simply because it is the capital city and it appears on maps showing proposed rail connections.

Taking a passive position could backfire however.

One cannot assume the Ottawa’s role as the capital city gives it any automatic competitive advantage over other cities especially larger municipalities. Take for example, Transport Canada’s decision to only allow international flights be restricted to only the Toronto, Montreal, Calgary and Vancouver airports during the COVID-19 pandemic. Even though the restrictions have been lifted recently, Ottawa airport is facing serious challenges in returning to its pre-pandemic status.

Its proximity to Montreal and to a lesser extent, Toronto is one of the reasons why. Then and more recently, Ottawa’s airport was not included on the list of six airports announced in May 2023 that will benefit for the federal government’s new, relaxed regulations for airport security despite being the nation’s capital which included Edmonton and Winnipeg in addition to the previous four. The rationale provided was that Ottawa’s level of international air traffic did not meet the required minimum threshold.

Ottawa also cannot rely on having the backing from Ontario either. For example, the province has a plan in its books from the previous Liberal government of constructing a high-speed rail corridor between Toronto and Windsor. Although the proposal has been put on pause by Premier Doug Ford, it could be quickly resurrected should the Quebec City-Toronto high-speed rail becomes close to reality.

I keep going back to when Highway 417 was built between Ottawa and Montreal and completed in 1975 just in time for the 1976 Summer Olympics in Montreal. Highway 416 linking Ottawa to Highway 401 and to Toronto was not completed until some 25 years later. Even Highway 115 was completed 40 years earlier providing easier access to Toronto’s recreation and cottage country around Peterborough. When it comes to transportation, Ottawa does not appear to be a priority for Ontario.

The worst-case scenario for Ottawa from an economic development perspective, and one which I would not dismiss as being unlikely or impossible, is a hybrid rail system consisting of a high-speed connection between Montreal and Toronto (and possibly extending to Windsor and Quebec City) along the 401/A20/A40 highway corridor and high frequency connections between Montreal and Ottawa and between Ottawa and Toronto via Peterborough or Smiths Falls (see map) although the Peterborough link could become less practical from a cost perspective given the low population numbers found along the route. A high frequency rail cannot compete against a high-speed one when it comes to economic competitiveness and sustainable development. It is useful to note that the strategic debates coming from the city councils of Montreal and Toronto have also focused on the linkage between the two largest cities in Canada and much less so if anything on connections with Ottawa.

One can speculate on a large number of different scenarios and outcomes but the key conclusion to be made is that Ottawa City Council needs to take on a more proactive role in the discussions to ensure its interests remain part of any future investment decision especially in terms high-speed rail even if it only includes a connection to Montreal (perhaps between Montreal and downtown Gatineau through Quebec – now that would be an interesting scenario).

July 11, 2023

A Tax Grant For What?

City Committee Reverts Back to Subsidizing Real Estate Developments

Not that long ago Ottawa City Council turned down an application from the Ottawa International Airport Authority for a property tax grant to build a new hotel on its property. This was the first time council did not approve an application under its Community Improvement Plan program. It appeared that the city was now going to take a close look at the evidence and rationale before approving property-tax grants. Well, that decision making change in direction did not last long when on July 4, 2023 the city finance and corporate services committee with a vote of 10 to 2, approved a $1,257,737 property tax grant under the premise that grant is required to permit a proposed development in Orléans to proceed. The proposed development includes the demolition of an existing dilapidated warehouse and the construction of three one-storey retail-office space. There are several issues about the decision but I want to focus just on the two most important ones.

The proposed development represents a lost opportunity to do something innovative with real value to the community which also supports the city’s own land use plans?

The city completed a thorough public consultation process leading to the Orléans Corridor Secondary Plan approved by council in September, 2022, less than a year ago. The Secondary Plan provides direction for supporting intensive, compact and sustainable development around transit stations and corridors and for encouraging enhanced cycling and pedestrian connections. The subject site is located within the Trim Minor Corridor designation which allows for up to six-storey buildings to be constructed and where the Plan encourages business activities that can spur a robust economy such as local breweries, distillers, recreation and entertainment.

There is very little about the proposed development that captures the community goals contained in the Secondary Plan. Bay Theresa Councillor Kavanagh asked the applicant during the committee presentation how the proposed project was not going to be car dependent. The applicant did not give a good answer because there isn’t one. A site plan prepared for the applicant for marketing purposes and not included in the staff report resembles any suburban car-oriented, single-storey retail malls found in any suburban commercial strip. Based on the letters of intent obtained by the applicant, the anticipated businesses are also typical suburban mall ones – pharmacy, physiotherapist, dentist, restaurant and even a car garage – not exactly activities one would associate with a robust “day and night economy’ or with pedestrians and bicycles. The site plan even shows a long row of cars apparently in line to get their drive-through coffee or fast food (a hint maybe of what the restaurant use will be?).

Does the developer’s willingness to pay for overpriced or even market priced land justify providing a property tax grant subsidy?

The answer should be obvious but it doesn’t appear so given the committee’s decision to approve the grant application. Somewhat surprising, the applicant admitted during his presentation at committee that the property was “overpriced” when he bought but proceeded with the purchase after he became aware of the property-tax grant program from the ward councillor. The applicant did state also that the grant became a factor in the purchase

On the other hand, perhaps the higher price of the property could in fact reflect market reality given its close proximity to the new Trim LRT station and the surrounding residential growth like Brigil’s existing and future high-rise residential complex. Even though single storey buildings are allowed to be built on the subject site, the market price of the property would instead reflect the real development potential of six storeys. So why would a municipality approve a property-tax grant so a developer can justify the purchase price of a property to build something significantly below the full development potential?

It is also worth pointing out that the applicant’s projected lease rates for the retail space are significantly greater than existing rental rates in Orléans. The project anticipates rents at between $4.17 and $4.75 / sq ft. In comparison, vacant space along Place d’Orléans Drive, also in close proximity to the new shopping centre LRT, is listed at $3.18/sq ft. This raises the question if the property tax is nothing more than a subsidy so that the developer can make their high profits?

So there is nothing in the staff report or in the debate at committee that supports the argument that the proposed development would not proceed but for the property-tax grant making the grant nothing more than a subsidy. Moreover, the issue I find most objectionable is using public money in the form of a property-tax reduction to support a underdeveloped, underproductive real-estate project which results in very little return to the community.

July 9, 2023

Another Big Tax Break For Developer

There is a report going to the finance and corporate services committee on Tuesday asking for approval of a $1,257,737 property tax grant over 10 years for the commercial redevelopment of 1280 Trim Road under the Integrated Orleans Community Improvement Plan (CIP).

The city staff report follows the same standard approach that has been followed for all previous CIP applications by providing very little evidence on whether or not the proposed project would not proceed but for the property tax grant. Moreover, the report provides no analysis of what broader community benefits might be realized from the property-tax grant incentive from the city.

The main argument in support of the application is that the high construction costs and current high interest rates have presented “challenges to generate a sufficient return to proceed with the project.” A similar argument was brought forward in the case of the recent new hotel CIP grant proposal near the Ottawa airport that was not approved by city council.

It is not clear from the report that there was any pro forma analysis or a review of the financial assumptions undertaken to look at how the property-tax grant impacts on the financial viability of the proposed development or if just the word of the applicant sufficed.

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It is also noted that the proposed new spaces are already listed in the market with a target availability date of December 1, 2024. The lease rates are between $38 to $42 / sq. ft. A quick MLS survey of rates in Orleans found rates around $14 in Taylor Creek Business Park to between $12 an $24 along St. Joseph Boulevard, Centrum Boulevard and Innes Road. It would appear that the high construction costs and interest rates have at least not dampened the enthusiasm and optimism of the property owner over the future development.

There is a very limited assessment in the report of what the community benefits might be in return to the city’s write-down of property taxes. The report does provide a skimpy economic impact statement that the value of construction will be spent on local supplies, materials, and consultants. It also states that there is a potential of 75 jobs being added once the space is leased but it does not discuss what type of jobs these will be except for perhaps a restaurant.

Are the types of uses creating jobs that would have occurred anyway without any incentives because of the growing population base and the overall emerging commercial attractiveness along Trim Road and the new LRT station which is in walking distance of the subject property? How do these new jobs contribute to a more balanced live-work community and to supporting 15-minute neighbourhoods?

The proposed development consists of three single-storey buildings totalling 1,565 sq. m. even though the secondary plan encourages six stories that the location is within the impact zone of the new LRT transit station where the city is encouraging compact, high density, mixed-use transit-oriented development and 15-minute communities.

An important question, from a public-policy perspective, is whether or not the city should be incentivizing the under-use and under-development of strategically important properties by offering property-tax grants especially given that the proposed development is not well aligned with the city’s own planning objectives.

City staff is currently reviewing the whole CIP program but the report completion is already behind schedule. I would like to think that the report recommendations will lead to a more effective CIP framework that will in fact support community improvements – but I am not optimistic.

July 3, 2023

Affordable Lansdowne Housing A Mirage

One of the City of Ottawa’s key selling points of the Lansdowne 2.0 revitalization plan is the inclusion of affordable rental housing. That selling point is a mirage.

According to Ottawa City Council’s directive approved in June 2022, 10 per cent of the total 1,200 residential units proposed by Ottawa Sports and Entertainment Group is to be affordable. The city defines affordable housing as “rental housing where the monthly rent does not exceed the city-wide average market rent by unit type as determined by the Canada Mortgage and Housing Corporation.”

The 10-per-cent affordable housing component will be required as part of the air-rights sales purchase agreement with the successful proponent of the competitive public request for offer process to be undertaken by the city. The affordable rental housing units are to be owned and managed by a non-profit housing provider to ensure the units will remain affordable.

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The following table compares the RFOs between the initial Lansdowne Partnership Plan and the proposed Lansdowne 2.0. It is useful to note that only two qualified submissions were made to the first RFO with Minto becoming the successful proponent.

Notwithstanding the strong desire on the part of city council to include affordable rental units in the redevelopment plan, even city staff expressed some doubt that this could be achieved without a significant financial contribution or subsidy to the non-profit housing provider.

Because the city’s funding strategy relies on the property-tax uplift or increment resulting from the new residential and commercial developments, the staff anticipate that the affordable rental units will only range between the low market level of 80 per cent of AMR to up to 35 per cent above AMR. The staff still tries to give this a positive spin by pointing out that even at 35 per cent above AMR, the affordable rental units would be a “considerable benefit” for the Glebe where market rents are even higher.

To try to reduce these rents further, city staff suggests the housing provider could consider approaching the Canada Mortgage and Housing Corporation to access National Funding and Financing. The city could also consider waiving development charges or building permit fees or providing equity contributions through its Affordable Housing Long Range Financial Plan.

Another option identified in the staff report is to have a reduction in the revenue realized from the sale of the air rights for the 10-per-cent portion of affordable housing which would approximate $4.4 million which then, presumably, would become a deduction to the non-profit provider’s cost to purchase the 120 units. The $4.4 million would also be added to the city’s debt requirement as it would not receive the same amount from the air-rights sale. OSEG will still recapture the amount it pays out for the air rights to the city through the sale of the 120 units to the non-profit housing provider even if the city does not deduct the same amount in its revenue stream.

In addition, it is also questionable if there would be any non-profit housing provider that would be interested in acquiring the 120 units given the anticipated rent levels without a major equity contribution from CMHC or the city. For example, according to Ottawa Community Housing’s 2022 Annual Report, the average household monthly income of its tenants is approximately $1,600.

A quick non-scientific survey of recent rents asked by condo owners in the two Minto built towers at Lansdowne Park showed that monthly rents for one-bedroom units with around 675 sq. ft. in The Rideau (1035 Bank St.) ranged between $2,250 and $2,500 and between $2,000 and $2,200 for one-bedroom units (about 640 sq ft) in The Vibe (118 Holmwood). A two-bedroom unit in The Vibe was asking $3,599/month in rent. One would not expect then that the market rents in the Lansdowne 2.0 towers would be anywhere close to being affordable to average income earning non-profit housing tenants without some form of large equity contribution or subsidy.

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It is interesting too that the staff report makes no reference to the city’s Affordable Housing Land and Funding Policy which states that when city-owned land is sold, the city will ensure that 25 per cent of any housing development meets the definition of affordable housing, or that 25 per cent of the city’s net proceeds be transferred to the Affordable Housing Reserve Fund. This did happen with the Lansdowne Partnership Plan development which ended up requiring the city to add another $2.8 million to its debt authority amount.

It doesn’t matter what actions might be taken to ensure that the 120 units achieve and remain at the affordable levels, the net result is that the onus of providing affordable housing falls entirely on the city and perhaps the non-profit housing provider, not OSEG.

June 27, 2023

City Planners Full of Buzzwords

Once upon a time not that long ago, City of Ottawa planners had included something called a Gold Belt in one of the earlier debates around the issue of identifying urban expansion boundaries for the new Official Plan.

By encompassing the surrounding countryside of farms and mineral deposits, the Gold Belt had the ring of being something positive, desirable and creative.

In planning reality, it represented another attempt to strangle urban expansion into the rural area much like the Greenbelt tried but failed to do in the 1950 Greber Plan.

The Merriam-Webster Dictionary defines buzzword as “an important-sounding usually technical word or phrase of little meaning used chiefly to impress laymen.” Like many professional subcultures, city planners also have their own lexicon of buzzwords and jargon which is where I would place the Gold Belt idea. However, the loss of the Gold Belt concept did not discourage Ottawa planners from coming up with a lot more buzzwords like “15-minute neighbourhoods,” “missing middle housing,” “transects” and so on in the city’s new Official Plan.

In the following table, I compare the usage of different buzzword terms used in the planners’ lexicon between the new OP approved in 2021 and the previously old OP approved in 2003. I did a word search of only the core parts of each OP which excluded things such as the table of contents, definitions, appendices with detailed secondary plans and maps etc. The number of pages in the core sections totalled 253 compared to 159 pages in the 2003 OP.

The above table clearly illustrates the significant increase in the incidence of planning jargon between the 2003 and 2021 OPs. Planners could argue that the use of these terms will help the general public to better understand the planning concepts. To a degree, this might be true but recognizing the term conceptually does not necessarily equate to understanding it.

Some of the concepts in the 2021 OP can also be found in the 2003 OP but with more understandable descriptors. For example, 15-minute neighbourhoods and nodes are described in the 2003 plan using more reader-friendly words such as compact, liveable, mixed-use and walkable or pedestrian-friendly. Similar statements also exist in the pre-amalgamation Official Plans from suburban municipalities such as Kanata and Gloucester with respect to policies related to Town Centres.

In the next table, I compare the incidence of the same buzzwords plus a couple of others in Ottawa’s 2021 OP with current plans from other larger Canadian cities including Toronto, Vancouver, Calgary and Edmonton. The City of Toronto OP is actually a consolidation of all OP amendments in effect up to March 8, 2022. The original OP was approved by Toronto City Council in 2002. The first number in each cell in the following table refers to the number of pages that contain each term and the number in brackets shows the total number of mentions in the OP as some pages may have referred to each one more than once.

All five Official Plans place a significant priority on sustainability, inclusiveness and resilience. The City of Ottawa, however, really out-competes by a wide margin the other four cities when it comes to writing about sub-area transects, 15-minute neighbourhoods, missing middle housing (except for Vancouver) and hubs.

Even in the case of transects where the term is found on almost one-third of the total number of pages in Ottawa’s Official Plan, the City of Vancouver uses the term in its more common way as describing a cross-section or an approximate straight line through a neighbourhood. Ottawa’s OP describes its transect approach to planning as a better way to “distinguish, by context, Ottawa’s distinct neighbourhoods and rural villages that are better tailored to an area’s context, age and function in the city” (eh?). To add more clarity, each transect represents a “different gradation in the type and evolution of built environment and planned function of the lands within it” (again, eh?)

Conclusion: I asked ChatGPT why city planners like to use buzzwords. It gave an interesting response which provides a pretty good conclusion for my post.

“The use of buzzwords can also be criticized for being superficial and obscuring more meaningful and substantive discussions about urban planning. It is important for city planners to strike a balance between using clear and accessible language and avoiding jargon that can be exclusionary or confusing.”

May 3, 2023

Stankovic Takes On Larry O’Brien Over CIPs

Our former mayor Larry O’Brien in an article in the Ottawa Citizen wants the city to invest in itself if we want to be a world-class city.

However, if we want to be a world-class capital city, then we need to invest in a reliable, efficient public transit network, in affordable housing, in our cultural and historical assets such as libraries and the Byward Market, in parks, open space, walking trails, bicycle paths, in helping young people find their first jobs and not in giving subsidies to Porsche dealerships and national hotel chains.

Our former mayor also thinks that we should not be that concerned about offering property-tax incentives because the dollar amounts have such a small foot-print on our tax revenue and budget. If he adds up all the property tax grants that the city has approved over the last two decades including the brownfields community initiatives programs, he would find that the accumulated amounts are pretty significant.

There is no such thing as free money when it comes to CIP property tax grants. Whether it’s a new condominium tower built on former contaminated lands or a downtown retail expansion at the Rideau Centre  or a new Porsche dealership or a new hotel at Ottawa International Airport, all these developments together create additional demands on city programs and services. If developers don’t have to pay for it through their property taxes, someone else will.

April 16, 2023

Pro-Airport Hotel Grant Argument Defies Logic: STANKOVIC

Reading Barrhaven West Councillor David Hill’s opinion piece in the Ottawa Citizen left me scratching my head at his arguments in favour of giving the hotel a property tax subsidy.

April 12, 2023

Airport Hotel Grant A Waste Of Money

The city’s $13.1-million tax grant has become a handout to Germain Hotels or to any other future applicant under the YOW Community Improvement Plan.

Here’s why:

1. Research shows the industrial real estate market has been booming over the last few years despite the pandemic along with significant increases in the demand for industrial space. That results in rising rental rates. The growth in demand has been especially driven by businesses involved in warehousing, logistics, distribution and fulfillment centres as well as storage space.

2. Annual airline passenger traffic totals are showing a strong upward trend approaching the pre-pandemic trendline.

3. The Ottawa airport however seems to be excluded from the recent industrial real estate boom even though an airport location should provide a premium strategic competitive advantage over other industrial and commercial lands. The airport will also soon have another advantage with the completion of the LRT terminal station and connection.

4. A recent study found that a hotel’s value located near the Toronto Pearson airport increased 22 per cent for every 10 per cent increase in international flights but declined 2.5 per cent every 10 per cent further away from the airport. The proposed new Germain hotel also offers a unique, important feature by including a covered pedestrian parkade from the hotel to the terminal.

5. In a 2022 report by Avison Young, the market research company concluded that, in terms of short-term outlook, “regardless of relatively high construction costs and lingering supply-chain challenges, significant growth prospects in several markets will result in more positive hotel feasibility outcomes.”

Relying on this program from the city to help in the financial rebound of the airport authority and to realize strong, sustained economic viability and growth in the long term, seems to be a very narrow and piecemeal approach.

What is needed is a more comprehensive strategic approach and a rethink of the existing airport master plan and strategic business plan which were approved before the pandemic started in 2020.

If Germain does not build the new hotel in the unlikely event council rejects the grant, somebody else will whether it’s a hotel or some other use and without the need for a subsidy.

April 3, 2023

Airport Report Full Of Holes

How does an Ottawa councillor vote when he or she isn’t provided with solid information to make a sound decision?

That’s the issue facing councillors as they weigh the need for a grant to a proposed airport hotel.

Does Germain Hotels really need a $13.1 property tax grant from the City of Ottawa to make its proposed new Alt Hotel on Airport lands feasible?

There is a report going to the city’s finance and corporate services committee on April 4 recommending approval of a $13.1-million property-tax grant. That’s over 25 years to be awarded to Germain Hotels / Alt Hotels for the construction of a new hotel on land leased from the Ottawa International Airport Authority.

This report doesn’t meet councillors’ need to make an informed decision.

The property tax grant comes under the Community Improvement Plan approved by council in July 2022 covering the vacant developable lands managed by the Airport Authority.

The overall aim of the CIP is to provide financial incentives for property-tax grants to stimulate new investment in property development.

Would the proposed hotel development not proceed if the $13.1 million grant is not approved? In other words, does the project need the property-tax grant to be financially viable?

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Remember that Germain had plans to build the new hotel on the same airport site with a planned opening date in late 2020 without any financial incentives from the city. However, due to the COVID-19 pandemic and its impact on the hospitality sector and the decline in airline passengers, the project was cancelled. The proposed developed has now been reactivated because of the potential $13.1-million property-tax grant available under the CIP program.

Now, the biggest limitation to the financial viability is no longer the pandemic impact but instead the escalation in construction costs. According to the staff report, the construction costs have gone up from $42 million in 2020 to $55 million in 2022. The report further states that the financial incentive was a “deciding factor” in Germain revisiting the project.

If I were a councillor trying to make an informed decision on whether or not to vote for the grant to a private business that owns hotels across Canada, I would have a number of questions.

1. Has there been any rigorous analysis to determine if that the proposed project would not proceed if the grant was not approved? The report states that the grant would represent a “material change to the project’s financial forecast and feasibility.” Was there a feasibility analysis undertaken by city staff or Germain as part of their submitted documentation or did city staff simply accept this conclusion from the applicant as being accurate?

2. What impact will the new hotel have on the other three hotels near the airport? The report makes reference to the positive economic impacts of the new hotel (without any actual factual substantiation) like the 50 new jobs. But if the other hotels lose 50 jobs because of market oversaturation, for example, with another hotel, there is no positive job impact. Has staff consulted with the other nearby hotels?

3. Why is staff recommending a 25-year property-grant period when city council previously approved 10-year periods for all the other CIP programs including the recent CIPs for Orleans and Montreal Road? Why is the 25-year grant period recommended for the new airport hotel (with a gross floor area of 7,472 sq m) when in 2017, Council approved a $2.3 million property tax grant for a new Hampton Inn which shortly became the Hyatt hotel (with a total gross leasable area of 7,669 sq m) over a 10-year period? If the same 10-year grant period is applied to the Germain project, the total accumulated property tax grant would become $3.7 million instead of $13.1 million over 25 years.

As a councillor, I would not be able to answer the above questions from reading the staff report.

March 30, 2023

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