Fool me Once???

Posted by Ron Bolin on May 21, 2013 in CITY FINANCE, CITY GOVERNMENT, PLANNING AND DEVELOPMENT | 4 Comments

Ron Bolin: May 21, 2013

Following a search for the proper venue, on Thursday, April 4, of this year I sent an email to Ms. June Hicklin, Advisory Officer, Local Government Department, Ministry of Community, Sport and Cultural Development regarding the degree to which a public referendum under provincial guidelines provided obligations on both the municipality which prepared the referendum question and officiated at its taking, as well as the public which approved it.  This is the correspondence which took place:

Ms. Hicklin:

I would like to understand the position of the Ministry in its administration of referenda carried out by municipal governments in BC. While I recognize that the issue in this instance may be moot, I seek a ruling on the nature of the reciprocal relationship between a public body and the public in the case of a referendum held under the community charter and/or the Local Government Act. The circumstances in this case are as follows:

-The City of Nanaimo, wishing to see a Conference Centre built in downtown Nanaimo made an agreement with a US developer to build the Centre as well as a hotel to serve it.

-A referendum in this regard was placed before the public in November 2004. The referendum question put forward was: “Are you in favour of adopting “NEW NANAIMO CENTRE LOAN AUTHORIZATION BYLAW 2004 NO. 5750” to permit the City to borrow up to 30 million dollars and carry out the terms of a partnering agreement with Triarc International Inc. for the development of the New Nanaimo Centre project?”

-The result of the referendum was favourable by a vote of 52% to 48%

-The terms of the Triarc partnering agreement were that Triarc would build a conference centre at a cost of $52.5 million to the city and, reciprocally, would build a Marriott hotel to service the centre at their expense.

-The $30 million was borrowed, but the conference centre cost was subsequently escalated to $72.5 million (no total project cost review has ever been released) without the benefit of another referendum and no hotel was ever built.

My question is: does any public body putting forward a referendum proposal to the public have any responsibility to uphold the conditions defined in the referendum or is the total risk for performance borne by the public?

There was considerable debate on the development at the time which continues to this day as the costs of operating the conference centre increase and offerings of public assistance to a hotel developer continue to escalate to this day.

I believe that an agreement by way of a referendum should be binding on both parties. A public body should not be permitted to unilaterally change a major element of a matter which has been dealt with in a referendum without a subsequent referendum.

As the conference centre exists, I seek merely to determine the extent to which a referendum is binding on both public parties to a referendum. A response to this question should be of utility to the public in all municipalities in understanding the nature of the deal which they may be making in a referendum.

I believe that the matter is of some urgency as a response might affect the current state of discussion of the public funding of a hotel project here in Nanaimo and be of interest in similar referendums held elsewhere in British Columbia. Are referenda obligations mutual or only one way?

Thank you for your consideration in this matter.

On April 12, the following response was received from Ms. Hicklin:

Ron Bolin,

 

There is a requirement in the Community Charter that loan authorization bylaws must receive Deputy Inspector’s approval. Once provided by our Ministry the local government proceeds with the vote. As the vote was successful, the City of Nanaimo was authorized to proceed with construction. If a local government exceeds the cost of the project they do not have to go back to a referendum if the local government can secure financing of the project without any further borrowing.

 

If either party of an agreement has not met the obligation of the agreement it would be up to the parties to find a way to resolve the issue. The Ministry has no role in enforcing agreements between local governments and other parties.

On April 17, following a careful reading of the response, I sent another email on this subject:

Ms. Hicklin:

I’m afraid that there may have been a misunderstanding of my question. I am aware of the requirement for a referendum for loans with paybacks exceeding five years. However, the instance which I raise is one in which the referendum question itself contained a second part, beyond the borrowing, which stipulated the conditions under which the money borrowed was to be spent and, indeed, noted a maximum sum to be spent on the project ($52.5 million) and the scope of the project (that in addition to the conference centre, a hotel would be built).

My question deals with the nature of the contract made with the public in such an undertaking and whether such conditions placed on the use of the borrowed money as stipulated in the referendum, has any binding effect on the use of that money, i.e. is it legitimate to change the conditions put to a referendum after the referendum has been passed.

As an aside, the loan authorization bylaw in question did not receive authorization from the Deputy Inspector’s approval prior to the referendum and the matter had to be approved by the legislature after the fact. The legislature could not, of course, have been aware that the full conditions of the referendum were later to be abrogated.

I suppose in essence my question is this: If a referendum is held on whether to approve borrowing $30 million to build a conference centre and hotel, is it then legitimate to use that money to build a conference centre only without holding another referendum? Would it make any difference if the referendum were to borrow $30 million to build a swimming pool and it was subsequently spent on a new City Hall?

I ask, not that you enforce any agreement, but simply advise on the legitimacy of the agreement. I first approached the Ombudspersons office in this regard and was referred to both the BC Elections office which told me that they had no part in municipal referendums other than providing the Voters List, and to your Ministry which directed me to you.

Thank you for your consideration.

On May 17, the following response was received:

Ron Bolin,

If costs increased significantly on a proposed construction project, a local government could proceed with part of the project using only the amount authorized and the bylaw would not have to be referred to the electors again; or increase the amount of allowed borrowing by amending the borrowing bylaw and seek elector approval again.

If a local government received elector assent with regard to a loan authorization bylaw to build a city hall the local government could not proceed with the construction of a swimming pool without amending the loan authorization bylaw.

 

A careful reading of this last response has caused me to review the events of that time carefully, not because the historical circumstances can be altered, but to try to understand the nature of the events and whether the rules were followed by the city or merely overlooked by those who had an uneasy feeling at the time that things might turn out as they indeed have with construction and maintenance costs as well as large operating subsidies.  The lessons learned here about partnering agreements may be particularly relevant to discussions which the City may be holding even now with possible hotel or multiplex developers.

While a more detailed chronology of the events leading to the development of the VICC can be found in:  Nanaimo between Past and Future: Critical Perspectives on Growth, Planning and the New Nanaimo Centre, eds. Eric W. Ricker and Frances Christopherson, Friends of Plan Nanaimo (2005) the short strokes relevant to this discussion are as follows:

Partnering Agreement with Triarc (Oct. 25, 2004)

Section 7 concerning costs set the maximum cost to the city at $52.5 million and include the construction of a hotel by Triarc.

Referendum Question (Nov. 20, 2004)

“Are you in favour of adopting “NEW NANAIMO CENTRE LOAN AUTHORIZATION BYLAW 2004 NO. 5750” to permit the City to borrow up to 30 million dollars and carry out the terms of a partnering agreement with Triarc International Inc. for the development of the New Nanaimo Centre project?”

Enabling Act (2005) :  This Bill in the BC legislature was required as the procedure used by the City in the Referendum was flawed.  The Act dealt with:

Nanaimo Centre loan authorization bylaw

18 (1) In this section, “proposed Nanaimo Centre bylaw” means the proposed bylaw given first reading by the council of the City of Nanaimo on October 18, 2004 and cited as the “New Nanaimo Centre Loan Authorization Bylaw 2004 No. 5750”.

(2) Section 135 (5) [order of obtaining inspector approval and elector approval] of the Community Charter does not apply to the proposed Nanaimo Centre bylaw and, instead, the approval of the electors must be obtained for the bylaw before it is submitted for the approval of the inspector.

(3) This section is deemed to have come into force on October 18, 2004 and is retroactive to the extent necessary to give full force and effect to its provisions and must not be construed as lacking retroactive effect in relation to any matter because it makes no specific reference to that matter.

And finally, the bylaw which authorized the borrowing:

CITY OF NANAIMO BYLAW NO. 5750

A BYLAW TO AUTHORIZE THE BORROWING OF THIRTY MILLION DOLLARS BEING A PORTION OF THE ESTIMATED COST OF CONSTRUCTING THE NEW NANAIMO CENTRE

WHEREAS Council wishes to enter into an agreement for the development and construction of the New Nanaimo Centre which includes a conference centre, museum, auditorium,parking facility and retail space to be developed on land to be owned by the City (the “City Project”) in conjunction with a hotel and residential development (emphesis mine) and redevelopment of the lands at the Civic Arena and old foundry (“Foundry Lands”) for residential, commercial and public purposes;

(Bylaw 5750.01)

AND WHEREAS by Bylaw under Section 179 of the Community Charter Council may incur a liability by borrowing for any purpose of a capital nature;

(Bylaw 5750.02)

AND WHEREAS the assent of the electors will be obtained prior to adoption of this Bylaw;

NOW THEREFORE the Council of the City of Nanaimo in open meeting assembled enacts as follows:

1. The Council is hereby empowered and authorized to undertake and carry out or cause to be carried out the construction of the New Nanaimo Centre generally in accordance with

general plans on file in the municipal office and to do all things necessary in connection therewith and, without limiting the generality of the foregoing:

a) to borrow upon the credit of the Municipality a sum not exceeding $30 Million;

b) to acquire all such real property, easements, rights of way, licenses, rights or

authorities as may be requisite or desirable for or in connection with the construction

of the New Nanaimo Centre;

c) to enter into one or more agreements for the development of the New Nanaimo Centre

(Bylaw 5750.02); and

d) to subdivide and dispose of land and to grant such perpetual easements for access, support and services for the hotel and residential parcels, licenses, rights or authorities as may be requisite or desirable for or in connection with the construction of the new Nanaimo Centre.

(Bylaw 5750.01)

2. The maximum term for which debentures may be issued to secure the debt created by this bylaw is twenty (20) years.

3. This bylaw may be cited as “NEW NANAIMO CENTRE LOAN AUTHORIZATION BYLAW 2004 NO. 5750”

 

In view of the questions raised by these circumstances and in addition to the facts as presented, I requested comments from Gary Korpan who was Mayor at that time as well as Councillor Brennan who is the only Councillor from that time now sitting on Council.  Mr. Korpan has given permission to publish his response:

Hi Ron

Well it underscores what I have often said: “One of the most important issues for the 21st century is the apparent and real lack of accountability.”

I refer not just to criminal and contractual issues but public policy matters

as well. Your correspondence reflects what I have found on my 2 decade

long fight against the Vancouver Island Gas Pipeline scandal, which is,

no one who should be responsible to act in the interests of the general

public seems capable or willing to do so. See my webpage April 11 post

for the latest on that front. http://garykorpan.shawwebspace.ca/

As for your correspondence some points:

The “right wing free enterprisers” on my last and Ruttan’s councils refused

to enforce the contract to get the hotel. I am disgusted by the failure of

my last & Ruttan’s councils to use the clauses I demanded to be included

in our agreements to protect the Nanaimo taxpayers’ interests. We had

legal recourse and Nanaimo’s majority on 3 separate councils have failed

to use the courts for our community’s benefit.

Similarly the local media regularly let the private partners

(and federal government) off the hook preferring to piss on those of us

who tried to hold everyone involved to their promises and contractual

obligations. Nanaimo often circles the victim and shoots inward.

 

Part of your premise is apples and oranges. The referendum was for

financing of the conference centre part. Which was only one component

of the bigger multi-use project. The Shaw Auditorium (really the new

Council Chambers), the new Museum, the commercial space, part of

the underground parking were NOT part of the referendum loan.

They (along with the new ice centre on 3rd St) were funded from

other sources. While estimates of the entire project altered as the

delays were incurred and prices rose, the whole project budget was

not finalized until February 2006. (Remember the demand for redesign

and “let the November 2005 municipal election decide” caused long and costly

delays.) Once the budget was set, it was followed and complied with,

as the post project costing analysis showed. That aspect of the referendum

was followed. As I stated above, the hotel part was botched despite my

pleas and efforts to hold the private “partners” to their obligations.

I think it would be more useful to demand Lunney and the feds to

reimburse, with interest, the federal share they and every other party

committed to. That would amount to over $14 million dollars that

the Nanaimo taxpayers got stuck with due to their lies.

Unfortunately, statute of limitations issues now prevent enforcement

of the contracts…even if current Mayor and Council finally form a backbone.

Gary

At the time of this writing I have not received a response from Councillor Brennan.  It will be posted as a comment to this post when it is received.

As time erodes our memories of these events now nearly 10 years ago, their consequences live on to consume our limited resources.  But perhaps that flame can light our way to better decisions in the future and cause the few who make them to remember those who must pay the price for them. This example is a warning to those who want to see more public private partnerships for hotels or multiplexes or other projects which may be nice but not necessary to good government.

I ask for your judgement in this case.  Were the conditions of the referendum legally fulfilled?  And if not, did it proceed only because of the hubris of a few and the ignorance and/or indifference of the rest of us?