Investments in Public Spaces Must be Justified On Their Own Merits
Posted May 11, 2018
The city planned to pay for the convention centre with property taxes on the other buildings in the Nova Centre. It didn’t work, and it was always a bad plan.
In late 2010, Halifax City Council voted to commit $56.4 million, matched by both the province and federal government, toward the cost of the convention centre portion of the Nova Centre project. Part of the proposal was that some or all of the city’s funding could be financed by the property taxes on the commercial part of the project.
The largest element of the commercial space is the office component. It is still only 30% full, so the appraisal for property tax purposes is much less than expected. Not only that, but the oversupply of office space in the downtown area, partly caused by the Nova Centre, has knocked down all tax appraisals, and therefore the taxes payable by office landlords.
The second component is the hotel, which is still unfinished inside and will not open until sometime next year. Likewise, the only retail component so far is the Bank of Montreal branch.
The property taxes on the commercial properties will never pay for the cost of the convention centre. Nor did it make sense to plan that they would.
The implied assumption is that the existence of the Centre is what caused the need for more office, hotel, and restaurant space. That may be partly true for the hotel, and for a restaurant or two, but it is certainly not true of the office space and most retail.
If Halifax needed more office space downtown it would get built somewhere, whether or not there was a new convention centre. Street level retail space is a glut on the market, given all the new apartment buildings with ground floor space looking for tenants.
The investment of public money has two possible justifications:
- It could expand and extend the tourist season in Halifax, and to a lesser extent in the rest of the province. The success in booking events for 2018 is an encouraging sign. One indicator will be the number of room nights sold in 2018 and future years, compared to 2017.
- It could improve the city’s sense of itself. That has certainly been a result of the widely admired new library and could be an outcome of the Nova Centre. It is not there yet. The sterile and cold street level façade on Argyle street stands in stark contrast to the inviting venues across the street. Tenants are needed that will bring the space to life.
Success will be measured by the pace and tourism impact of event activity, and the extent to which it is enhancing Halifax’s image as a great place to visit.
It will be a couple of years before we can make an informed judgement on the extent to which these benefits justify the investment of taxpayers’ money.
The convention centre can aspire to be busy for 150 or more days of the year. No such hope is available for a stadium.
The CFL and the principals of Maritime Football Ltd. have been dropping hints of a stadium and franchise announcement for more than a year.
The Saskatchewan Roughriders are easily the most financially successful team in the CFL. A new stadium that opened last year in Regina cost $278 million. The city contributed $73 million and the province gave $80 million and loaned a further $100 million, to be paid for by a surcharge on tickets.
The federal government does not contribute to the cost of professional sports venues, so for a stadium to be built in Halifax would likely require at least $250 million of support from the city and province in the form contributions, and loans that might not be repaid.
There would be 10 home games a year plus the possibility of one or two playoff games and maybe a concert or two. A good year would see the venue used 15 times. For seven months of the year the stadium and associated parking lot would be barren. Even the most fanciful economic impact analysis would struggle to make that look good.
We should therefore anticipate a replay by the proponents of the argument that it could be paid for with taxes on associated new construction, either residential or commercial. This will be just as false as it was for the convention centre.
Houses get built when there are people who want to buy them. Retail space gets built when there are eager tenants. Neither will be impacted by the existence of a nearby stadium. If anything, a space that is empty 350 days a year might be a deterrent.
Mayor Savage has said that “Interest in a stadium and a CFL expansion to Halifax is longstanding. My consistent response has been that a stadium is not a capital priority at this time. Any proposal would need to be private sector led and make economic sense for the municipality.” Good.
The city’s list of long term capital projects has an estimated cost $500 million higher than what current assets and taxes can fund.
The list includes $60 million for a stadium. That would neither be large enough to be relevant as a CFL venue nor would it be of interest to universities, which prefer their home games to be on campus. There is no evidence of a business case.
Halifax already has among Canada’s highest property tax rates. It would be best if council pared back its list of projects to those that current resources can support, so taxes don’t go any higher. Taking any substantial investment in a stadium off the list would be a good place to start.
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