Conventional Wisdom?

After considerable study by both subject matter experts and provincial officials, a proposal has been made for a new convention center which will cost $159 million of borrowed money. The proposal has now been supported by the provincial government and forwarded to HRM for its response.

It is clear that a new convention center would be good for the city and the province. That does not necessarily mean that the proposed cost to taxpayers is reasonable nor that the deal is well structured.

Three questions merit further consideration.

1)Why does the province not have ownership of the convention center as a result of the transaction? In the proposed arrangement taxpayers fully fund the cost of the building over 25 years, but at the end of that period the developer owns it.The Deloitte report mentions by way of explanation that the developer owns the land. This can hardly be an insurmountable obstacle; condominium arrangements that include a variety of users—commercial, retail, and residential—are commonplace. Minister Estabrooks’ response to this question on CBC Mainstreet was remarkably unpersuasive.

2)Why should the borrowing be done by the developer rather than the province? This adds cost because the developer’s rate of interest will be higher than that for the province. On Oct 25 the province can borrow money for 25 years at about 4.25%. The cost for the developer to borrow would be perhaps 1% higher, which adds $1.6 million to the annual cost for no apparent value in return.  The Minister’s answer to this question was equally unpersuasive.

3)Why does the case for support include reference to the associated elements? The project includes proposed office, hotel, and retail elements. These are all good ideas and will no doubt benefit from the relationship to the convention center. But why does it make sense to include the proposed tax revenues from them in the case for the convention center? There are many office and hotel projects being considered in the downtown core—will each one of  them provide a cause for government largesse?

In fact what is lacking from the many public reports by experts is a simple balance sheet showing the cost to taxpayers in comparison with the benefits which cabinet felt would justify them. It is to be hoped that cabinet insisted on such a report as part of its deliberations. It should be made public. HRM council will need a similar report.