Million-dollar maybe
In 2010 the NDP government announced its support for a new convention centre in Halifax. It would cost $140 million to build, plus $19 million for construction financing, for a total of $159 million. And because the federal government would cover $46 million of the cost, the real cost to Nova Scotians would be only $113 million. The $46 million federal contribution, though, was simply federal money already designated for infrastructure spending in Nova Scotia.
The government explained that the proposed $113 million would amount to an annual cost of $10.2 million when amortized over 25 years, plus three other annual charges---$1.2 million for "facility upgrades," $1.7 million for operations and maintenance costs and $1.1 million to cover expected annual operating losses. So the $10.2 million became $14.2 million each year. Over 25 years this totals $355 million. With the phantom $46 million of federal money, the total would be $401 million.
HRM, incidentally, agreed to split the $14 million annual cost.
The financial return to the province would be from extra spending attributable to the new convention centre---spending by the convention centre itself, by visitors attending conventions and by Nova Scotians who might otherwise have left the province for some of their convention business. The net direct and spinoff benefit of this spending to the province would be $2.7 million a year, according to provincial consultants.
But the annual benefit of $2.7 million doesn't allow for the return we currently receive from the existing convention centre. Given that the proposed new centre was expected to attract about double the number of visitors coming now, the economic benefit of the current centre would be about half the $2.7 million figure, or about $1.4 million. So the province would invest $7.1 million each year for the next 25 years, and it would receive about $1.4 million each year in return, for a loss of $5.7 million a year.
HRM agreed to invest $7.1 million each year. HRM's return from its investment would be in the form of increased municipal taxes from the new development, less the property taxes that would have been generated by the development that would have been constructed were the new centre not to go ahead.
HRM staff estimated that property taxes from the proposed new centre would be roughly $7.7 million per year. Nonetheless, even if the $7.7 million figure is accepted, no allowance was made for the taxes from an alternate development on the site (estimated by HRM at $2 million), nor for HRM's share of the expected annual operating loss (about $1 million) nor for decreases in tax revenues from businesses that would be negatively affected by the new centre (estimated by HRM staff at $0.6 million a year). This reduces the $7.7 million in expected new tax revenue for HRM to $4.1 million ---a loss of $3 million a year.
The province, then, can expect an annual loss of $5.7 million, and HRM $3 million, for a total annual loss of $8.7 million. Over 25 years, that's $217 million--- plus the $46 million federal "contribution" that the province will have to cover in the future for infrastructure spending.
Tim Bousquet presented a solid overview of the situation in The Coast a few weeks ago ("Halifax's Xanadu," March 6). He explored the likelihood that the development would find enough tenants by asking two key real estate experts: Ross Cantwell of Cantwell & Company, and Greg Brewster of Colliers International. Both experts praised the proposed convention centre's developer, Joe Ramia, for trying to bring it off. But both also pointed to the poor prospects for finding enough tenants. In fact, Brewster suggested it might not be that difficult to cut the losses. "It's very easy to leave it unfinished," he said. And may be right.
Why not simply finish the underground parking garage part of the development, cap it off and call for proposals for other developments on the site? We could encourage the kind of development that HRM's downtown needs to regenerate itself, and we'd have a few hundred new parking spaces to boot.
Let's spend a few million on the old convention centre to upgrade it, and pay Mr. Ramia for his work so far on the site. We could save the rest of the $200 million to pay for our schools, our hospitals, and the other public services we desperately need. And perhaps we could direct the $46 million from the federal infrastructure program back to fixing up our infrastructure. —Allan Robertson, Halifax
