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Doubling down on downtown condos

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After years of premature congratulation over the renewal of Winnipeg's downtown and the Exchange District, there's been a sudden outburst of belated candour. On Wednesday, city council voted 13-3 to support a CentreVenture plan. The new program offers $10,000 incentives to buyers who purchase unsold condos in the Exchange, even though the units were already subsidized at the construction phase. Winnipeg's strategy for urban renewal has been so successful, taxpayers will even bribe you to be a part of it.

CentreVenture president Ross McGowan told the Free Press that "to our knowledge, this has never been done before."

He has a point. After 20 years in public policy, I haven't seen many governments dumb enough or desperate enough to subsidize both the buyer and the seller in the same transaction. No one else has done this before because most city councils would be more inclined to ask for someone's resignation instead.

At a forum on the fate of downtown in May, I was asked if I thought core-area neighbourhoods had finally turned a corner. I replied that the only honest answer was "we can't really say."

Winnipeg has a chronic fear of measurable facts. The mayor raises a cheer whenever new condo or rental units are announced, but real outcomes in terms of occupancy or density get short shrift. Crimestat still doesn't publicly track assaults or stabbings downtown or in any other neighbourhood. No one has ever honestly measured socio-economic returns on millions invested in CentreVenture or similar agencies. Without real data, we're supposed to sit back and trust the latest press release.

Now, the truth is creeping out in city hall's own documentation. Contrast the last few years of cheerleading with the language in Wednesday's report. "Unit sales since (the latest development subsidy's) inception have been lower than expected with many completed units remaining vacant." More: "The development community is skeptical about further investment." More: New policies are needed to focus "as much on developing demand as on subsidizing supply."

Even with that outbreak of realism, other facts were still sidestepped. For example, Coun. Jenny Gerbasi incorrectly described this program as if it's tax-increment financing. It's not that simple. Real TIF programs are supposed to pay for themselves by directly incenting new growth in a city's tax base. Instead, this plan redirects future taxes from projects "approved under the downtown residential development grant program," though many of these projects are already complete or underway.

Also, the public discussion of this plan has focused solely on the city's role in this mess. It's important to note, however, that there are at least three programs at work here, not just two. Many of the condo sites in question already benefit from the provincial tax-increment finance program, which uses future school taxes as an incentive.

To their credit, councillors John Orlikow, Brian Mayes and Russ Wyatt voted against the plan. But any sunny inspiration you may glean from their courage should dim when you consider all the questions that remain unasked and unanswered here.

Start with the fact that this plan is debt-financed. Council approved a $7.8-million increase in CentreVenture's line of credit on Wednesday to fund the incentives and a number of other new Exchange District services. Lesson learned: There isn't sufficient debt room to fix Winnipeg's roads, pools or bridges, but there's plenty of debt room to entice you to buy unsold condos from unlucky developers.

Just seven months ago, CentreVenture was already carrying $18.6 million in liabilities, backed in part by its growing collection of down-market hotels. Just four years earlier, CentreVenture's liabilities were a mere $2.5 million. Question: Has anyone checked lately on the agency's ability to carry or repay this bubbling pot of new public debt? And if we're funding new Exchange services like "area foot patrols" by handing debt room to a city agency, isn't that back-door deficit spending?

Question: If CentreVenture exists to read realty markets before directing millions in market incentives, why hasn't city council called McGowan to account for misjudging the market? What research did CentreVenture do before it bet public dollars on misplaced expectations?

If Exchange District condo demand is not in sync with the overall market, it stands to reason that nearby rentals may face the same challenges. Question: Since taxpayers have invested millions in direct cash subsidies for rental construction, has anyone bothered to check on actual tenant occupancy, satisfaction and turnover in those projects, too?

One last question: Since these concerns aren't a surprise to anyone who was paying attention for the last few years, why are you hearing these questions from me first and not from your elected representatives?

Brian F. Kelcey blogs at stateofthecity.ca.

Republished from the Winnipeg Free Press print edition July 20, 2013 A17

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