Fools rush in?

Hey there, time traveller!
This article was published 18/11/2013 (4370 days ago), so information in it may no longer be current.

In Canada’s overheated housing market, prospective homebuyers are sometimes tempted to forgo inspections.

If they find a house that has everything their family needs, they might not bother checking out the foundation or the electrical system, gambling on the odds they’ll have enough money or credit to afford any unforeseen problems.

Starry-eyed couples with more money than sense can be forgiven for making such a move. After all, it’s their money.

The City of Winnipeg, however, is not supposed to behave like an impulsive pair of yuppies in love  with a two-storey home with a view of the park, a newly renovated kitchen and 2,500 square feet of living space.

Cities can’t afford to gamble on real estate. But that appears to be what Winnipeg did when it rushed to purchase the former Canada Post building without first figuring out how much it would cost to renovate this thing into a new headquarters for the Winnipeg Police Service.

Six years ago this fall, the city started wondering whether it was time to find the police a new home. It was 2007, and a plan to repair the crumbling Tyndall-stone exterior of the Public Safety Building was put on hold because the cost of recladding the stone exterior and decanting police into temporary offices elsewhere was rising well above the $21.3-million project budget.

At city hall, police and politicians alike wondered whether it made more sense to build a brand-new HQ instead of fixing the PSB, a six-storey structure erected on Princess Street in 1964.

So early in 2008, the police started poking around Canada Post’s Graham Avenue mail-sorting facility, a 1955 structure made up of a 10-storey office tower and a six-storey warehouse. Canada Post was about to abandon this big block in favour of a new mail-sorting facility near Richardson International Airport.

The police spent 18 months poring over the old Canada Post building, trying to determine whether it would be able to house not just all the officers working at the PSB, but a total of 14 different police divisions. The idea was to beef up the police presence in downtown Winnipeg.

A total of eight different consultants were paid no less than $173,000 to conduct the initial due diligence on the Canada Post building acquisition. Ultimately, it was up to senior city officials to make the call on whether it was a good idea to buy the thing.

In 2009, the sale was on. Winnipeg deputy chief administrative officer Phil Sheegl convinced Canada Post to sole-source the sale of the building to the city for $31.5 million. To sweeten the deal, the city agreed to extend Winnipeg Transit service to Canada Post’s new plant near the airport.

At this point, the entire police headquarters project had a $135-million price tag, which covered the purchase of the building and the renovations.

With the benefit of 20/20 hindsight though, it’s fair to ask how many other prospective buyers would be itching to purchase a 54-year-old, 600,000-square-foot warehouse in the middle of downtown Winnipeg. Old warehouse buildings aren’t exactly hot commodities in a downtown where the only thing more common than under-used old buildings are surface-parking lots created when someone knocks one of these things down.

Nonetheless, city officials felt they had to act — and act fast.

“The opportunity to purchase the Canada Post facility was time-sensitive,” acting chief administrative officer Deepak Joshi and chief financial officer Mike Ruta said last week in a statement.

“The Canada Post Building sits on a full city block in Winnipeg’s downtown. Finding another suitable location in Winnipeg’s downtown would be difficult. This was an opportunity to consolidate the core functions of the (police) into one location. It is about better policing and a safer city.”

The only problem was nobody knew how much it would actually cost to renovate the building. The city decided to buy first and worry about the price tag later — justifying this rush on the basis Canada Post might sell its oversized, obsolete structure to someone else.

Normally, complex government buildings are designed, then costed out and finally built. The new police HQ followed an entirely different construction model — again because of the need to move quickly.

“Had the public service waited for engineering studies and conceptual design work to be completed, our costing estimates would have been more accurate. But the opportunity to purchase the building may no longer have been available,” Joshi and Ruta said in their statement.

Today, the cost of the project stands at $211 million, thanks to problems with the building that were not discovered during the initial due-diligence phase, problems with an initial project design and construction change orders that weren’t covered by a “guaranteed maximum price” that was neither guaranteed nor maximum.

The project’s cost rose past the point where the city would experience any savings over a PSB repair job in 2011, according to a city report.

Now Winnipeg may borrow money to finish the job.

Did the police really need such an elaborate new home? That question is irrelevant, because they’re getting one next year.

But in the interest of avoiding idiotic future moves, Winnipeggers deserve to know why officials were in such a rush to buy a massive gamble of a fixer-upper — with public money on the line.

bartley.kives@freepress.mb.ca