A growing list of business people and taxpayers are making public their opposition to the City of Abbotsford’s plan to give $17.5 Million to the YMCA.
The latest to join the chorus is Don Campbell from Cutting Edge Research who, on Thursday published a stinging rebuke of the decisions on his blog.
We’ve reprinted his post below.
By Funding The YMCA Project The City of Abbotsford Sends Mixed Messages
Do We Need Tax Increases So We Can Hurt Current Abbotsford Businesses?
Over the last 20 years, in my economic research business, I have been blessed to analyze and speak to almost 100 cities across this great nation of ours. This has given me a unique perspective into what we are witnessing in our local Abbotsford City hall right now – and what we are witnessing isn’t very pleasant.
In fact, it is not very often that I witness such wasteful and very short sighted tax payer funds being poured after wasted resources. The proposed $17mil grant to the “Y” project is just another indication of such. It seems like some critical discussions on this proposed “Y” project seem to be completely pushed to the sidelines.
Yes, the “Y” does do good work across the country, it is true. However, is there a better use for our taxpayer funds and Fraser Health Property? Let’s step away from the current discussion and analyze it from a few different perspectives BEFORE we allow the council to literally give away our hard earned tax dollars. Here are some critical components and options to consider that have worked in other regions as they make their decisions.
#1 Attacking The Livelihood of Current Tax Payers
Generally, in this proposal, the city is considering gifting somewhere in the area of $17million into a project of which they will have zero ownership. Then, with this money, the Y will create competition to the City’s own Recreation Centers and Gyms. In addition to creating competition to themselves, they are also creating a tax-payer funded competitor to the great Abbotsford Entrepreneurs who have dug into their own pockets and taken financial risks in order to create private rec centers health/day care/after school programs.
By doing so, the City has decided to pick who wins and who loses in the local business. This gets especially sad when you consider that the current Abbotsford business owners (many of whom sill be forced out of business) all pay taxes/fees/licenses to the city – will the Y be doing so? (see below)
Imagine if the city did this in any other industry (retail, manufacturing, automotive….), there would be a huge outcry. By writing this cheque (no matter how structured), they have decided to give the “Y” a financial advantage that, truthfully, the entrepreneur won’t be able to compete with.
#2 Donating Land When You Are Broke
Let’s take it a bit further shall we: (part #1) – Donation of the property from the ‘struggling/under-funded’ Fraser Health Region:
1. This very valuable land is currently owned/operated by the dramatically underfunded Fraser Health Region. Would it not make sense, if the Health Authority needs capital, to structure a deal where the land is either sold to the Y and the Fraser Health could hold a mortgage on the property and receive affordable payments on this valuable asset and have these payments fund new capital purchases for the hospital (MRI for instance).
OR for ongoing revenue, use a system that is used across the country by many large land owners: Give the “Y” a 50+yr lease with monthly payments to the Fraser Health Authority, thus creating more cash to serve the tax payers of the region while keeping this valuable piece of property on the balance sheet of the Fraser health Authority for use in the future. Why are we just allowing them to throw away an asset that can serve this community for hundreds of years.
2. If this property is donated, does that mean, even if we donate the additional $17mil to the project, that the City of Abbotsford will never receive a DIME in property tax revenue from what will become a HIGH value property? And if so does that make sense to anyone? Free money, free land = no financial gain for the city.
3. If we GIVE away assets such as these, what will we do in the future when our population inevitably ages and needs more senior services/housing/health care. The baby boomer age wave is coming and we are already under-served in this area – should not THIS be the focus of the long term plan for the Fraser Health Region or will they donate other parts of the land to businesses wanting to serve the Fraser health mandate?
Part #2 Gifting of the $17 mill vs Thoughtfully Using it In The City
1. Let’s consider, how many amazing programs could the city create within our current rec centers with some of this money (day care / after school care / helping those in need). All of the programs that the Y is promising to do.
2. What if we used part of this money to upgrade our city owned recreation facilities and thus get VALUE/EQUITY/REVENUE from our $17mil rather than just support someone else’s competing business (and, yes, no matter how you slice it – the Y has a business plan).
3. What if we spent a few Million and ADDED on to the, AESC which is an underperforming asset we already own, to make an amazing gym and offer some of the profitable programs that the Y is proposing. The research exists to show there is a need, or else the ‘Y” wouldn’t want to enter into our community. So why don’t we access that research and strategically add to our asset base. If we are going to spend upwards of $17mill why not add to our asset base and revenue and help an underperforming asset become better.
4. What if we did NOTHING and put the 17mill on the sidelines and let the market (with our amazing Abbotsford entrepreneurs and business owners) step in and fill the void. Keep the 17 Million for what the city is supposed to be spending money on: (for instance Infrastructure improvements, new police building and an overpass at Mt. Lehman that will be able to handle the HUGE volume of traffic that the new Mall is going to attract).
5. Worst of these option, but still better than gifting tax payer money, what if we LENT the money to the Y at rates 2% higher than the city can borrow at. City would then have a guaranteed source of revenue, SOME return on our $17mil and still be able to provide the Y with a hand-up (if that is what we desperately feel we need to do)
Part #3: Other Regions Results
We, in Abbotsford City, don’t have a great reputation for negotiating deals that give the taxpayers a win (No need for me to list them). The first place to start this conversation/negotiations would be to review the results that other regions have experienced with their negotiated deals:
1.Discover exactly how these other deals were structured with the Y. We can start with our close neighbor in Surrey and work out from there. Edmonton has a number of successful “YMCAs”, do we know how they structure those?
2.Speak to the regions financial managers to see if the promised impact have come true over the years of operations or if they have under-performed or cost more than expected in loss of other businesses.
3.Take all of this data and negotiate from a position of power, rather than vacuum. The more knowledge we have the better decisions we can make. We can take the wins and losses of other areas how other regions have negotiated as learning tools and build our own special template.
There simply are too many loose ends, options and questions that need to be addressed before this can become a reality. Both the Fraser Health Region and the City of Abbotsford have a lot to consider before moving forward with tax payer assets. But, simply put, if we are giving away assets, cash and potential income it will be pretty difficult for these 2 bodies to claim they are ‘Under-Funded’ in the future and demand increases in tax-payer dollars.
CUTTING EDGE RESEARCH INC
Don R Campbell
Senior Analyst & Founding Partner