Give It Away 2: Rise of the Boondoggle
Last summer I wrote to you about the ridiculousness of the Starlight Investments Portage Place “deal”.
[Actually, it’s only a “deal” for Starlight… for the taxpayer, it’s just another boondoggle-in-the-making.]
Well, the ridiculousness just hit a new high water mark.
But first, here’s a quick timeline of what’s happened so far:
- August 2019: Sale of Portage Place land approved by all three levels of government. Starlight has 60 days (to the end of October 2019) to conduct its due diligence and confirm they will move forward with the project.
- October 2019: Starlight requests (and receives) an extension to their due diligence period, to February 2020.
[Sorry everyone, this project is going to be harder than we thought! Don’t worry though, we’re committed to you, Winnipeg!]
- February 2020: Starlight requests (and receives) another extension, this time to August 2020.
[Yeah, turns out we might need a bit of public money to make the numbers work… anyone?]
- May 2020: Province announces $28.7 million in tax incentives for Starlight.
[Thanks, that’s great. But we’ll need another $20 million each from the City and the Feds as well…]
- July 14, 2020: City of Winnipeg unwilling to pay $20M towards Portage Place redevelopment, citing a report from the administration that indicates with any contribution over $5 million, the City would not recoup its investment.
- July 15, 2020: Starlight threatens to leave: “To be quite honest, at $5 million, the deal is dead,” says Marni Larkin, spokesperson for Starlight Investments.
[If you don’t give us the money, we’re leaving!]
- July 23, 2020: City of Winnipeg approves $20 million incentive package.
- August 2020: Starlight requests (and receives) another extension, to November 2020, to give the Federal government time to consider their own $20 million contribution. Starlight spokesperson Marni Larkin indicates this will likely be the last extension the company will agree to before deciding to walk away from the deal.
[Last chance, if you don’t give us the money, we’re leaving!]
- November 2020: In the shocker of the year, Starlight requests (and receives) another extension! They now have until March 1, 2021 to commit to the deal.
[Give us the money, we mean it… we’re going to count to three.]
- March 1, 2021: Deadline passes without a commitment from the Feds. The deal is dead…
“Larkin said Starlight simply can’t justify another deadline extension to its shareholders…”
…or is it?
“She said the proposal is not, however, officially dead, since something could still be worked out over the next few days.”
[And three! Ok, that’s it we’re leaving. Look, our hand is on the doorknob. We mean it this time. We’re not joking. We’re totally leaving. Better give us the money or else…]
- March 2, 2021: It is revealed that Starlight now wants more money. Lots more. Instead of the original $20 million contribution from the Feds, they now need $50 million, plus $240 million in federal loans.
[Or else, presumably, they’re leaving?]
It should seem fairly obvious to even the casual observer that our government officials are being played like a cheap piano.
We’re still committed to speaking to Starlight to try to make this project work.— St. Boniface-St. Vital MP Dan Vandal, Federal Minister for Northern Affairs
The ridiculousness knows no bounds!
Let’s break down the numbers, for those following along at home:
$28.7 million tax incentive from the Province
+ $20 million package from the City
+ $50 million grant from the Feds
+ $240 million in loans from the Feds
= $338.7 million in total government dollars
That means out of a $400 million promised investment by Starlight, about 85% of it isn’t actually coming from Starlight.
Of course, it’s still surprising to me how our politicians continue to share the delusion that “if only we just build this one mega-project, then Downtown will be saved!”. Our city history is littered with such attempts going back to the 1960s. Apparently, they’ve learned nothing from our experiences with the Civic Centre, or the Trizec Building, or even the original construction of the actual Portage Place that we somehow think is NOW the solution. Again. [Hat tip to local super-historian Chris Cassidy for all that research!]
But let’s put a pin in that for a moment to think about why it is that a single project of this size which is being 85% paid for with government dollars could be a problem.
Well, first is risk. Betting that kind of taxpayer money on a single pass-fail project is unbelievably risky. Sure, we might hit a home run. But if history is any indication, we will almost certainly strike out instead, leaving taxpayers with a massive bill. I mean, would you put all your money on a single hot stock tip? Or put it all on a single hand of blackjack? Sure, you might hit it big, but…
Second is the fact that even if the Feds acquiesce, we won’t have heard the last of Starlight. What happens when the project is 30% built, and Starlight comes back with an “Oh gosh, gee… it looks like we won’t have enough money to finish. I guess we’ll just have to leave this massive hole in the ground. See ya! I mean, unless the government can provide more money…”
And since we’ll have already anted up $340 million, we’ll have to see their raise with whatever additional dollars they ask for, just so we can “protect our investment” and see this project through to completion.
Essentially, the government investment becomes too large to walk away from. To use another poker analogy, we’re pot-committed.
And third, I have to ask, if the three levels of government are willing to put in so much money, why don’t they just do the whole project themselves? I mean, at those ratios, Starlight’s contribution to the project adds up to less than the purchase price of the land. But the three levels of government already own the land, so why not just cut Starlight out? At least that way, we wouldn’t be taking on all the risk of the downside, with none of the potential for upside, as it is now.
And anyways, shouldn’t we ask why it is that Starlight needs $240 million in loans from the federal government to do this in the first place? Can’t they just go to a bank or an insurance company and get a mortgage like regular people?
Why is it that the banks and insurance companies, you know, private sector money or so-called “smart money”, aren’t touching this? Could it be that they think the risk of not getting their money back is too great? That alone is reason to give this whole thing pause.
But look at what we’re getting for the money, we’ll be told.
Ok, yeah. Let’s look at that.
Starlight is going to build us 500 residential units, for $98.7 million in government subsidies. That’s nearly $200,000 per unit. Throw in the loans and Starlight would be getting over $675,000 per unit in government funds. Does anyone else think that seems, um, excessive?
I’m pretty sure we can get a better deal than that… raise your hand any Winnipegger who would accept $200,000 per unit of free money to build some housing, say a duplex or triplex?
I mean, the very same day we heard about Starlight’s new request, it was announced that the Manitoba Non-Profit Housing Association is going to build 250 housing units with only $2.5 million in government funds. That comes out to only $10,000 per unit. But Starlight can’t possibly make this happen without $200,000 in grants and $475,000 in loans? Per unit?
The lesson we haven’t learned over the past 60 years, but that we should learn today, is that there are no shortcuts to revitalizing Downtown, or any neighbourhood for that matter. There is no single, magic-bullet mega-project that will save the day. Never in the history of Winnipeg has that ever been true.
It will be the work of local business owners putting in their blood, sweat, tears and savings into bettering our city. It will be the work of small developers doing small projects. It will be the work of resident groups, community organizations and individual citizens volunteering at the local hockey rink, park cleanup or community patrol.
And when everyone is pushing in the same direction, including government, it can provide real results surprisingly quickly. After all, that’s how it was done for millennia before we drastically changed our approach after World War II.
Doing it that way provides resilience, spreads risk, offers the flexibility of adjusting course as we progress, and reduces the displacement of current residents. And it creates wealth for the people of Winnipeg rather than simply extracting it to Toronto.
And letting the little guy compete can cost next to nothing, instead of the hundreds of millions of dollars we’re looking at here. And if we are absolutely hell-bent on spending that kind of money, we’ll get a better return by spending it on hundreds of small, local projects instead of one big one. Less risky too.
But despite all that, it’s obvious our elected officials don’t get it yet — why else would they still be entertaining giving hundreds of millions of dollars to some suit from Toronto, while rejecting a request for a measly $36,000 in aid to the Downtown BIZ to help local businesses do the work of building a recovery in the city centre?
It’s not too late to reverse course and kill this stupid, stupid project. Contact your Federal MP to tell them you don’t support allocating government funds to yet another pipe dream mega-project. While you’re at it, let your Councillor and MLA know it too.
Then we can all get to the real work of building a prosperous place together, with no ill-advised shortcuts.