Dear Winnipeg

A Fun Blog About Infrastructure and Municipal Finance

Battle of the Business Titans

Dear Winnipeg,

Last summer, the Osborne-neighbourhood corner store owned by Jung Ja Shin and her son Jason went up in flames at the hands of an arsonist, who had also tried to set three other fires that night. Jason managed to escape from their apartment on the second storey. Jung Ja died of her injuries.

She was remembered as a pillar of the community, as someone who was “so, so, so nice”, and who went above and beyond for every customer who walked in.

So it should not come as a surprise to anyone that her sister-in-law, Hae-Kyung (Heather) Shin, would want to rebuild.

Unfortunately, the E-Mart Grocery Store at 157 Scott St is what’s known in planning speak as “legal non-conforming”. That means it was built before the current zoning and development by-laws went into effect, and so it is allowed to stand even though it doesn’t meet all the current zoning rules. We laypeople would call it “grandfathered”.

But now that is has burned down, whatever gets rebuilt in its place must now conform to the rules.

And a corner store with an apartment on top does not conform.

The current zoning for her property only allows residential uses, and restricts her to one unit per 800 sq ft of land. Since the lot is 1,845 sq ft, that means she can build no more than two residential units. But it also requires a 25 ft front yard setback, and a 25 ft rear yard setback. And since her lot is only 45 ft deep, that means the largest building she can build must be no more than… [checks notes]… negative 5 ft wide.

Ok, so in reality, the zoning rules allow her to build nothing. At least not without going through the process of rezoning and/or variances.

This is not surprising. I’ve written before how our city’s rules have made most of our older neighbourhoods illegal.

But Heather was undeterred. She would go through the process of rezoning the property in order to rebuild and operate the store.

Until she was confronted with the price tag for that process: $20,000.

Now, twenty Gs might not be a big deal to someone building a 42-storey, 395-unit apartment building, but for someone trying to build a small mixed-use building, like a corner store with an apartment on top, it’s a deal-killer. Like most of us, Heather does not have that kind of money.

And to be clear, this isn’t the fee to rezone the property. It’s the fee to APPLY to rezone the property. There is no guarantee she’ll actually get the rezoning she needs. Just a guarantee that she’ll have $20,000 less than she used to.

So Heather did what a lot of us might do in this case: she asked her Councillor for help. Her Councillor was happy to oblige and even went with her to help share her story with the PP&D Committee in the hopes of getting the fee waived.

Unfortunately, that request was denied.

Some committee members raised the fear of setting a precedent, as well as the need for the City to be consistent with development applications in imposing fees and ensuring that all applicants are treated equally.

“What do we say to somebody else who’s in the same position or (others) who start coming on a regular basis (asking for the same thing)? My heart goes out to the family, it’s a sad story. But at the end of the day, the city is a corporation and there’s a fee for services.”

— Councillor (and Mayoral Candidate) Kevin Klein, at the September 8th, 2022 PP&D Standing Committee meeting

Makes sense to me.

Except that, not even a week earlier, we saw this complaint in the media about how the Planning department (allegedly) rebuffed a request from Amazon for a subsidy for their development.

“As a result of the City’s inability to engage in negotiations and the apparent lack of vision for the future of our city, the facility will now be built outside Winnipeg… This is (about) accountability right here. We offer these (tax incentive) programs… consistently for other projects at the City of Winnipeg.”

— also Councillor (and Mayoral Candidate) Kevin Klein, the week before

All applicants treated equally, eh? It looks to me like some applicants are more equal than others.

And I think we all recognize that. Big projects get all the attention, and all the subsidies, while small projects get, well, the shaft. Even though small projects almost always outperform big projects, and even when basic human decency would warrant helping out the small project.

But the reality is that the business case for Heather’s proposal is so unbelievably strong, that the tragic circumstances that brought her to that committee meeting shouldn’t even enter the equation. We should just do her project, and waive her fee. Every. Single. Time.

So I’m going to make that business case for Heather.

Let’s compare the two offers:

Heather Shin

The Ask: $20,000 to waive an application fee

The Deal: Heather would build a mixed-use corner store with apartment.

The Value: Currently, the vacant, charred remains of the building are valued at $140,000. On a lot size of 1,845 sq ft, that’s already producing $75.88/sq ft of value for the City. It’s probably safe to say that a new building here would come in at least at a very conservative $300,000.

Counting only the increase of $160,000 from that $20,000 investment means each additional dollar of new assessment value cost us 12.5 cents. At current tax rates, we’d recoup our full investment in about 16 years.

Jeff Bezos

The Ask: $100 million to build an overpass (estimated cost based on the last one we built)

The Deal: Jeff would build a 250,000 square-foot e-commerce warehouse/distribution centre (apparently).

The Value: Amazon’s two current buildings in the city, a 113,000 sq ft facility at 11 Plymouth St and a 121,000 sq ft facility at 1001 Regent Ave W, are valued at $6.796 million and $13.416 million, on lots of 7.3 acres and 14.0 acres. That’s a value of $21.28/sq ft and $22/sq ft, respectively. We could reasonably expect a third facility to fall in the same range.

Even using the numbers from the more productive Regent facility, a new 250,000 sq ft facility might be valued at $27.719 million and would sit on nearly 29 acres. Even if that land had been initially valued at zero, our $100 million overpass investment would mean that each additional dollar of new assessment value created would have cost us $3.60. At current tax rates, it would take over 412 years to recoup that initial investment. Plus we’d also have the ongoing costs of maintenance and replacement for the overpass.

The verdict

Heather comes out ahead here, and it’s not even close.

Even as an empty burnt-out husk, E-Mart Grocery outperforms the Amazon warehouse by a factor of almost 4.

But that’s not all.

Heather’s store is creating two jobs, for a one-time cost of $10,000 per job created.

Jeff’s warehouse would create a few hundred jobs, although some have claimed as many as 2,000. Even using the higher number, that’s an upfront cost of $50,000 per job created. Plus the ongoing maintenance and eventual replacement costs of the new infrastructure.

Heather’s project is creating one housing unit.

Jeff’s project creates none.

Heather’s small-scale, mixed use project is good for walkability, which is good for transit.

Jeff’s is not.

Heather’s store is here for the long haul. And even if she is forced to close, since it’s small, there are a lot of people here with the means to try again in the same space.

Jeff will shut it all down and leave town if his sales drop by a mere 3%. Then we’re stuck with a massive empty building that only Amazon could use, and an accompanying $100 million infrastructure liability.

Heather’s profits are going to stay in Winnipeg, as she reinvests in her own business, and as she spends her own money at other area businesses, thus multiplying the positive effects to our local economy.

Jeff’s going to send his profits into outer space, literally as far from Winnipeg as it is possible.

I could keep going, but the point is clear: we should be taking Heather’s deal all day long.

Her deal is so good, we should want to do as many of these as we can. Jeff Bezos be damned.

Does this mean I think we should waive Heather’s fees? That she deserves special treatment for this special case?

No. Rather, Heather deserves a zoning regulation that doesn’t make her jump through any of these hoops in the first place. She deserves a development process that provides zero friction for her, and others like her, to just do this as quickly and as often as possible. She deserves a planning system that falls over itself to make this easy, cheap and convenient for her to do what she does to improve her neighbourhood, and our City coffers.

Because that’s not what we have. We have a system where we have to pay a billionaire to even look at us, while we make it illegal for small businesses to do basically anything.

As Hazel Borys has said, we have to legalize small.

We could argue forever about all the nuances that simply must go into the zoning code, but at its core, here’s what we do:

  1. Open up the Zoning By-law in our favourite word processing software.
  2. Search & replace every instance of “parking minimum” with “parking maximum”. Or simply delete any reference to parking minimums. Your choice.
  3. Search & replace every instance of R1 (single-family only) and R2 (single-family or duplex only) with RMU (residential mixed use).
  4. Delete the entire section on Dimensional standards for RMU (the restrictions on setbacks, maximum lot coverage, etc).
  5. Click Save.

We can leave in all the stuff that makes big projects difficult… those do need extra scrutiny.

That’s it! Easy right?

We could do this at the next Council meeting, and then Heather could get to work literally building a stronger, more sustainable, more economically vibrant Winnipeg!

And Jeff, I’m sorry, but for all those reasons, I’m out.

Love,

Elmwood Guy