The Purchase of the Kamloops Daily News Building – Strategic Purchase or Waste of Money?

When I first moved to Kamloops in 2001, there were a lot of things that I noticed about the landscape downtown where I chose to live.  The predominance of stucco and bright colours, the general lack of brick buildings with the exception of the courthouse, which was a hostel at the time, the boil water advisory, and the aridness.  There was a quaint ice cream shop and a nightclub that each occupied a corner of a dirt parking lot on the other side of the tracks near Riverside Park.  There was a new condo development in the downtown that I really wanted to move into.  There were also two movie theatres downtown – one that played recent releases and one that played old movies.  This was at the beginning of the process of movie theatres consolidating together in larger facilities with up-to-date sound systems and stadium seating so it was a bit jarring to see two theatres so close together.  Within a month of me moving here, the theatre playing older movies closed and now sits empty, 16 years later.  I’ll come back to this in a bit.

With our recent byelection campaign, I saw IMG_0441numerous candidates take direct aim at the current Council for the purchase of the Kamloops Daily News building and property and the subsequent demolition of the building which is happening right now.  Their points generally centre on their belief that it was a waste of taxpayers’ dollars.  On one hand, I understand where they are coming from – the building and land costs, along with the demolition and construction of the parking lot have been reported to be near $6 million, which is steep, for a parking lot.  While it was meant for the Performing Arts Centre, the voters in the borrowing referendum were not on-board and subsequent efforts to determine what else could be put on the property appear to have been underwhelming.  On the surface, it looks like the City, and taxpayers, might have wasted a bunch of money on this initiative given that the principal purpose of the site has not, and may never come to fruition and right now all there is to show for this is an expensive parking lot.

But was this a waste of taxpayers’ dollars? In order to assess this, it’s important to consider the dollars involved and the value of the City controlling a large portion of land in the downtown.  We can start by looking at what the City gave up by purchasing the site – namely property tax revenue from the site as it is if it were to be continued to be owned by private interests.  Currently, based on assessed values of the site, the City would be generating approximately $70,000 per year in property tax (the site is approximately 0.59 hectares).

What we don’t know if this level of property taxation would stay the same over time.  One clue would be my earlier description of the old movie theatre.  For whatever reasons, this property has not been used in the last 16 years IMG_0447despite being at a relatively prominent location in downtown. It finally sold last month for around $1 million.  According to BC Assessment, the building has an assessed value of $55,700 and the land has a value of $765,000 (0.12 hectares).  Based on commercial taxation rates, the City is only able to generate approximately $11,000 per year off of this property.  Not only does this property not currently provide value to surrounding land uses in terms of traffic generation, it does not maximize the value to the City in terms of taxation.  This is instructive as it is very likely that the Daily News building could continue to depreciate in value if it were not sold causing the City to lose revenue potential.  Old large buildings that are not easily adaptable with potential asbestos are not popular buys and there is decent potential that the building would remain vacant for a long time, collecting graffiti and generally not providing any value to the downtown.

So what can be gained by the City purchasing the property and demolishing the building?  First, we have to remember the City purchased an asset – land.  According to BC Assessment, the land is worth $3.4 million.  So, if the City were to sell the land at that value today, it would end up losing money but it’s not $6 million.  If the City continues to use it for a parking lot, they have the potential of generating $154,000 per year (bIMG_0448ased on $80/stall/month, 160 stalls).  The City could likely sell the land for redevelopment, with the favoured development type being a mixed-use development with ground floor commercial with residential on top.  To provide a comparison, Victoria Landing on the 600 block of Victoria Street is a mixed-use building that includes commercial and residential uses and is the newest and one of the few mixed-use buildings in the downtown.  It has a total assessed value of over $16 million and generates approximately $105,000 per year in taxation (on a 0.11 hectare site – roughly the same size as the old movie theatre property).  It is worth noting that the Kamloops Daily News site is large enough to accommodate 2 – 3 developments similar to Victoria Landing.

So let’s say, as a scenario, the City sells the site for $3.7 million in 5 years time to a developer with a requirement that the site is developed in 2 years and has a similar value to 2.5 times what Victoria Landing is worth in terms of commercial and residential development.  While it may take awhile, as indicated in the table below the City would have earned $6.1 million by 2031 through parking, land sale, and subsequent taxation.

Year Revenue Revenue Type
2018 $153,600 Parking
2019 $153,600 Parking
2020 $153,600 Parking
2021 $153,600 Parking
2022 $153,600 Parking
2023 $3,700,000 Land Sale
2024 $50,468 Property Tax on Land
2025 $50,468 Property Tax on Land
2026 $261,130 Property Tax on Lands and Buildings
2027 $261,130 Property Tax on Lands and Buildings
2028 $261,130 Property Tax on Lands and Buildings
2029 $261,130 Property Tax on Lands and Buildings
2030 $261,130 Property Tax on Lands and Buildings
2031 $261,130 Property Tax on Lands and Buildings
Total $6,135,715  

This is simplistic as it does not take into account inflation, net present values, and changes in tax rates, nor does it take into account any interest paid to borrow for the purchase of the site though being a municipality, the City gets really low interest rates.  It also doesn’t take into account any revitalization tax exemptions that the development might be eligible for.  And you could probably argue that this is a fairly optimistic scenario to think that more than $40 million of investment would go into the property.

Overall though, you get the picture, all is not lost from a financial perspective and the idea that this was a waste of taxpayers’ dollars is at best muddy when thought of over a long enough timeframe.  Obviously, if a private interest had originally purchased the building and land and developed the whole property, that would have been more advantageous from a financial perspective, but the point is that the City didn’t purchase a miscellaneous piece of land with no value, it purchased a piece of land that is an asset that will generate revenue in some form that is likely cover the purchase and demolition costs eventually.

The other thing that must be factored in is that by owning the property, the City is in the driver’s seat in terms of dictating what goes there next, even if they sell the property to a developer, as they can put conditions on the sale.  The City can require that future redevelopment of the land meet certain values such as providing affordable housing, community parking, energy efficiency or some other feature that is beneficial to the community.  While zoning and development permits could enable part of this, the City would have more ability to require these community benefits be met through a purchase and sale agreement.  This is a prominent piece of land with significant potential – if it gets developed in the right way, it can add value to an area of the downtown that could use a lot of love.

In addition to the mixed-use development opportunities, there is also the opportunity to revisit the Performing Art Centre as well as some other potential civic use (i.e. new City Hall perhaps).  While these would not necessarily generate tax revenue, they would help in revitalizing Seymour Street.

We should also remember that this wouldn’t be the first time that the City has sold prominent pieces of real estate in the downtown that was eventually used for significant development.  As I mentioned earlier, theIMG_0443 parking lot that had at one end Scoopz Ice Cream Parlour and the Max Nightclub is now the Sandman Signature Hotel which has $23 million of assessed value and generates over $325,000 of taxation.  There are well over 200 jobs generated from this development as well.

In closing, I understand why people may be concerned about the purchase of the Kamloops Daily News building and land, but from a financial perspective, there is still a strong chance that the City comes out ahead on this in the long-term, provided that the City is smart with how they use the site.  In addition, the control over what happens on this site in the future is a significant benefit and will help the City ensure that the development that eventually does occur is generates value both on the site and in the surrounding downtown area.  I believe quite strongly that there are sometimes good reasons for municipalities to purchase property to speed along redevelopment or meet a community goal, particularly for properties that have strategic importance, such as the Kamloops Daily News Building.  Based on this, I think the City probably did a good thing by purchasing the site and will likely recoup the costs.  The challenge now is to work to extract the most long-term financial and community benefit from this property.

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