Vaughn Palmer
Sun

VICTORIA – The year began with the B.C. Liberals promising to get a handle on the Vancouver convention centre expansion project.

Yes, they’d promised to do that before. Vowed it could be built for $495 million. Swore up and down that $565 million, then $615 million was the absolute limit.

But this time they were serious. The cabinet minister for the project, Stan Hagen, was as firm as could be. “One number,” he demanded from the project managers.

Not a range. Not another estimate. One number.

Hagen soon learned there is no easy way to firm up costs on a project that was grounded from the outset in the budgetary equivalent of swampland.

The B.C. Liberals launched into the convention centre expansion with no reliable analysis of the cost of building something that size over water. No good sense of rising prices for labour and materials. No firm grasp of the scope of the project, which kept changing — to this day.

They also agreed to an open-ended construction contract, putting provincial taxpayers on the hook for every dollar of rapidly inflating costs.

One number? By the time the legislature convened for the spring session, the best Hagen could say was that the cost would be “in the range of $800 million,” a desperately vague estimate that drew well-deserved sneers.

Halfway through the session, with nothing new to to say about the quest for the one, true number, Hagen announced a shakeup at the board of directors of the convention centre expansion.

Shunted aside, Ken Dobell, Premier Gordon Campbell’s man of many hats. Incoming, David Podmore, fresh from the property development industry. Hagen also appointed a couple of other new directors, saying the government wanted “a little more construction experience” on the board.

Construction experience — on a board overseeing one of the biggest construction projects in the province? Where do the Liberals get these notions?

The session ended and spring gave way to summer, but still the rumours persisted that the Liberals were having to face up to one more overrun on the convention centre project.

Then came the press advisory for Wednesday’s fiscal double header — release of the public accounts for the most recent budget year at 10 a.m., release of an update on the convention centre finances at 11:30 a.m.

The public accounts dropped the first shoe. On April 11 of this year, the cabinet approved a revised budget of $771 million for the convention centre project.

But that decision came after the March 31 end of the budget year, so it was recorded in the public accounts as a “subsequent event.”

Nor was that the end of the saga. For, as Finance Minister Carole Taylor advised reporters, after the public accounts were completed and printed, she’d learned of another upward revision in the convention centre budget.

Call it a subsequent “subsequent event.”

The new number was $883 million, Taylor said. In the space of three months, the budget had climbed by another $112 million, to a level that (recalling Hagen’s earlier circumlocution) was more “in the range” of $900 million.

The provincial share (after deducting fixed contributions from the federal government, Tourism Vancouver and minor sources) is pegged at $541 million, up from $203 million when the project was announced.

Don’t reach for the calculator — the overrun is 167 per cent.

The Liberals had major concerns about how the latest numbers would go down with the public, judging from the way they staged the second of the two press conferences.

Hagen led off with an account of the project’s virtues that fell just short of suggesting it ought to displace the Taj Mahal from the list of the seven new wonders of the world. Podmore followed with a prediction that anyone seeing the finished product will say “Wow! that’s really something.”

Together they promised that the convention centre will be successful, wealth-producing and something British Columbians can embrace with pride.

Neither added “unlike the fast ferries,” but that is surely what they were thinking.

Both insisted Wednesday’s announcement also marked the end of the budget overruns.

Podmore said he locked down the budget by negotiating a fixed price on the main construction contract. It was “a tough negotiation,” he conceded, given that the builder, PCL construction, was holding most of the cards.

But the price was now fixed. “I’m putting my neck on the line here,” he told reporters. “I won’t be back for any more money.”

Almost lost in Wednesday’s announcement was the news that they’ve quietly increased the scope of the project by another $40 million — “enhancements” according to Podmore.

More evidence of the lack of discipline that has characterized this project from the outset. One more reason why I wouldn’t take the new number to the bank just yet.

© The Vancouver Sun 2007

Critic says convention centre overrun is ‘approaching fast-ferry fiasco in magnitude’

Derrick Penner
Province

Work continues Wednesday on the Vancouver convention centre expansion, after latest budget hike. Photograph by : Glenn Baglo, Vancouver Sun

The budget for the Vancouver convention centre expansion project has ballooned to $883.2 million, $83-million higher than the figure the provincial government used as recently as February, Tourism, Sports and Arts Minister Stan Hagen revealed Wednesday.

Hagen said the cost is being driven higher by a challenging construction site, unprecedented cost inflation and a late request to add more artwork and finishings to make it more of a landmark.

Hagen and developer David Podmore, who was hand-picked by the government to take over the project and its dramatically escalating cost in April, unveiled the new figure at a news conference.

The province’s contribution to the project will be $541 million. The rest will be paid for by the federal government and Tourism Vancouver, and with revenue from leasing retail space in the building.

Podmore said the government agreed to his request to increase the project’s budget to add more local artwork and other finishings that will make it a local landmark similar to the new international terminal at Vancouver International Airport.

“When people walk into this building, I tell you, their jaws are going to drop,” Podmore said.

He added that he was “pleased cabinet supported me in a very substantial budget to finish the interior of the building.”

Hagen said the new figure is the project’s final budget. It is more than 10-per-cent higher than the $800 million the province used as recently as February, 43-per-cent higher than the $615 million cited by the province in 2005, and 56-per-cent more than the $565-million budget Premier Gordon Campbell said would be the price tag when he and then federal industry minister David Emerson broke ground on the project in November 2004.

It is 78-per-cent higher than the $495 million cost when the project was first devised prior to 2001.

However, Hagen characterized the expansion project as one of the province’s most important economic-development initiatives, which will generate billions of dollars in new tourism.

He added that the expanded centre has booked 54 events for after it opens in 2009, 29 of which would not have been accommodated in the existing centre, and which will generate $1 billion in economic activity.

“The cost of not building this project would have been far greater,” Hagen said.

Harry Bains, the NDP’s Olympics critic and MLA for Surrey Newton, expressed confidence in Podmore but said Wednesday announcement was meant to deflect attention away from mismanagement of the project.

“These are just another [set] of numbers,” Bains said of the project’s latest budget.

Bains said government ministers, including Campbell, have assured the public that previous budget figures would be the final cost and “I don’t believe the public will trust these numbers.”

“I think what we’ve seen today is a clear display of mismanagement and incompetency of this government and the last board of this [convention centre expansion company],” Bains said.

Bains added he was most disappointed that “no one has been held accountable.”

Maureen Bader, B.C. director of the Canadian Taxpayers Federation, said mismanagement of taxpayer dollars has defined the convention centre expansion from the start, and the cost overrun “is approaching the fast-ferry fiasco in magnitude.”

Podmore said 80 per cent of the new budget is now set, including a $537-million set-price contract that he reached with the expansion’s main contractor, PCL Constructors Westcoast Inc., in late May.

He added that the only major contracts that have not been awarded are an upgrade for the existing Vancouver Convention and Exhibition Centre and final finishing for the new building, which he said will open March 15, 2009.

He said those items will not further increase the cost.

“I’m putting my neck on the line,” Podmore said. “I don’t expect to be back, I don’t want to be back. I won’t be back to ask for more money.”

Podmore said it was always the project corporation’s intent to reach a set-price contract with PCL, which was initially hired as a fee-for-service construction manager.

Negotiations were protracted because of complications with the waterfront site. Anibal Valente, PCL’s vice-president and district manager, said the project was “kind of a moving target” because it was being designed as it was being built.

He said that fixed-price contracts add a natural incentive to complete projects on time because the contractor keeps any money that is saved by finishing early. If it is late, however, Valente said “it will be on our nickel.”

© The Vancouver Sun 2007

City policy also driving renters out of Vancouver to the suburbs, realtors say

Marke Andrews
Sun

Two Vancouver realtors who have completed a survey of sales over the first six months of the year say Vancouver’s moratorium on demolition of rental housing is forcing rents higher and driving renters out of the city and into the suburbs.

David Goodman and Mark Goodman, Macdonald Commercial realtors who co-authored The Goodman Report, note sales of apartment buildings in Vancouver in the first half of 2007 declined 34 per cent from the same period last year, while suburban buildings sales increased by 10 per cent.

In hard numbers, 31 Vancouver buildings sold for $134.3 million this year, compared to 47 buildings worth $208 million in 2006. In the suburbs, 46 buildings worth $138.6 million sold, compared to 42 buildings worth $136.8 million in 2006.

The authors state that Vancouver city council’s moratorium on rental housing demolition until December 31, 2009, penalizes apartment-block owners, the report recommended that they “should be entitled to have the land portion of their properties re-assessed at a lower figure to reflect the implications of this bylaw.”

The report predicts Vancouver’s low vacancy rate for rental apartments will worsen, and “rents on turnover [apartments vacated by existing renters] will escalate well beyond the rate of inflation or the posted CMHC [Canada Mortgage and Housing Corporation] averages.”

In the most recent CMHC statistics, rental vacancy rates in Greater Vancouver in April were 0.8 per cent for bachelor apartments, 0.7 per cent for one-bedroom units, 1.2 per cent for two-bedrooms and 3.2 per cent for three or more bedrooms. There were no breakdowns by neighbourhood, but in 2006 rental rates for a one-bedroom apartment ranged from a low of 0.1 per cent in West Vancouver to three per cent in Surrey. Vancouver’s 2006 vacancy rate was 0.3 per cent.

There were no new apartment buildings in Surrey, Langley, Richmond, Port Coquitlam, Port Moody or West Vancouver. Of the regions outside Vancouver, Burnaby was the busiest area, with 23 buildings sold in the first half of the year, compared to just seven in the first half of 2006. New Westminster (seven buildings), North Vancouver (seven) and Coquitlam (five) were other areas of activity.

David Goodman says it’s a bad time for renters to find accommodation in Vancouver.

“It’s getting increasingly difficult,” said Goodman in an interview. “There are shortages of rental accommodation and not many prospects of new supply coming down the chain.

“There are no incentives that we’re aware of that are going to make it easier for developers to build rentals,” said Goodman, who adds that without a change in density or height allowances, or without allowing developers to build rentals with market housing on the same site, it’s just not economically feasible to build a rentals-only structure.

Vancouver council put the moratorium in place to protect existing rental housing from being torn down to build market housing, but Goodman believes it’s having the opposite effect.

“I see the vacancy rate going from bad to worse and the moratorium will do virtually nothing to enhance the rental supply,” said Goodman.

However, CMHC senior market analyst Robyn Adamache sees some easing of the vacancy rate next year because more condominium projects will be completed. “A lot of people who are living in rentals are waiting for their condos to be finished,” said Adamache.

© The Vancouver Sun 2007

Calgary leads the way, but Vancouver also sets fast pace

Province

OTTAWA — An office-building boom in Alberta pushed investment in non-residential building construction to another record high in the second quarter of the year, Statistics Canada reported yesterday.

Investment from April to June 2007 hit $9.9 billion, up five per cent from the first quarter, extending the upward trend in investment seen for the past four years, the agency said. In constant dollars, investment in non-residential building construction rose 2.1 per cent from the first quarter.

Investment in the commercial component led the way, with a 6.3-per-cent increase to $5.9 billion.

Investment in the institutional component rose 2.4 per cent to $2.6 billion, while investment in the industrial component increased 4.3 per cent to $1.5 billion, the data showed.

Provincially, the biggest second-quarter increase occurred in Alberta, where investment rose 11.1 per cent to $2.3 billion, the 16th consecutive quarterly gain. Ontario was a distant second, with investment increasing 4.1 per cent to $3.6 billion. In both provinces, investment rose in all three components, Statistics Canada said.

“Western Canada’s dynamic economy continued to spark the non-residential sector,” the report says.

“Other contributing factors included a strong labour market, high profits recorded by Canadian corporations, strong consumer demand for durable goods and declining vacancy rates in large urban centres.”

Eighteen of 34 census metropolitan areas recorded gains, the agency said, with the strongest in Calgary where investment rose 17.2 per cent to $1.1 billion.

In B.C., Vancouver and Kelowna both experienced a 6.5-per-cent rise in the value of developments between the first and second quarters of 2007, while investment fell 15.5 per cent in Abbotsford and 2.6 per cent in Victoria.

© The Vancouver Province 2007