Please do more thorough research before you point fingers at me (a former mayor) before stating the city’s “financial diarrhea,” since 2008, were a direct result of the cost overruns building the South Okanagan Events Centre (Penticton Western News, June 15, letters to the editor – Inability to stick to a budget).
Let me set the record straight. Prior to 2005, council proposed to construct a single ice arena at a guesstimate cost of $39-million. After a review of the proposal, it was decided that the building did not meet the city’s future needs. To construct a larger building, the cost would obviously be higher than $39-million. As you know the city was successful in negotiating a $42-million gift towards the cost of the SOEC. It was known the projected cost of the building would be over that amount. Therefore the additional monies would be raised through an assessment on property taxes over three years — $9 in the first year to a max assessment of $27, based on a property valued at $300,000 (2007 price). This assessment was passed unanimously by council.
So why did the cost of the SOEC escalate to $52-million? Several reasons. Additions were made to the building, such as a Olympic size ice sheet, accommodation of the Summer Hockey School and the Hockey Hall of Fame access through to the convention centre. After construction started, the price of steel and concrete almost doubled. Skilled labour was in short supply, some trades were paid one-third more than their normal wage rate. All these costs were out of the city’s control.
It was suggested that council should have signed a fixed price contract on the SOEC. Had council taken that option the referred escalation in building materials and labour would have bankrupted any contractor. The city would have been left with a skeleton of a building as was the case in Victoria.
Surrounding infrastructure also had to be realigned and rebuilt to accommodate the building. These costs were taken out of the appropriate accounts not out of the annual charge of $27. The city was forced into buying residential properties by the Ministry of Highways, at a cost of $2.2 million (dormitory land). Finger-pointers have failed to look more closely into what happened at city hall after I left office.
After 2008, the Core Review resulted in the firing of top professional management staff at an undisclosed cost. I’ve heard the cost of these firings was $3 million. For the next three years council implemented a “zero” based budget. In order to maintain a “zero” based budget council withdrew funds from city’s reserves. No city can ignore inflationary costs, neither can any household caring for their property and their families. No council should ever maintain a “zero” budget by continuously drawing from its reserves.
This present council has now opted not to collect property taxes on all new construction for 10 years. Who’s going to make up that shortfall in the city’s future budgets?
In conclusion, the cost overrun of the SOEC did not impact the city’s budgets after 2008, the debt will be paid off through the $27 tax assessment and will be paid off next year. Again, this creative budgeting did not prevent the subsequent councils from increasing taxes to accommodate the unavoidable inflationary costs.
Just recently over 3,000 Jehovah Witness delegates occupied the SOEC, a major boost to the city’s economy. According to the Chamber of Commerce the SOEC brings in $32 million annually into our local economy. If the SOEC hadn’t been built back in 2008 with some creative financing, the city could never afford it today, or tomorrow. The SOEC building is now valued at around $90-million, a city asset.
Don’t point fingers at the cost of the SOEC for causing the city’s “financial diarrhea,” point fingers at those who replaced me and wanting to promote themselves to higher political positions by maintaining “zero” based city budgets.