Does anyone in Red Deer remember
Monarch Place? I'll bet there are plenty of people in City Hall who
do.
Not so much the Alberta Legislature,
where learning from one's mistakes is not established practice. And
therefor, it is entirely possible Red Deer or some other Alberta
municipality will see history repeat itself.
To refresh: Ten years ago, Monarch
Place opened on the city's north side, with 65 assisted living
housing units, most of which were to be subsidized for people with
low incomes and physical disabilities, for people needing
transitional housing, or who were escaping abuse in their homes.
The project, run by Innovative Housing
Society of Canada, received a lot of taxpayer assistance: a $1.3
million Canada-Alberta Affordable Housing grant, $500,000 from the
city of Red Deer, plus significant local contributions of both free
building materials and labour from local businesses and groups.
In all, the society got a $6 million
asset for a lot less than $6 million.
It took years to get this much out of
them, but it appears their business plan was flawed from the start.
They did not anticipate the costs of live-in care for their
residents; they did not plan for less than full continuous occupancy;
there were the usual cost over-runs. They did not even plan for
having to pay municipal taxes.
In short, even with all this taxpayer
help, they said they were losing money from Day One.
So they took advantage of a legal
loophole, and sold the units as rental condos to absentee landlords —
list price: $7 million. Those landlords formed a condo association
and promptly doubled the rents, making them unaffordable for their
residents. Some residents even had their showers closed off.
The loophole said if the original deal
with the granting bodies was broken before 15 years, some of the
money would have to be paid back. In 2008, the city finaly got
$244,000 back of its half-million gift. At the time, the society
still owed the province $1.17 million.
Ten years is a long time in the life of
a government, time enough to forget who screwed up by providing
taxpayers' money to groups with bad business plans.
So the province is ready to do it
again. This time with seniors care.
Presumably, the new business plan has been
given a little more thought. After all, Christenson Communities and
Points West Living have calculated their annual profits per-bed, per
year.
The Monarch Place contract was for 15
years. These new contracts are for 30, renewable every five years.
The Christenson project got $4.7
million in provincial money, for 60 continuing care beds (at
government-established rates), out of 122 units in Timberstone Mews.
Points West got $5.5 million from the
province for 60 beds with the same deal, in a 139-unit project along
Taylor Drive.
The group Public Interest Alberta paid
the fees for a freedom of information search on the projects and
found the Christenson project plans for a 29 per cent annual rate of
return on their 60 government-subsidized beds, while Points West
expects a 25 per cent annual return on theirs.
Do you have a business idea that would
qualify for four or five million in taxpayer grants, where, right in
the application, you specify your expected rates of return — in
this case between 25 and 29 per cent per year? Didn't think so.
Bill Moore Kilgannon, executive
director of Public Interest Alberta doesn't question public spending
on seniors care. He questions why Alberta is allowing these kinds of
profit returns. Ontario doesn't, for instance, he says.
If something over $5,500 a year per bed
is the going rate for a successful grant application, and
the province has already funded 3,780 spaces — that's over $20
million a year going into corporate profits, which taxpayers were
told would be earmarked for seniors care.
Nor has Kilgannon forgotten the lessons
of Monarch Place. What these companies are really getting is a big
real estate asset, for far less than cost. When their mortgages are
paid, they will hold something worth far more than they paid for it.
What happens, say, on some five-year
anniversary on this 30 year contract, when the government has had its
memory wiped clean by elections past and is concerned only with the
next election? Can the owners then say, well, let's just sell this
asset and walk away laughing?
Irene Martin-Lindsay, executive
director of the Alberta Senior Citizens Housing Association paints a
pretty altruistic picture of the arrangements.
She says projects like this are
mixtures of government-subsidized (and price-capped) beds and free
market units, because the more expensive private beds help subsidize the
costs. And really, the companies are just doing this because
providing care for seniors is the right thing to do.
Who are we to question that? Are we taxpayers,
voters, potential residents, or something?
Ten years is a long time to remember,
never mind 30. But I seem to recall the people at Monarch Place
saying pretty much the same thing, when they took the taxpayers money
— and ran.
Follow Greg Neiman's blog at
Readersadvocate.blogspot.ca
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