3 Examples of the City of Edmonton’s Out-of-Control Spending Problem

Champagne taste on a beer budget.

It’s a term often used in real estate to describe a buyer who wants a more expensive property than he can afford.

With a quick modification, it leads to a potential new slogan for the City of Edmonton:

Champagne taste on a tax-payer-funded-champagne budget.

Perhaps not as catchy, but it’s considerably more accurate as Edmonton has a spending problem ultimately being financed by citizens and businesses.

In this article we’ll present three examples of City Council’s unapologetic obsession with shiny things.

EXHIBIT A: Edmonton Tower

In 2016, the City of Edmonton moved staff into a brand new, class A office building called Edmonton Tower.  They occupy 16 floors in this building, which incidentally just became the highest priced office tower sale in Edmonton’s history when it recently sold for $400M.

To state this another way, the City of Edmonton is leasing the most expensive office tower in the entire city.

Council defended this decision by suggesting the ivory tower most expensive office building in the city would make their operations more efficient.   This is the same logic a Ferrari buyer would use when convincing himself that the car will help him get to work faster.

EXHIBIT B: Recreation Centres

If leasing the most expensive office building in town wasn’t enough, they might as well add a lavish recreation centre to go with it.  Can you imagine how awkward it would be not having caviar to go with the champagne?

When the City built the Meadows Community Recreation Centre 5 years ago, the cost was $138M.  Go back 10 years and the cost of building The Terwillegar Community Recreation Centre was $106M.

This week, City Council just approved a budget for a recreation centre in Lewis Estates for $321M.

In the course of 10 years, the price of a recreation centre has apparently tripled.

NEW NOTE: As respectfully pointed out to us by Councillor Knack, the price of the actual building is $179M, with the remaining $142M required for land servicing and soft costs.  That raises additional questions for another time.

EXHIBIT C – Northeast Edmonton Bus Barn

So we have the expensive office space and an exquisite recreation centre, all that’s missing is the nicest garage (tax-payer) money can buy.

Enter the Kathleen Andrews Traffic Garage in northeast Edmonton.  Designed to house 300 buses and 700 employees, the 500,000 square foot building has a project budget of $210M.

Let’s compare this warehouse, which has a budget of $420 per square foot, to other large industrial properties currently under way or recently built.

AGLC in St Albert just built a 546,000 sq ft logistics centre at an estimated cost of $91.5M ($167 per square foot).

Amazon is building a 1,000,000 sq ft warehouse at at estimated cost of $113M ($113 per square foot).

Ford Motors Distribution Centre, a 400,000 sq ft facility is being built at an estimated cost of $45M ($113 per square foot).

It bears emphasizing: the City of Edmonton is building a warehouse for 3 – 4x the cost per square foot of other industrial properties in the region.

Pretty much the only property more expensive than the bus barn is the office tower that the City is paying the majority of rent on.

NEW NOTE: This property has a lot of bells and whistles that might not be in other industrial buildings.  What first caught our eye about this property, however, was the elaborate and detailed exterior.  Although the purpose of the building is to serve as a warehouse for buses, it is undeniably being built to champage-esque standards.

Most buyers who have champagne tastes and beer budgets typically have to come to reality on what they can afford.  For the City of Edmonton, however, they just keep raising taxes.

Based on the City of Edmonton’s proclivity to spend money on real estate, we’re going to suggest this mentality has permeated all facets of the organization.  We would be quite surprised to hear that an organization leasing the most expensive office space in town and building lavish garages would be somehow fiscally restrained in other departments.

And herein lies a problem with civic politics: there is no official opposition.  This has produced the scenario where a number of councillors are spending money with little to no accountability.  And the few financially responsible councillors are being drowned out by the rest of council who have a spend-first-think-later mentality.

This culture of spending needs to change, and change soon.  If it doesn’t, there won’t be anyone left to pay for the champagne.

 

 

We write a blog on Edmonton’s commercial real estate market every Friday at 11:00 am.  Subscribe to get the posts delivered right to your inbox and we’ll include a free copy of our ebook Leasing Commercial Real Estate in Edmonton.

Our Team

Chad Griffiths

Chad Griffiths

Partner, SIOR, CCIM

Chad is a partner with NAI Commercial Real Estate and focuses on the Greater Edmonton area. Chad entered the industry in 2004 and has completed over 400 commercial transactions with clients ranging from small, local companies to large institutional owners. Chad has been a top 15 producer with NAI Canada-wide since 2013.

Ryan Brown

Ryan Brown

Partner, BCom, SIOR

Ryan is a partner with NAI Commercial Real Estate in Edmonton and is currently ranked nationally as one of NAI's top advisors. Having executed in excess of $100 Million worth of sales transactions and over 2 Million square feet of lease transactions, Ryan has developed a firm understanding of asset evaluation and an aptitude for building design, functionality, and long-term practicality.

Darcie Bouteiller

Darcie Bouteiller

Associate

Darcie is a licensed Commercial Real Estate Agent in the Province of Alberta with a focus on the Edmonton market and its surrounding areas. Darcie accomplishes custom solutions for her clients through her personable nature and results driven attitude. Darcie can help if you are looking to invest in commercial real estate or are looking for representation for a sale or lease transactions.

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