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Turner Drake & Partners Ltd.
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# Wednesday, 29 November 2017

Another few years passed, another resurgence of attention and debate on Nova Scotia’s Capped Assessment Program. Municipalities are once again beating their drum against it, reiterating well-worn criticisms and receiving well-worn rebuttals. The public is largely disinterested, unfortunately, and the Province is loath to make the necessary changes without a strong call to action. The issues are not intuitive, and the impacts are largely invisible, and thus the CAP has immense political inertia.

With governments thankfully enacting open data policies, making publicly funded data publicly accessible, Turner Drake & Partners has now been able to crunch the numbers for more than 140,000 taxable residential assessment accounts in the Halifax Regional Municipality (HRM) to show just how ineffective this public policy has become.

What is the Capped Assessment Program?
The mechanics of the CAP, and the basics of its problems, have been explained many times over. Sources abound, but our own Property Tax professionals have previously covered the topic in our blog, as well as our recent company newsletter.

Normally, assessments are free to track market trends, but in Nova Scotia the CAP limits annual growth in a property’s assessment to inflation. Nova Scotia’s CAP is not like other taxpayer protection measures, such as California’s famous Proposition 13 which limits growth in assessment and total revenue collected. In Nova Scotia, if the total assessment base is reduced because of the CAP, tax rates are simply increased. Based on our analysis for HRM, we see no evidence of an impact on municipal spending. Operating Budgets have grown consistently since 2000:



Therein lies the problem. It is a program that only redistributes the tax burden. Some pay less, but the taxman gets his due, and so others pay more to make up the difference.

What is the Problem?
The problem arises in how the CAP decides who is to pay more. An assessment-based property tax system is not perfect, but one of its strengths is that property values generally correlate well with a household’s ability to pay. Of course this is not always true, and in fact the original purpose of the CAP was to alleviate situations where rural families were being priced off their land because Ethan Hawke bought the island next door. This is a valid issue that deserves a policy response, and we know that the CAP has helped people in this regard. However, by taking a broad based approach to solving a very acute issue, the program has created far more inequity than it was ever able to solve.

The CAP introduces distortion to the assessment system, reallocating tax burden based on occupancy length and tenure type. Most critics frame this issue as being arbitrarily unfair and use maps like the one below to illustrate the random nature of its distortions; houses in the same neighbourhood, with the same services, but carrying different tax burdens.


(Tax Distortion in a Halifax neighbourhood: red overpays, green underpays, sized by magnitude)

The sad truth is that its unfairness is less random, and its benefit more misallocated than most assume. As our Economic Intelligence Unit knows, people tend to sort themselves into similar locations and types of housing depending on their backgrounds, economic status, and life-stage. Thus, the CAP doesn’t just discriminate against certain properties on the basis of eligibility and program mechanics; it by extension discriminates against certain locations and people. This becomes apparent as the map zooms out:


(Tax Distortion in South End Halifax: red overpays, green underpays, sized by magnitude)

Today the CAP is championed as the way to bring “stability, predictability and affordability” to the taxpayers writ-large. In reality, the CAP generally fails to deliver these supposed benefits, while systemically giving the greatest assistance to those that least need it, by taking from those who can least afford it.

Halifax Case Study
To help illustrate the outcomes of the CAP, Turner Drake’s Economic Intelligence Unit compiled data from the Property Valuation Services Corporation’s DataZone for the 2017 assessment year, budget and tax rate data from the Halifax Regional Municipality’s website and Open Data Portal, and socio-economic data from Statistics Canada. Assuming the municipality would uniformly adjust tax rates to offset the 11% increase in assessment under a CAP repeal, our analysis allows us to estimate who is currently paying more and who is paying less, by how much, and whether these outcomes have social or spatial patterns. Every municipality is different, but with HRM comprising the greatest variety of settlement types, 44% of the population, and 55% of the total provincial assessment base, we find the results instructive.

Results
Urban – Spatial patterns in the urban areas are remarkable. Whether your kitchen has a view of the Northwest Arm seems to be the strongest predictor of tax savings, though much of the Peninsula’s west side makes out well. The apartment-heavy downtown and North Dartmouth areas are hit hard, while suburbs (unless recently developed) generally overpay, but just slightly. Aside from a small number of waterfront areas, Bedford and the developing suburbs are not saving much. Sackville and Spryfield are a mixed bag, with recent development in those areas hardest hit.


(Tax Overpay [more red] and Underpay [more blue] – Halifax Peninsula, Central Dartmouth and suburbs)

Rural – Compared to urban areas, rural areas tend to be more random as new construction and sales activity is dispersed while “hot” market areas tend to be highly targeted. The Chebucto Peninsula appears to make out reasonably well overall. The Head of St. Margaret’s Bay area is most favoured, while farther flung locations like Prospect have a more even balance.


(Tax Overpay [more red] and Underpay [more blue] – Head of St. Margaret’s Bay)

Unfortunately for the Eastern Shore, it looks like the shorter the drive to the city, the better your tax relief. Porter’s Lake is a mixed bag, and most communities past Jeddore pay a little bit more. Sheet Harbour is case in point, a very small handful of savers while most overpay mildly. The hardest hit property is a nursing home which pays an additional $5,000 in property taxes under the CAP. In aggregate, the outer rural areas of the municipality pony up an extra $110,000, while the rural areas within city commute distance save nearly $750,000.

Household Median Income – A strong relationship is observed between tax savings and median household income. Thanks to the mechanics of assessments, the more expensive and fast appreciating properties tend to accrue the largest discounts under the CAP. Shockingly, these desirable, expensive areas tend to be occupied by households of higher income. What is truly surprising, however, is the detail and extent to which this relationship holds true. Even within neighbourhoods that generally trail overall median income levels, tax distortions tended to favour the (relatively) higher income areas:


(Tax Distortion and Median Household Income in Fairview: red overpays, green underpays, sized by magnitude, darker grey is higher income, lighter grey is lower)

This relationship varies in strength across the municipality, but only truly breaks down in newly developed areas as new construction starts out uncapped, and tends to attract higher income households due to the premium price of a new home. Spryfield is a case study in getting the worst of both worlds:


(Tax Distortion and Median Household Income in Spryfield: red overpays, green underpays, sized by magnitude, darker grey is higher income, lighter grey is lower)

The level of income detail in rural areas is less fine-grained, but broadly, we see this pattern repeated when comparing the Chebucto Peninsula to the Eastern Shore.

Much Ado About Nothing
Despite the prolific shifting of taxes among tens of thousands of accounts, for most residential rate-payers in HRM the whole program may as well not exist. We estimate 45% of properties have their taxes adjusted (upwards and downward) by less than $200 per year, with the average bill enjoying less than $10 in savings. If we expand our bounds to adjustments of less than $500, we capture approximately 88% of all accounts, though now on average they have to pay $30 extra. Even at the extreme end of this sample, $40 per month is not exactly a significant level of tax relief. For the vast majority of households, the existence of the CAP does little to foster stability, predictability or affordability over an unadulterated assessment system.

Winners and Losers
With the vast middle-ground essentially playing musical chairs with small dollars, the real impacts are felt in the outliers. The maximum overpayment is limited by the artificial inflation of tax rates (roughly 11%), however the maximum discount has no similar limit; it is dependent on local market trends and the length of time a property remains capped. Thus the program tends to siphon tax dollars from a broad base of chronic over-payers and deliver them in considerable amounts to a relatively small number of super-savers.

The 403,000 souls in HRM are organised into just over 173,000 households; groups that occupy a single dwelling unit (usually based on family relations). Most of these pay more under the CAP. About 30% live in apartments that are not eligible for the program, and thus pay rents inflated by higher property taxes. Another 27% occupy eligible residences, but still pay more because the higher tax rate overwhelms their modest assessment discount (or lack of discount if newly purchased). So more than half, 57%, of all households in the municipality are losers, overpaying by an average of $275 per year. The majority of this unfortunate group will always pay more because their residences do not qualify for the program, or their capped assessment will simply not build up a sufficient discount over time. In total, the CAP extracts around $27 million from this bunch – a hefty sum on top of the taxes they fairly pay.


(Capped Properties That Actually Pay More: plenty of misery to go around)

Around $10 million of this is used to benefit land that is likely vacant but classified as residential, while the remainder is redistributed to the winner households, mostly in small amounts. Yet there are some very lucky recipients of this involuntary largess. Tax discounts in excess of 60% are not uncommon, and there is more than one tony street address that receives a larger tax break than the combined saving of entire mobile home parks.

The top 1% of households are afforded an average tax break of $1,500 per year. In total, this group enjoys more than $2.5 million of tax savings. In other words, it’s likely that the top 1% of beneficiaries are receiving around 15% of the total benefit collected by households, and much of this flows to high-income areas.


(Top 1% of Tax Savers: not quite so widely spread)

The System We Want?
Ultimately, tax policy is public policy, and the most fundamental test of public policy is whether it achieves its ends. It is a good and worthy goal that families not be forced from their homes by sudden tax spikes. It is also good that funding for local government be raised in a way that gives households stability, predictability, and affordability. Does the CAP achieve any of this, and to the extent that it does, is it worth the cost?

Property values and ability to pay are closely aligned, but not perfectly. There are always those who will have difficulty when taxes on the former unexpectedly outstrips the latter. They deserve protection, but the CAP is not a precise tool; for every property owner truly assisted, many others receive unneeded relief, or are undeservedly burdened. Beyond this, most households would experience stability and predictability in their property taxes regardless of the CAP, and the majority would actually have improved affordability without it, if only mildly.

So this is the outcome of the CAP, ten years after full implementation. Are we achieving these feeble results at an acceptable cost? Can we only provide peace of mind in taxation through a system that demands someone else’s sacrifice? Is it acceptable that we systematically target people like rural nursing home residents, low income apartment dwellers, first-time home buyers, and downsizing seniors to make those sacrifices? And is it acceptable that we provide only meagre relief to the residents of mobile home parks and housing co-ops, while systematically directing the greatest savings to neighbourhoods with lowest need? Surely we can do better than this.

©2017 Turner Drake & Partners Ltd. all rights reserved. Contains information licensed under the Open Data & Information Government Licence – PVSC & Participating Municipalities, and the Open Government Licence—Halifax. Analysis and conclusions are the product of Turner Drake & Partners Ltd., and do not necessarily reflect the views or endorsement of Property Valuation Services Corporation, the Halifax Regional Municipality, or any other entity. Whilst every effort has been made to ensure the accuracy and completeness of this document, no liability is assumed by Turner Drake & Partners Ltd. for errors or omissions. This is distributed without charge on the understanding that the contents do not render legal, accounting, appraisal or other professional services.

For more information on this analysis, contact Neil Lovitt, our Senior Manager of Planning & Economic Intelligence at 429-1811 ext. 349 (HRM), 1 (800) 567-3033 (toll free), or nlovitt@turnerdrake.com.

Wednesday, 29 November 2017 17:11:44 (Atlantic Standard Time, UTC-04:00)  #    -
Economic Intelligence Unit | Nova Scotia | Planning | Property Tax | Turner Drake
# Wednesday, 25 October 2017

Nova Scotia’s 2018 Preliminary Property Assessments are available on the Property Valuation Service Corporation (PVSC)’s website, and there is a brief window to discuss assessments with PVSC assessors prior to the assessment roll being finalized on December 1st.

Between now and then, the PVSC is encouraging property owners to discuss any errors or provide additional information which may have an impact on the value of their property. The benefits in taking advantage of this opportunity are:


1)     It provides a higher level of certainty in preparing tax budgets for the 2018 fiscal year (for both the owner, and the municipality).


2)     It provides property owners with an opportunity to address concerns with 2018 assessments outside of the formal appeal process, and before the values are finalized and inserted on the official assessment roll.


3)     Owners who are not satisfied with the results of pre-roll consultations can still file a formal appeal when official assessment notices are received in January.

 

Preliminary consultations are typically less formal and more timely (and thus cost effective) than an appeal.  This is especially so because at the “pre-roll” stage, assessors aren’t in the position of defending an assessment that has already been published.  The best time to address an assessment issue is before the problem becomes one.

 

The link to proposed 2018 assessment data is as follows: https://www.pvsc.ca/en/home/findanassessment/searchbyaan.aspx.  Preliminary 2018 assessments are publicly available; owners will need their Assessment Account Number and PIN Access Code (which can be found at the top-right hand corner of their 2017 Assessment Notice) to access the underlying valuation records.


 

Giselle Kakamousias is the Vice-President of Turner Drake’s Property Tax Division.  Her experience negotiating and appealing property assessments is extensive (don’t be fooled by the photo - her calculator is older than some of her colleagues): it is a wise property owner who follows her advice.  If you’d like more of it, she can be reached at (902) 429-1811 ext. 333 or gkakamousias@turnerdrake.com.

Wednesday, 25 October 2017 12:49:18 (Atlantic Daylight Time, UTC-03:00)  #    -
Atlantic Canada | Nova Scotia | Property Tax | Turner Drake
# Friday, 18 August 2017

Of Heaven and Sea and Earth 

Please be suitably impressed by this photo: it has all three of a church, a lighthouse and a commercial heritage building


Five years ago, the Chronicle Herald reported that some of Nova Scotia’s churches were exploring the option of deregistering their buildings’ heritage status under the provincial Heritage Property Act.  Nova Scotia’s churches are often their town’s signature property, featuring architectural details ranging from elaborate stained glass windows to ceilings built by 19th century shipwrights using the same techniques used on the hulls of wooden ships.  But cultural and demographic shifts have reduced demand for churches in the province.  Dwindling congregations mean reduced budgets unable to cope with the high costs of maintaining and operating historic properties.  Deregistration is required for demolition, the only option some congregations saw in the face of financial realities: maintenance requirements outweighed the ability to keep these architectural gems standing.  Recent years have seen other churches amalgamate congregations, keeping and maintaining a single building while selling the rest off for (hopefully sympathetic) redevelopment.

Wolfville United Church as it was

A more literal beacon facing a similar threat of extinction is the Canadian lighthouse.  Changing technologies have rendered redundant their function, if not their cultural attraction.  In May 2008, Parliament passed the Heritage Lighthouse Protection Act, a bill to designate and preserve lighthouses of historic significance.  It took effect in May 2010, only to be followed in June by an announcement declaring almost all Canadian lighthouses surplus, no longer to be maintained by the Coast Guard.  Since then, community groups have become the champions of select historic lighthouses, while the rest, presumably, will suffer the same fate as many an unfortunate ship along our rocky coasts.  

Peggy’s Cove lighthouse, a likely survivor

The foregoing each illustrate the perils of functional obsolescence: when a building’s functionality no longer meets market demands only its cultural significance can protect it – and then only if a champion steps up, e.g. government, community group, or passionate property owner.  Urban heritage properties are particularly susceptible to rising functional obsolescence due to the high value of the land on which they sit: the financial rewards of redevelopment contrast starkly with the economic pitfalls of retaining and maintaining them. Demolition is tempting. 

This year we celebrate Canada 150.  With our history and heritage, for better or worse, on prominent display, we decided to turn our attention to the uphill battle faced by commercial heritage properties in Halifax.

Size Matters

Hemlines are the harbinger of stock prices.  Construction of the tallest skyscraper marks the dawn of recession.  Floorplates sound the death knell of heritage properties?  

Open concept office-in-waiting

Downtown heritage buildings in Atlantic Canada are at an inherent disadvantage versus modern construction because they are simply too small.  Even 30-year-old buildings are feeling the strain imposed by their new, more spacious contemporaries, whose design is able to accommodate demand for open concept offices.  In Halifax, total demand has yet to catch up with new supply. Rental rates are restricted and tenants can afford to move into the new buildings, leaving the last generation of Class A office space struggling to stay relevant – and occupied.  The trend is toward larger floorplates as companies are opting for large, open concept offices with collaborative workspaces and few individual offices.  Downtown Halifax doesn’t have a supply of unused historic warehouses with high ceilings and large floorplates ripe for conversion well suited to modern tastes. Instead, our heritage properties are mainly small buildings, 3-6 storeys high and with floor plates between 1,000 and 6,000 square feet (typically at the lower end of this range). 

Halifax has a few examples of what can be done to overcome this drawback.  Barrington Espace and the RBC Waterside Centre both maintained the façades of a number of adjacent heritage properties while completely overhauling their innards, joining the buildings within to allow for larger floorplates (Saint John’s CentreBeam Place is another example of where this technique was used successfully).  If done carefully, this can present a best of both worlds compromise.  If not, the result may be the Disneyfication of heritage: it looks about right, but there’s no soul.  Either way, it is not an option for detached heritage properties: they are left to find occupants happy with the original floorplates size.

Barrington Espace, RBC Waterside Centre, CentreBeam Place…thanks, Google Street View!

Finding a Fit

Heritage properties need a certain tenant.  The predominant competitor of the heritage office building is the home office: to attract a tenant away from this “free” space, a historic building must provide cachet and interest, and must find a tenant who wants (or needs) both as marketing tools for their business.  Heritage tenants are drawn from a pool of largely creative firms represented by public relations and marketing firms, IT companies, and (interestingly) employment recruiting agencies.  Often, these firms are start-ups; there is a symbiotic relationship between the two, with the heritage property providing an inspiring ambiance (and maybe cheap rent: see below), and the company providing income and life to the building.  What the heritage property has more trouble providing is a flexible workspace that can grow with the company.  When they become too large for their space, they must seek a larger floorplate in a more modern building.  There is a happy medium: mid-sized companies who could occupy an entire heritage property as a single tenant.  But in Atlantic Canada, most companies are either large or small, a by-product of provincial regulatory demands which force companies to “get large or go under” (Atlantic Canada is made up of four small provinces each with their own regulatory requirements for businesses: half the population and half the land area of any other province, but four times the regulations…but this is a topic for another day).         

The Champions

There are three classes of champions for heritage properties: passionate owners (hopefully with deep pockets), community groups who recognize the social benefit of maintaining our built heritage, and governments which either have a measure of both these characteristics or are open to the influence of those who do. 

Heritage property owners must appreciate the unique features of old buildings.  To quote one (you’ll never guess who), they “speak to you in a way new buildings don’t.  There is a sense of calm, a personality.  They have been there for centuries, and if the economics can work, they will be there long after you’ve turned to dust.”  Ah, the economics.  Heritage properties in Halifax do not attract a rental premium as they do in some larger cities, such as Toronto’s trendy Distillery District.  There may be a purchase premium, albeit not driven solely by heritage, but location as well, due to the prime situation some heritage properties enjoy by virtue of having gotten there first.  Halifax’s downtown is distinguished by its waterfront; heritage properties with a connection to it in particular may enjoy a purchase premium, provided this connection is maintained (pause now to be thankful for the public outcry that halted “Harbour Drive” before it started…and hopeful that the redevelopment of its first phase, the Cogswell Interchange, will be successful in repairing the fabric of the area). 

 

Toronto’s Distillery District, as modelled by a pair of junior TDPers

There is a social benefit to heritage properties, usually external to the site itself.  A 2011 study by Place Economics highlighted six areas of positive economic impact attributed to heritage preservation: jobs, property values, heritage tourism, environmental impact, social impact and downtown revitalization.  Heritage properties differentiate cities from one another, providing a unique draw to residents, visitors and immigrants alike.  The world’s most successful cities have vibrant heritage architecture, often interspersed with modern buildings.  Community groups recognize this and fight to preserve historic built environments, but it is often the building owners who fund these broader social benefits by bearing the increased costs of renovation and upkeep.  It is here that governments can play a vital role via heritage preservation policies, but they must take care that they get them right.       

Incentivise or incense?

Halifax Regional Municipality recently commissioned a study to investigate heritage incentives.  However structured, these are a means by which society as a whole, via taxes, can help pay for the social benefit of heritage properties.  Two of the largest pitfalls of which governments must be wary when enacting policies to protect heritage properties both involve the risk of (inadvertently) penalizing property owners. 

The first is the more obvious one, wherein the owner of a protected building is prevented from redeveloping a site to a more lucrative density, diminishing the ability to make money from the property and potentially its market value.  One avenue available to the city is to compensate the property owner for the diminished value by purchasing the air rights, i.e. the space above the building in which they would otherwise be allowed to build, but are prevented by heritage preservation policy.  This could be accomplished either directly, with the municipality retaining ownership of the air rights, or by opening the market for air rights trading, allowing heritage property owners to sell their air rights to developers of non-heritage sites to increase the allowable height on their sites.  (Yes, this has the potential to open another can of worms, but it’s a good theory if the policy is well thought out). 

The second potential pitfall lies in supporting some, but not all heritage properties; such as with the creation of a heritage preservation zone.  While those properties (and their owners) located within the zone stand to benefit from financial incentives offered by the municipality, any heritage properties outside the zone are placed at greater disadvantage.  Still competing against larger modern buildings, they are now on an uneven field against their direct (heritage) competition.  The supported properties have the money to modernize without deficit to their owners’ bottom line, while unsupported properties are further penalized physically and financially. 

For more on heritage rights and wrongs, don’t miss our Summer 2017 newsletter, coming soon to a mailbox near you.  If you are not already subscribed to this informative and gutsy publication, please get in touch with us at 902-429-1811 or tdp@turnerdrake.com.

Alexandra Baird Allen is the Manager of our Economic Intelligence Unit, a position which makes surprisingly good use of her liberal arts degree in history & cultural studies, as well as her expertise in GIS.  For more information on our Economic Intelligence Products, visit our website or contact Alex at 902-429-1811 ext. 323 or abairdallen@turnerdrake.com.

Friday, 18 August 2017 12:21:25 (Atlantic Daylight Time, UTC-03:00)  #    -
Atlantic Canada | Brokerage | Economic Intelligence Unit | New Brunswick | Newfoundland & Labrador | Nova Scotia | Planning | Prince Edward Island | Property Tax | Turner Drake  | Valuation
# Thursday, 01 June 2017

I can honestly say that these 13 weeks have been nothing short of amazing, over this time I have learned so much and gained experience that will help me throughout my life. I expected to come in one day a week for 8 hours a day and job shadow someone. I never thought that I would have my own space to work and be able to do so many things on my own. Every Tuesday morning I would meet with Ashley Urquhart (my boss for the day) and she would tell me the plan. If I had any questions that her door was always open, she was always very upbeat and happy, that made it extremely easy to talk to her.

I got into a morning routine of doing certain jobs, I would do Tenders, Google Analytics, and they even let me post on their social media accounts! I got to tweet about news that I thought was important, that was probably one of the best parts of my Co-Op experience. I never thought that they would give a Co-Op student in high school this much responsibility, I am beyond grateful that they did.  I always had someone close by to help me if I ever needed anything. The person sitting closest to me was Michael McCurdy, he made the day fun and I got to see how to be professional in the workplace and how to talk to clients over the phone. I worked with a great bunch of people that made this experience a lot of fun and helped me learn new things. My aunt, Patti Farewell, has work at Turner Drake & Partners for 26 years and now I see why, it is a very enjoyable place to work and everyone makes you feel welcome. The owner, Mike Turner, would always talk to me and ask me how things are going, along with his wife Verna, who would always make a point of talking to me and saying how nicely I was dressed, they were nice little conversations that made me smile. One day I got to sit in on a support staff meeting, we got lunch and talked about new ideas for TDP, I felt very included and like I was a part of the team.

The Co-Op interview was with Mark Turner (Vice President of the company) it was professional like a “real” interview would be so that I would be prepared for the actual thing when I go to apply for my full time job later in life. He was very nice and made me excited to start, I later got to work on a small project for him.

Right away I was being trained by two people who did exactly what I wanted to do. Ashley Urquhart and Alex Baird Allen were my safety nets throughout this time. The first few things they let me do on my own was, Tenders- finding new jobs and properties for the company to look at. The next job was Google Analytics- finding out how many people looked at the websites and how many people follow TDP’s social media accounts. They also trained me to do a few other jobs that would help me later, Data Mining- updating client’s information, Media Sheets- updating who they send things to. There were also basic jobs such as, photocopying, mail-outs and manuals. After a bit of time went by I was able to post on the company’s twitter. I was given the job of making a new flyer that would later be sent out to clients, I was surprised that they felt like I was doing well enough to be given a project that important. I spent many hours on it and got nothing but positive feedback. It’s going to be weird not seeing these people for a while, I would really like to come back for my grade 12 Co-Op and give it my all once more. Lastly I liked how much responsibility I had. They gave me my own place to work but it was also around people so I never alone. This is definitely a place I would love at work at after I finish school.

Help us prevent youth migration, hire a coop student today!


Thursday, 01 June 2017 16:08:11 (Atlantic Daylight Time, UTC-03:00)  #    -
Turner Drake
# Monday, 08 May 2017


(Image via Global News)

Symptoms of an Election
In the run up to the now transpiring Nova Scotia provincial election, our governing party engaged in the time-honoured tradition of the spending announcement roadshow. A few million for a community centre here, a few million more for an overpass there, culminating finally in the double whammy of a new outpatient facility in suburban Halifax, and toll-free twinning of several sections of highway.

Unlike most spending announcements, the outpatient facility drew immediate criticism. While the highway twinning has started to attract some rightful critique, the patently foolish choice of locating a medical facility in the retail backlands of a dysfunctional industrial park was apparent to many; not the least of which being senior municipal staff who’d advised the Province of these issues months prior. Embarrassingly, the location is a miserable failure when measured against the Province’s own aging population action plan, Shift, which it had announced along with nearly $14 million in funding mere weeks before.

As an aside: of the opportunities for criticism of the outpatient location, and there are many, the purchase price of the land is not a fruitful one. Without the benefit of knowing the particular details of the deal, the $12.00/ft² paid by the Province for the raw land includes the cost to bring the site to a state of development-readiness. Land in this condition elsewhere in Bayers Lake has sold in the neighbourhood of $11.50/ft², so this is hardly the 12,000% markup insinuated by some reporters and rival politicians. (For future reference, comparing purchase price to assessed values for development land – or any real estate for that matter – can be extremely misleading. Media Types: if you’re looking for a real estate angle on a story, give me a call… I know some people.)

A Bad Prognosis if Left Untreated
So here’s the rub. Atlantic Canada, as we’ve described many times, is facing a serious demographic crunch that will constrain income tax revenue to the provinces, and property tax revenue to municipalities (in Nova Scotia, see Canso, Springhill, Hantsport, and Parrsboro for a preview). Given the scale of these trends, immigration is not likely to alleviate this difficulty. This means public investment utilises increasingly precious dollars; long gone is the time where we could rely on growth to overcome poor decisions.

Yet, public capital spending is and will remain one of the most significant factors in the trajectory of our communities. The provision and location of these facilities influences development trends for decades. A new medical facility is not just a site for convenient patient care. It is also a major employer, and consumer of both public and private services. It generates broader impacts; spinoffs that if harnessed properly can enhance the benefits of other facilities, strengthen neighbourhoods and local business, and mitigate future infrastructure costs. A newly twinned highway is not just a safety improvement for the travelling public, it is a half-billion dollars no longer available to be spent on other priorities. We’ve got to get serious, we’ve got to be scrappy, and we have to be careful to maximise the benefits our public spending generates. Opportunities of an equivalent scale from private-sector activity are few and far between.

By narrowly constraining their site selection study (I presume, as this information is also not publicly available), the government has perhaps saved money on the land for the outpatient facility, only to create far greater costs in the form of municipal servicing expenses, diminished economic spinoff, and foregone social benefits. This short-sightedness is not resigned only to our provincial overlords, municipalities large and small consistently miss opportunities to strengthen and improve neighbourhoods or commercial main streets. At best, we have a habit of placing community facilities in a location that only performs well on measures of land price and vehicular accessibility. At worst, it is directed by decades of parochial bickering and ends up in a location agreed to be equally terrible for everyone.


Nice wellness centre you have there, shame about the sidewalk.
(Image via Pictometry ©2015)

Prescription
As the highway twinning issue has shown, no “overwhelming public consensus” is going to emerge on any policy or funding choice other than those promising a free lunch. It is going to take political guts to lead the way: the decisions we need to make are pound-wise at the risk of appearing penny-foolish. Better analysis can help identify the optimal site selection and communicate the wisdom of that choice. A paltry million saved in cheap land will pale in comparison to full lifecycle costs of poorly located public infrastructure. The property taxes generated by that good natured economic development project might never recoup its initial cost. And increasingly, methods are available to help quantify and communicate the broad community and economy strengthening effects that government undertakings can create. A complete approach to site selection and capital project analysis in a time where each dollar counts is the difference between spending decisions that achieve lasting public value instead of fleeting public relations.


Remember, an ounce of prevention is worth a pound of cure, and we have the skills required to evaluate your options in the context they deserve. Neil Lovitt, our Senior Manager of Planning & Economic Intelligence can be reached at 429-1811 ext. 349 (HRM), 1 (800) 567-3033 (toll free), or nlovitt@turnerdrake.com.

Monday, 08 May 2017 10:29:39 (Atlantic Daylight Time, UTC-03:00)  #    -
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