Repeating our mistakes

Does anyone in Red Deer remember Monarch Place? I’ll bet there are plenty of people in City Hall who do.

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 therefore, it is entirely possible that 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 units 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 overruns.

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 finally got $244,000 back from 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 $4 million or $5 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.

Greg Neiman is a retired Advocate editor. Follow his blog at readersadvocate.blogspot.ca or email greg.neiman.blog@gmail.com.

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