Tuesday, December 13, 2011

The Sandown Proposal - too much risk is transferred to the local government

I have been meaning to look more closely at this proposal for sometime and it is only the motion yesterday that got me to look closer at it.

The proposal is for the owner to remove 12 acres from the ALR and give the remaining 83 acres to the municipality with it to be agricultural land into perpetuity.   The existing eight lots would be consolidated into the two above lots.  There is nothing to stop the 12 acres of commercial land being further subdivided

I like consolidation of ALR lands into larger properties, it helps protect lands for agriculture into the future.   But as I look at this proposal more closely, I am not convinced that it is not beneficial to North Saanich

  1. The value of the 83 acres is not close to $6,000,000 as suggested.   As a single lot the land would have a value of about $2.5 to $3.0 million.
  2. The addition of 12.05 acres of municipal lands into the ALR is something that should be independent of any proposal.    The Municipality could ask to add this to the ALR at any time.  The municipality is giving up land value by doing this.
  3. Agricultural land owned by the municipality trying to make a profit is not a recipe for success.
  4. The owner gets out of having to deal with all the old buildings on the site.
  5. There is a major transfer of risk from the owner to the District of North Saanich.

So what happens to this land if this proposal does not go ahead?

It could be sold as eight separate lots.   Four of them are 20 acres and the last four combine for 15 acres.   The four small lots are not really very desirable for housing given the proximity to the Pat Bay Highway.  The land also still has the racetrack on it and to remove it has costs.   It does not make it that desirable to buy.  Only one of the 20 acre lots is not encumbered with the detritus of the racetrack.

So how much could you sell this land for?   Selling the three easternmost 20 acre lots is only realistic as a single unit.   Selling the properties off at this time would I suspect bring in net proceeds of about $4.5 to $5 million.  

The proposal would give the owner a 12 acre commercial property, given the shortage of commercial lands in this region it has a lot of value.   I am not sure what the 12 acres would be worth, but my guess is that something in the range of $8,000,000 to $10,000,000 as a bare property.

The proposal gives the owner a $3 to $5.5 million benefit over the status quo.  There is nothing fundamentally wrong with this.  The problem comes for the residents of North Saanich that might be on the hook for costs not expected.  This is a large transfer of risk from the current owner to the District.

North Saanich is in danger of getting into some dangerous territory if it goes ahead with this.   The problem is that I doubt anyone really knows what the land needs to bring it back to agricultural production.  By agreement with the ALC, the District of North Saanich will be responsible for removing all the racetrack infrastructure, it will be responsible for drainage on the property, and it will be responsible soil reclamation.   The District will have to hire an agrologist to oversee this.   I look at the staff report and it does not include costs for the agrologist, soil reclamation or the drainage.

The MOU also covers 95 acres of land and not just the single 83 acre lot.   It would also include the 12.05 acres of new ALR land from the District.  The District of North Saanich property seems to sorely lacking in top soil and would require soil reclamation.  

One interesting aspect of the agreement with the ALC is that the District has agreed that the land would not be used as park, and very specifically meaning no park developments.   What this means is ensuring the public does not make and use trails on the land.

The idea that the District would then manage this land as some form of an agricultural operation such as small allotments for new farmers, larger leases to farmers, community gardens, farmer markets, and educational activities by universities and other organizations.   I am not convinced that the District could recover the costs needed to manage this property.   It also forgoes taxes from the property.

The ideas of how this land would be used after it belongs to the District are much to airy fairy.  With airy fairy ideas, the District will have to remove more of the buildings than if there was someone with a clear idea of what to do with the land.

The net value the land to the District of North Saanich would be about $2,000,000 to $2,500,000.   The net cost liability to the District of Saanich would be in the range of $800,000 to $1,200,000.  I am adding costs for an agrologist, a cost for drainage, a cost for soil recommendation, and a wider variation in the cost of the removing the buildings and track.  There is a benefit to North Saanich but it disappears if there are any problems.   The District has all the risk.

In my opinion a better option would be to allow the consolidation and subdivison without any ownership going to the municipality    The MOU would be between the ALC, District and the owner.   The onus on removing the racetrack and other land improvements would fall on the owner.   The owner would also buy the 12.05 acres of land from North Saanich and bring it into the ALR.   During the time of the requirements of the MOU, the ALC and the District of North Saanich would hold a lien on the property.   When it is all done, the owner would be allowed to sell all of the lands.

Going forward in this way achieves everything North Saanich is looking for at no risk to North Saanich.   The owner would net roughly the same amount of money, but they would take on the risk.
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