During a meeting of Medicine Hat city council on Monday, Coun. Robert Dumanowski (front) voted against a proposal to list the city-owned former food bank location on S. Railway for a substantial discount, while Coun. Allison Knodel (centre) said it's time to part with the property acquired four years ago.--NEWS PHOTO COLLIN GALLANT
cgallant@medicinehatnews.com@CollinGallant
Staff say other considerations came into play when the city acquired the former food bank location nearly four years ago, but council agreed Monday it should be sold at a loss now to avoid more monetary costs.
The idea to list the building at 532 S. Railway St. – valued at $500,000 in a swap of buildings – for $250,000 was tabled in December as council requested more background on the original purchase and, specifically, why up to $240,000 in potential abatement costs were not better flagged in 2020.
Rochelle Pancoast, the managing director now overseeing the land department, told council that no senior land officials remain from that time, but it appears from files that the former city manager “waived” the need for additional analysis in order to get the deal done.
Considering the whole transaction, including $800,000 in cash to swap the building for the Maple Avenue firehall, which had abatement issues of its own, the deal was moved ahead, she said.
“(Currently) staff still view it as a surplus property that is incurring costs,” she said, citing $18,000 in insurance, basic maintenance and security.
Other options included listing at the higher price, finding a tenant who wouldn’t require remodelling, or offering a subsidized lease for community group use
Council voted 8-1 to engage a private realtor to move the property “as is, where is” for the bare land value.
Coun. Andy McGrogan raised the issue late last year and said the city needs to revisit its policies and have clear goals when acquiring property.
“I think we have to cut our losses and move on,” he said, adding staff time and effort would be spent on a new marketing strategy or managing the building. “(The original deal was) a tradeoff in values … but I think the city should be getting out of owning some of these buildings.”
Coun. Robert Dumanowski told council he “struggled” with administration’s explanation, and argued the building should be held until it would garner a better price.
“I was part of the (original sale) decision, but I’m struggling with this technicality – which puts it nicely – it’s a substantial amount of money,” he said. “This seems hurried … what’s the opportunity to hold it for now and see what interest is?”
Administrators, who say the building is structurally sound but has a bad layout after a series of renovations, has garnered some interest, but no serious offers from the community. A major renovation, likely triggering and potentially expensive demolition, are likely hurting interest.
The city acquired the building in 2020 when it executed a swap and cash deal that allowed the food bank – since rebranded as the Root Cellar – to renovate and set up in the former Maple Avenue fire station, which was also up for sale.
That put $800,000 in municipal coffers, and since the old location was valued at $500,000, the deal met the $1.3-million asking price for the station.
In November, a council committee recommended discounting the S. Railway lot price by the expected demolition cost to move the site toward private-sector redevelopment.
Coun. Shila Sharps said a below market lease to a nonprofit would likely trigger the need for the city to manage the building and invest more money to fix up the building.
Pancoast said a tenant might be able to operate without renovations, but the mechanical system would likely need work soon. A preferential lease rate would also require policy changes, Pancoast said, and holding the property would hurt the land department’s financial performance.
“It reinforces my belief that we should take a loss now, rather than hold on and take a loss later,” said Sharps.
Couns. Allison Knodel, Darren Hirsch and Alison Van Dyke all spoke in favour of the lower listing price.
Mayor Linnsie Clark said the controversy should give the city impetus to better detail its real estate deals.
“Certainly moving forward we want to make sure we’re accurately accounting for any subsidies that are embedded in a purchase price or lease prices and be clear about that,” she said.
