GUELPH – A “fantastic concept” or a “bonanza handout” to “well-off” seniors? Could it be both?
County councillors will consider a plan to build an $88-million supportive seniors community on Wellington Place lands through a strategic planning process.
Ed Starr of SHS Consulting presented a preliminary business plan for the proposed “Continuum of Care” development on March 13 at the County of Wellington’s Information, Heritage and Seniors Committee.
He provided essentially the same presentation for the full county council on March 28.
Starr noted at the March 28 session the 206-unit development for 300 residents represents less than two per cent of the total seniors housing market projected for Wellington County over the next 25 years, leaving ample opportunity for private sector involvement in addressing market needs.
Total capital costs for the concept are estimated at $88,041,732. This includes the development’s soft costs, land cost and hard costs (construction costs), as well as HST. Professional fees for building consultants make up the largest portion of soft costs, estimated at just under $11 million. Hard costs including construction, site servicing, hydro, appliances, furniture and equipment total nearly $62 million.
Capital contributions include a projected $27 million in revenue from life lease units, over $3 million in funding through Canada Mortgage and Housing Corporation programs, and a county land contribution estimated at almost $6.2 million.
That leaves just under $44 million to be raised through debentures, mortgage financing and additional capital contributions.
The study projects the development would operate at a profit of about $243,000 for the first full year of operation. That’s based on about $3.5 million in operating revenues, including just over $3.1 million in rental income and $108,000 for parking. Operating expenses are estimated at about $3,308,800.
“This is not showing a massively profitable development,” said Starr. “It really is a public service.”
Councillor Campbell Cork asked about the potential for the units, built with local tax dollars, ending up being occupied by someone from outside of the county.
“Under human rights legislation, we don’t believe it’s legal to restrict someone from living in a certain location,” explained Starr, who suggested the county could “commence your marketing and application process locally,” before advertising it more widely.
“The marketing doesn’t have to go out past Wellington County,” agreed councilor Mary Lloyd.
“I have a sense that the signs will go up and the units will be full before anything can happen and it will all be the local residents … certainly getting their names on the list first.”
Cork also asked if the $88 million cost estimate was a “best case” or “worst case” scenario.
“I would say its a reasonable estimate based on this type of concept. I would say its fairly realistic,” Starr replied.
Councillor Chris White called the continuum a “fantastic concept” but wanted to know, “How does this affect how the county’s operating?
“In other words, if we move forward on this project what’s the opportunity cost? What aren’t we doing, if we do this? Does this ultimately affect taxes?” asked White.
Starr replied, “We would plan this such that, and in fact it would never be accepted unless, you’re getting a positive annual return.” He predicted there would be “no long-term impact on the county,” as a result of taking on the project.
“In the same breath, if you are borrowing and debenturing, that is a liability in terms of the county’s overall long-term borrowing capacity,” Starr added.
County treasurer Ken DeHart said based on the available information, the project is doable.
“We’ve got an $88 million project. We’ve got $44 million in identified funding sources. So we’re going to have to come up with another nearly $44 million. At this point in time were looking at a $13 million equity contribution and about $30 million worth of debt,” DeHart noted.
“If we issue that kind of debt. We’re going to basically double the county’s existing debt. Again, we’re looking at a positive cash flow, so it should be covered. Amortization period is split between 30 and 50 years. We’re really not that concerned about the term of the mortgage or the term of the debt because really what we’re looking at there is does it cover the life of the asset?”
DeHart continued, “The bigger concern is the magnitude of the project. So it may have a short-term impact on our credit rating, but the fact that it’s generating a positive cash flow and a positive operating profit,” makes debt repayment less of an issue, because “the positive cash flow takes into account paying back the debt.
“So overall I think this is a good concept, but I think the decision is really do you want the service?” said DeHart. “And if you want the service, we’ll figure out the best way to fund it.”
Councillor Doug Breen said he would like to see how the project would cost out based on a public/private partnership model.
“I assume that elsewhere in the province people have done this, or elsewhere in the world, through private/public partnerships,” said Breen.
“Nobody is going to pull money out of their pocket for $250,000 a year in net profit, I realize that, but has anyone done it? And I guess really what I’m asking is what does that do to the purchase price? The only way that you can make that work is to push up the cost of the rental or push up the purchase price so they could get a return on their investment. Essentially if we we’re to do this, as opposed to partnering with the private sector, the only reason we’d be doing it would be to subsidize the cost of the end unit and I’d just like to see what that would look like.”
Councillor Diane Ballantyne said, “I would say that of course the numbers matter, but we’re talking about people here and we’re living in an age, and the common terminology is the grey tsunami, and for us to suggest that we are not going to provide services for our citizens, which is exactly what we exist for, and to provide dignity as well as safety in aging and to provide relief for the sandwich generation which is looking after their aging parents and understand that we have a housing shortage that could be potentially freed up in some regard at least, to answer Ken’s question ‘Do we want to proceed with this project?’ my response to this would be a resounding yes.”
Councillor Allan Alls said, “I agree the surveys show that the … senior population is growing exponentially and will continue to grow in the future. I’d like to see the numbers a little better than we have … the need is there for it.”
“With population projections as they are coming forward and seeing how quickly Wellington County is going to grow, I think unfortunately we’ll probably be under serviced the day it opens because it won’t be big enough,” said Lloyd.
Councillor Dave Anderson asked if the plan allowed for future expansion and Starr replied additional phases could be built into the design and planning.
“When you get into the full detail planning you might want to set aside additional phases for future growth and have that approved as part of this process,” Starr said.
While he agreed the needs exists and continuum is a solid concept, Cork questioned if driving the project is the county’s role.
“I don’t think we’re talking a question of need. I think we know there’s a giant need … but I think we are talking whether this is our role and I think that’s something our strategic session is going to deal with, not today,” said Cork.
However, he added, “The plan envisions county taxpayers handing over a $6 million property for 200 retirement residences and we’re subsidizing a handful of retirees, not necessarily all from Wellington County, to the tune of $30,000 apiece of Wellington County taxpayers’ money.”
Cork continued, “And that six million could well go up to more millions of Wellington County taxpayers’ money if there’s exemptions for property taxes and exemptions for development charges and most of the 200 residents that are in line for this bonanza handout from the county are some of our more well-off residents, residents who in fact don’t need that $30,000 handout. They will do just fine without it. They’re the ones that will find the housing.
“The ones on the waiting list aren’t these people and we’re embarking on this, the largest project in Wellington County history, to serve the well off, at a time in our history when there’s virtually no accommodation on the open market for the less well off, for those making less than $28,000.
“We’re doing this at a time when the private sector is supplying housing such as what’s being proposed here and, in the one instance I’m familiar with, it is being supplied at a cheaper price than is being proposed here.”
Cork pointed out the county could spend $200 million “just in paving needs of our roads.
“And our roads are used by everybody, not just a select 200. So, I would really like for somebody on council to explain to me not the need or how wonderful it will be, but the rationale of handing out this $30,000 each of Wellington County taxpayers’ money mostly to well off retirees who may not even come from Wellington County,” Cork continued.
Warden Kelly Linton said the matter would get a further airing at a strategic planning session set for April 4 at the Hillsburgh Library, beginning at 9am. A second session will be held on April 25 immediately following the monthly county council meeting.
“I think this is a very good discussion we will have on our strategic planning day on April 4,” said Linton.
“I think there’s a clear sense from this council that we want this to address real need out there. We don’t want to replace what the private sector is doing … this is just going to provide some relief for seniors who require affordable housing and different housing options.”
Noting “there obviously has to be more discussion,” Linton stated, “I think all of us recognizes this is a need. All of us recognize this is where the county plays. This is right in our wheelhouse and we want to make sure we’re doing it in partnership with the private sector” and other stakeholders.
“This is something that we want to do that’s in the best interest of the community and obviously we want to do something that’s cost-effective,” Linton continued.
“… The prospect of not moving in this direction really is irresponsible of us because we all know that there is a need and we know that decisions have to be made and that’s why we’re around this horseshoe as leaders of this community and we’ll make those hard decisions one by one,” said the warden.
Starr’s report was accepted for information.
