Post date: Oct 16, 2013 4:45:24 AM
John has written a few letters to the editor expressing his concern about spending millions of dollars on a new building. A report prepared by County staff leans toward a new building because they limited themselves to only 3 options
#1. Renovate existing building estimated at $26,116,290
#2. Status quo. Cost Minimum $13,600,000,000 over 40 years with no asset value shown for the expenditure
#3. New building cost $32,534,100
It is important to realize the big difference between commercial/government and individuals regarding equity. People want equity to fund their retirement or even leave something to their children. The point is individuals have a limited lifespan and changing needs over time. Governments and business have neither and therefore have no need to build equity. If the county’s goal is building equity they should direct more tax dollars away from providing services to invest in land, gold, stocks, or mutual funds to build up a “retirement” fund.
Homes tend to increase in value but commercial buildings depreciate. Ironically the reason for moving maintenance to the new location is that it is not worth repairing the old building because it has depreciated so much.
Another disadvantage is employees that do not want to commute as far will quit and we will lose their knowledge and experience. Time will be wasted hiring and training new people.
Calgary has a downtown core not because the resource companies have wells downtown, but because the activities of an office are better served by proximity to other offices and suppliers. Employees that have banking or other errands to run can do so during their lunch breaks.
Permits will not be approved faster, roads will not be better maintained, recreation facilities and municipal reserves will not receive more care because the office sits on county owned land versus a leased facility. In fact, money spent creating this legacy to councillors lacking basic financial skills will take away from providing services to county residents.
The disadvantages of spending $32 million for a new county office can be easily listed. The only stated benefit is the good feeling to “...conduct their business in the county...”. $32 million is far too much for a feeling.
Letter #2 evaluates the status Quo option with discounted expense steam:
When evaluating a stream of maintenance costs for the new building a Net Present Value NPV method should be used to compare the costs of old versus new. There are detailed definitions and even tools on the internet for calculating the NPV of investment alternatives.
Using the estimate of $425,000 per year in repair and leasing costs for 40 years, the NPV using a 5% discount rate is just over $7 million. To look at this another way, if the county could sell a 20 acre parcel near Balzac for $8 million and invest that money at 5% the interest and principal could be used to pay for 40 years of upkeep to the existing building and leasing space without any debt or further contribution from taxpayers.
However, we do not have to choose now between 40 years of maintenance and a brand new building. There could be significant changes over the next 5 or 10 years. Perhaps the old building will be damaged in some way or lost to a storm. Besides waiting, there are other alternatives that are not even considered in his evaluation. If there are too many staff for the current location perhaps some of them could work from home. The Provincial and Federal governments have offices all over to better serve their ‘customers’. The county could also consider having some remote offices in towns throughout the county. This alternative would reduce crowding at the county office and allow residents to get county business done with a minimum of travel.
With this glaring lack of financial skill guess it’s no wonder these incumbent councillors let the Rocky View County haul Wheatland’s waste for 5 years after they were aware it was a money losing proposition (http://www.rockyview.ca/Default.aspx?tabid=792&EntryId=521). When it comes time elect county councillors this fall let’s find some that have the financial skills needed to correctly evaluate multi-million dollar proposals for spending YOUR money.
The following image shows the proposed 160 acre "Civic Campus" promoted by some long serving councillors. It not entirely clear, but the estimated cost of $32 million appears to be only for the building labelled Municipal Hall. No estimates have been provided for the other 20 buildings but $3 to 4 million per building would be probable.