Council defends business of land sales
City says land business making a little money, even in a downturn, while not harming growth of the private sector
The city’s role in land development is something several council members “won’t apologize for,” though others are touting measures meant to appease private sector competitors. The rest have questions about the 2016 land department annual report, presented to council Monday.
Overall, the opinion was that the department — the target of harsh criticism from private developers and business groups — has long provided a financial windfall and is now doing more than ever to help land sales in all sectors.
“It’s the most open, transparent report we’ve ever had,” said Mayor Ted Clugston following the meeting. “Will (the business sector) be happy with it? They usually want to see more return on investment ... but I think they’ll be happy.”
Council heard that while the office did produce a small $317,000 dividend in 2016, during a citywide slowdown on new home construction, return on investment fell to five per cent — from 55 the year before.
The report states that, considering several years, it is meeting its own guidelines about market share (no more than half) and to examine pricing.
Land department general manager Grant MacKay told council an independent review of the entire inventory begun in 2015 resulted in only a five per cent reduction in one community, Saamis Heights.
Coun. Les Pearson said the department needs to better track development outside Medicine Hat city limits.
Administrators said the current policy is to get independent lot appraisals that factor in near-region pricing — a practice that should find a regional market price.
Coun. Brian Varga wanted to know, if lot sales are so slow — just 25 last year and 40 budgeted sales for 2017, compared to more than 260 on the market — how any new lots could be approved.
MacKay said a longer view is needed, and the mix of lots and price ranges are important in the long lead industry.
About 60 lots planned for Ranchlands 3C could begin selling in 2018.
Planning is occurring now on premium subdivision Riverwalk and mixed-use community Brier Park — both in the north — but actual building is pushed off until at least 2020.
“We’re not selling very much right now, so we’re not looking to plot very much in to the ground right now,” said MacKay.
That strategy is one reason why the office provided a dividend in 2016, despite “historically low” lot sales.
Net revenue for the year was $3.4 million against expenses of $2.4 million, which led to a $317,000 dividend, mainly from reducing capital spending which is a factor in determining a payout.
“(Sales were) grossly less than anticipated; we’re in a slump but we’re in the black,” said Coun. Robert Dumanowski.
“In my time I’ve never seen so many adjustments as we’ve made over the last few years. That’s a good thing.”
The business has $43.3 million over 19 years in dividends that were mostly channelled to large municipal building projects such as the Esplanade and original Family Leisure Centre construction.
Coun. Julie Friesen cited those figures in her defence of the operation.
“I think there’s a darned good reason to be in the land business,” said Friesen. “In truth if you look at the numbers, the (landscape) is very fair.”
Without exact figures from private developers, the department compared new residential development permits on lots sold by the city to all others. That shows a near 50 per cent split over several years.
New figures on lease revenue and internal transfers within city departments were also detailed in the report.