Future land agreements should include non-refundable deposit, councillor says

All future land sale agreements between the municipality and a purchaser should include a non-refundable deposit to avoid situations similar to the Canadian Tire deal, a city councillor believes.

During city council’s May 11 regular meeting, city administration presented a report that indicated the City of Moose Jaw spent $111,267.17 on third-party expenses to prepare property on the Moose Jaw Exhibition Grounds for sale to Canadian Tire Real Estate Limited. Specifically, those costs were for land surveys and studies related to environmental, geotechnical, biophysical and engineering designs.

There were no external legal fees related to this part of the project.

This land was not for sale at the time since the exhibition company had a long-term lease with the municipality for that property, said Coun. Brian Swanson, who didn’t share city administration’s confidence that this property “will” sell as the report indicated. Instead, Canadian Tire made an unsolicited bid for those lots. To have serviced that land beforehand would have been impossible without knowing the desired configuration of the lots. Anyone who drives through the Grayson Industrial Park will find lots that are already serviced and have been available for years, he continued. However, the municipality has not recouped any costs for all the inputs it installed.

“I don’t believe any legitimate developer expects to be able to come in and say, ‘I need 2.97 acres and it has to be fully serviced in two weeks,’” Swanson said. “I would hope the one lesson that we learned is at the time of contract acceptance by both parties, there should be a component of a non-refundable deposit.”

At that point, Coun. Chris Warren attempted to call a point of order and accused Swanson of re-fighting an old battle by talking about non-refundable deposits. Warren interrupted Swanson a couple more times before the latter continued speaking.

“I can appreciate the lack of desire to hear this, but the two most recent land deals, we are out $170,000 in costs that would have been part of a non-refundable deposit,” Swanson said.

The main lesson council and city administration should learn, he added, is that they should include a non-refundable deposit in future land contracts.

In the report, city manager Jim Puffalt indicated one lesson the municipality has learned in recent land development projects is it needs to have fully serviced commercial and/or industrial land ready for sale. That would require an advance of funds from the land development fund to ensure properties are fully serviced and servicing costs are known.

“That advance is recouped when the property sells, as will be done in this circumstance (with the Canadian Tire deal),” he wrote.

Substantial delays could affect sales when foundational work such as surveys and studies are not completed, Puffalt continued. The municipality needs to establish sale prices for municipal land, but shouldn’t overlook economic development opportunities if they allow the municipality to present itself as a place to do business. “When that opportunity happens, the previous described work must occur so that sales can be completed in a timely and expedient manner,” he added. When an opportunity presents itself, sometimes “we have to do what we have to do” to make it work, Puffalt said in response to Swanson’s remarks. Delays at the start of a project can be a hindrance, so the municipality should complete service work ahead of time to eliminate those delays.