Amazon deal is good, but not a city-building project
It’s not a ‘city-building project’ as claimed by mayor but council made right decision
That’s money we don’t have to spend ourselves. So they are creating a public benefit for this. So the rationale for this is quite strong.
The deal Ottawa’s made to help Amazon open a warehouse in the east end is good, even if our politicians’ prostrations at the online retail giant’s feet are unbecoming.
Mayor Jim Watson hung an Amazon.com placard over the city crest on the podium in his office Tuesday as he and a few city councillors announced that the company will have a million-square-foot “fulfilment centre” at Boundary Road and Highway 417. The politicians goofed around with it afterward like it was a giant novelty cheque. There weren’t even any Amazon people there.
At the city council meeting Wednesday, Watson lectured the three councillors (Catherine McKenney, Tobi Nussbaum and Jeff Leiper) who were reluctant to vote to forgive an $800,000 payment from the project’s builder.
Rural councillors voted for a new central library, a new headquarters for Invest Ottawa and a new art gallery, after all, even though there’s (I guess) nothing in those for rural Ottawans.
“These were projects that everybody got behind because they were about city-building,” Watson told the ungrateful downtowners.
This is the wrong argument. The warehouse’s 600 promised jobs will be welcome but they won’t transform Ottawa. This is not Amazon’s “HQ2,” with its promised 50,000 jobs for elite programmers, engineers, quants, marketers, managers and on and on. HQ2 will have a major effect on whatever city gets it; one the size of Ottawa would be redefined.
These will be warehouse jobs with a company whose warehouse jobs are notoriously gruelling.
Paying a bunch of city money for them (either directly or through waived fees) would not be a good idea. But what’s happening here, if you chase all the money through, is that Amazon is subsidizing the city government’s costs, not the other way around.
To help get the warehouse built in Ottawa (and not, say, a couple of highway interchanges east along the 417 in Russell) the city’s letting the firm that’ll own the property and build the building for Amazon delay paying the development charges that would apply to such a project. Montreal-based Broccolini, which already does a lot of business in Ottawa, will also not have to pay the usual interest that comes with such a delay.
Normally the city charges an arbitrary 10-per-cent interest, which is a lot considering how low interest rates are these days, for a deferral lasting a maximum of one year. In this case, it would have meant that $800,000 payment on top of the $8 million in development charges that Broccolini is still to pay.
There’s a quid pro quo. Broccolini will build a bunch of infrastructure out there that under ordinary circumstances the city would have been responsible for — new water pipes, natural-gas and electricity service, and road improvements. The city ballparks those costs at $8.4 million to $9.1 million.
“That’s money we don’t have to spend ourselves,” the city’s urban-planning chief Steve Willis told councillors. “So they are creating a public benefit for this. So the rationale for this is quite strong.”
If the city had played hardball and the Broccolini-Amazon side had done the same, taxpayers would be something like $8 million worse off.
This way, Ottawans get both the money and the infrastructure, which will also support more development in the area (which the city has been actively promoting, without a ton of success until now).
Broccolini presumably gets an acceptable profit from Amazon’s lease and a kick-start for other projects. Amazon, a massive company with money to spend to get what it wants, gets its warehouse built fast.
The city has made similar allowances on interest payments before, albeit with much smaller amounts of money. The Nouvelle-Scène theatre got a free extension on its development charges. So did the Metcalfe Agricultural Society for a new storage building on its fairground. Habitat for Humanity has been given interest-free deferrals on charges that they won’t have to pay at all if the homes they build don’t get flipped into the regular real-estate market for at least 35 years.
City council even waived the interest on the development charges for a single house in Hearts Desire in 2016, when the landowners got caught by a change to the rules on charges for properties where previous buildings had been demolished. That was a $3,100 giveaway to people building one suburban McMansion, for no other reason than that city council felt bad for them.
The Amazon deal has a whole lot more justification: It’s a win for the treasury. The city comes out ahead, and without having to guess at economic impacts or effects on property values or factor in multiplier effects or any fairy dust Amazon might sprinkle over the local economy.