Harper Tories privatize nine operating federal buildings

25-year deal puts taxpayers on the hook for untold billions in undefined future rent and maintenance costs

Ottawa (22 August 2007) - The Harper Conservatives have just sold nine operating federal buildings, owned by the taxpayers of Canada, to a private firm called Larco Investments for $630 million less than assessed market value.

In turn, they have agreed to rent the same buildings back from Larco at a cost of $79 million annually, plus open-ended management and maintenance charges, for 25 years. On top of that, they have given Larco an option to extend the leases indefinitely beyond 25 years.

Larco is a Vancouver-based company whose holdings include hotel and casino interests in Las Vegas.

The sale actually involves 16 buildings since one of the nine properties is an Ottawa "complex" that includes seven separate buildings. In total, the Conservatives plan to sell off some 40 federal properties, carrying out an exercise started but not completed by the Martin Liberals before them.

The nine properties sold to Larco include:

  • The Sinclair Centre 757 West Hastings St. in Vancouver;
  • The Government of Canada Building at 401 Burrard St. in Vancouver;
  • The Harry Hays Building at 220-4th Ave. South East in Calgary;
  • Canada Place at 9700 Jasper Ave. in Edmonton;
  • The Joseph Shepard Building at 4900 Yonge St. in Toronto;
  • The Thomas D'Arcy McGee Building at 90 Sparks St. in Ottawa;
  • The Skyline Complex, which includes seven buildings in the Nepean area of Ottawa;
  • The Revenue Canada building at 305 Rene Levesque West in Montreal; and,
  • The Royal Canadian Mounted Police headequarters at 4225 Dorchester West in Montreal.

Michael Fortier, the unelected Tory minister of public works, was unavailable to answer media questions after disclosing the sale this week. The announcement was timed to be overshadowed by the North American leaders' summit in Montebello.

But Fortier did issue a statement claiming that it was "a fair deal for taxpayers" because the $1.64 billion sale price was $400 million higher than the assessed value of the properties.

In fact, the Harperites appear to be deliberately downplaying the real value of the properties to make the sale look like less of a giveaway of public assets than it appears to be.

Independently assessed at $2.3 billion

Contrary to government claims, the buildings were assessed independently by Informetrica at $2.3 billion, meaning that they were sold off at $630 million less than their fair market value, says the The Public Service Alliance of Canada (PSAC). Informetrica is a privately-owned Canadian company specializing in quantitative economic research. It assessed the properties at the request of PSAC.

“This is a give-away of colossal proportion," says PSAC spokesperson Patty Ducharme. "In addition to ceding ownership of nine premium properties, the federal government has, in effect, written a $630 million cheque signed by Canadian taxpayers.”

Informetrica arrived at this conclusion after analyzing details related to the sale of the buildings and information from publicly available sources.

“The structure of the transaction leaves taxpayers responsible for all maintenance and upgrades to the interior of the buildings," Ducharme added. "Tax dollars will ensure that the heating systems, windows, elevators, plumbing and electrical systems, etc. in these newly private buildings will be kept in top shape."

'A sweet deal'

The deal requires taxpayers to pay Larco a management fee based on a percentage of the gross rent paid at each building. It also prohibits Ottawa from buying back the buildings at the end of the lease if the buy-back results in a financial advantage to the federal government.

“This a sweet deal for the new owners and a lemon for taxpayers. It’s a 25-year guarantee of steady profits. Taxpayers will pay extra operating and maintenance costs, and the federal government will be able to buy back the buildings only if taxpayers do not benefit financially,” Ducharme said.

The deal is reminiscent of other spectacular Conservative giveaways to corporate interests at a high cost to taxpayers.

When Brian Mulroney was prime minister, Canada Post had a new heaquarters built in Ottawa by the private sector and then leased it for 99 years at a cost that would have resulted in taxpayers paying many times the original cost of the structure. The deal was so bad it was reversed by the Chretien Liberal government. However, the cost of doing so was never revealed.

Meanwhile, the Ontario government of former Tory Premier Mike Harris leased Highway 407, through the heart of Metro Toronto, to a private consortium, also for 99 years, on terms so outrageous that even the courts have been unable to prevent the operators from raising tolls at will. That lease still has more than 90 years to run.

Robin Mathews, a West Coast writer and professor, says such privatization schemes amount to "legalized theft."

"It is, briefly, the use of laws to further immoral acts, the use of political and other pressure and power to have immoral acts passed ... or to prevent moral laws from being passed... (It) is the active practice of breach of trust outside of any of the laws that presently can be invoked that cover breach of trust," he argues.

Privatization on this scale is an exclusive club. Stephen Harper and his cabinet just became members in good standing.

NUPGE

The National Union of Public and General Employees (NUPGE) is one of Canada's largest labour organizations with over 340,000 members. Our mission is to improve the lives of working families and to build a stronger Canada by ensuring that our common wealth is used for the common good. NUPGE

Issues and Campaigns: