Winnipeg Free Press

Winnipeg Free Press (Newspaper) - June 1, 2000, Winnipeg, Manitoba A12 local exclusive report meddling continued from Page a1 Wayne Osiow Mikii Winnipeg free press councillors tried to Bluff the owner of the mandarin building into a better but the Effort was a costly Bluff hurts cites image councillors tried to play one property owner against another by David Obrien in the High stakes game of property it never pays to Bluff with a weak City councillors Learned that when they manufactured an elaborate ruse to play one property owner off another in an Effort to Force a bidding War for civic Busi not Only did it it ended up costing the both in terms of Money and Good Faith with the Pri vate according to an audit into How the City conducts property the incident happened in 1999 when Garth Steek was chair Man of the property and develop ment councillors Mike John Prystanski and Al Golden were the other Mem Bers at the the City had a 10year lease expiring for the first three floors of the mandarin build a modern Structure next door to City the lease had a renewal option that had to be exercised by april but the City was interested in buying the committee successfully negotiated a new lease As an interim measure and then bought the building in july for about Mil lion Good for taxpayers both deals were Good for the tax the audit the problem was the Way they were handled by the politicians on the property staff in the property division had recommended the lease renewal Early in but the committee ordered the department to negotiate lower rental rates As Well As the Purchase of the at the same the civil ser vants were told to determine whether the Bank of Commerce an empty heritage build ing at main could be used for civic the bureaucrats and the owners of the building spent months Dis cussing the even though the committee never intended to move City workers into the old Bank we were advised by Steek that the consideration of the Bank of Commerce building was a employed to induce a reduction in the acquisition costs of the Man Darin the auditors were clearly appalled by the ruse and the involvement of civic politicians in the the request to review the Bank of Commerce building initiated a two month flurry of activity in the civic accommodations division and Winnipeg Hydro one of the Possi ble this was done at a Cost to the bureaucrats were required to evaluate several proposals submitted by the the administration developed specific space plans and estimated costs for leasehold improvements that would be the administration recommended against moving into the heritage but the politicians Laid the matter Over on several occasions to consider locating civic staff in the old Bank the Many changes in direction on the mandarin building negotiations frustrated both administrative staff and the managers of the mandarin and raised questions As to whether the City was bargaining in Good in the the report the Bluff failed and the Price for the mandarin didst go Down and ended up an expensive waste of time that Hurt the cites image As a fair and honest bureaucrats left out of negotiations experts advised but committee told staff to write report backing lease by David Obrien four City councillors met with the owner of an empty heritage build ing two years ago to negotiate a possible lease for civic the meeting took place inside the confederation life 457 main where owner Sandy Shindelman gave the politicians a tour and expounded on the Virtues of locating the councillors looked around and said it All seemed pretty Good to they needed space for the assessment department and the location near City Hall was even the building was a heritage Structure and mov ing into it was the Best Way to save the Deal was the Only problem was that civic bureaucrats in the property Divi Sion we rent when they found out about they didst like the proposal and they recommended against but the committee ordered them to write a report recommending the giving the impression to others that it indeed was a Good it turned out to be a very bad Deal for according to an audit into the Way the City con ducts property the information is contained in Case studies of two lease deals suggesting politicians should stick to Broad policy issues and leave the other work to civic Man the property committee was led at that time by Mike with councillors Dan Vandal and Garth for councillor Pat also on the was Defeated in the last the auditors report that councillors on the property committee met in the building and expressed an opinion on its Ade Quacy prior to the Start of formal conversations were held with the lessor in the absence of the departmental experts advised caution and suggested other but the committee directed the department to bring Back a report with positive recommendations related to the lease and it exerted pressure to expedite the approval process by approving the lease in the report two members of the property Branch asked to have their names removed from the final report because they were concerned with the and the departmental con troller was asked to sign the Finan Cial statement analysis without an Opportunity to perform a review and Only complied because of the need to meet the deadline established by the while the building had an assessed value of million and possibly could have been Pur chased for Council approved a 10month lease that will be Worth nearly not counting leasehold improvements and other the City incurred All the risks of ownership Over those 15 without a cent of equity or even an option to As lease was signed four months before civic staff were ready to move into the build ing a Cost of four City councillors met inside the confederation life building with owner Sandy where they struck a building improvements and the need to buy new furniture it was discovered later that existing furniture fit in the building for some reason Cost another the report three floors of the building Are still the committee directed the administration to negotiate a lease with one particular property owner for one specific the report said in criticizing the the prospective landlord was allowed to make a proposal directly to the committee before the department had an Opportunity to review and advise the com Mittee on the the City did not formally make an offer to Purchase and Dis missed an alternative proposal from the owner that would have Cost less and resulted in a trans Fer of title after 25 the report the report also said the property Coti Mittee approved the lease As will Intel tinned As commit tee members May have these risked sending a message to the Public councillors Are the Deal makers but the behaviour of councillors on the property and development committee was singled out As a major obstacle to conducting land transactions in an fair and consistent the investigation was confined to about 20 land transactions and two leasing deals that occurred in 1998 and 1999 when Mike Oshaughnessy and Garth Steek led the property and development the document said councillors on the committee intimidated and ignored the advice of departmental ordered reports to be written and edited in ways that reflected political set their own prices for Practised Tim consuming and counterproductive bargaining tactics and discussed deals with developers privately outside the committee this scenario resulted in executive policy and then making decisions based on information that was frequently incomplete and even the report decisions were also made in a without policy guidelines on critical issues such As using land sales As eco nomic incentives or to stimulate the development of heritage the politicians forgot that their Job is to govern and set policies for civic whose Job it is to manage and negotiate property the report bureaucrats serve the politicians serve the Public inter the report in their councillors on the committee said they did this out of a belief that their involve ment was necessary to bring these deals to a timely and successful Steek and Oshaughnessy have both complained in the past about an plodding bureaucracy that want equipped to respond quickly to the demands of the private and developers have repeatedly grumbled that the civil servants dont return phone Arent accessible and take forever to make causing proposals to die due to Lack of several development projects of varying sizes Are in peril because of time delays and ineptness on the part of various sources have the auditors stated the politicians were doing More harm than Good by trying to Speed up and circumvent the As Well intentioned As committee members May have these interventions undermined the Confidence and credibility of administrative staff and risked sending a Mes Sage to the Public councillors Are the when councillors take Over negotiations they encourage the Public to see the solution As circumvent ing due this int the first time civic politicians have been criticized for stepping Over the in a 1996 report on a fiasco in the cites assess ment lawyer John Scurfield said political considerations and meddling by councillors often interfered with proper business decisions in the Day today manage ment of civic the auditors concluded in their Scurfield warning was ignored by politicians who seemed to think they knew More about real estate negotiations than the peo ple who were hired to do the with facilities and nearly on third of All property inside City including Homes and buildings seized in tax and thousands of hectares of undeveloped the City is the largest landlord and property manager in As a and because of its jurisdiction Over building licensing and other the City handles thousands of property related matters every in one leasing political interference probably Cost taxpayers about million because of a bad business decision that was rammed through by the property the report in another the committee delayed a increasing the final Cost to the City and upsetting the private sector because of the bargaining tactics the City Doest have a Clear policy on whether surplus land must be put on the open or simply sold to some one who wants to the City is not allowing All members of the Public an equal Opportunity to Purchase its surplus this can ultimately result in the perception of favouritism by the Public the land not being used for its Best purpose from a City the report goes on the failure to solicit offers in some cases from the Public has led to the perception that certain property owners and managers were Given preference Over others and that this May have affected the it has also been reported to us that this practice caused some Mem Bers of the Industry to choose not to do business with the the investigation also revealed some civil servants question the integrity of certain although no names were mentioned in the and staff in the property and land services department also complained about leaks of sensitive information to the development this the leaks circumvents the ability of staff to negotiate fairly and compromises the integrity of real estate management process wave Lowacki Winnipeg free press in even though none of the details in the Complex arrangement had been Council later approved the lease with Little partly because it was never informed of All the details and the report suggests the com Mittee seemed to believe it was doing a Good deed by leasing a heritage even at a Premium but the auditors said there was no reason Why rental space in the building needed to be higher than other the report said councillors were suffering under the myth of the heritage the report didst study the Hamilton 395 main but the City is currently spending close to million to renovate the heritage even though it Doest own it and never despite the 20 years remaining on the which was extended recently As part of a highly controversial the City is not allowing All Mem Bers of the Public an equal Opportunity to Purchase its surplus prop this can ultimately result in the perception of favouritism the auditor recommended that ethical guidelines for councillors and City employees be strengthened to hold both groups More accountable for their the report criticized bureaucrats for sometimes failing in their Job to present politicians with concise reports that outlined All the without Clear the politicians often had no Choice but to do their own analysis and make their own the cites real estate division was described As under staffed and overwhelmed by a rising volume of which raises the probability that mistakes will but in their councillors were constantly demand ing information and reports from interrupting their workdays and slowing Down the report in 1999 workers in the property Branch prepared about 300 or More than one a Day for every working the report also noted that major deals were not vetted by senior bureaucrats such As Stephens or chief financial offi cer Bob the document urged several changes to ensure top officials Are involved in the biggest Stephens said in the report she intended to bolster the control mechanisms and make other changes to ensure the bureaucracy does its Job the Issue of councillors being too involved in land deals first came to a head last when the mayor dumped Garth Steek As chairman of the property seeks personal ethics were never in but Murray said he was disappointed the ambitious councillor for River Heights haunt spent More time formulating tomorrow the bailout ;