Cancelled Centennial Building project cost taxpayers potential $2.5M a year in savings

The Progressive Conservative government's cancellation of a major infrastructure project in downtown Fredericton wiped out a potential $2.5 million a year in potential savings for taxpayers, CBC News has learned.

An internal government study from 2015 proposed the province save money by refurbishing Fredericton's Centennial Building and moving some government departments from rented offices into the structure.

The document, prepared under the previous Liberal government, said the departments could move when leases in privately owned buildings expired, starting in 2020.

"This is a low-cost option over the 40 year life of the building," said the Space Utilization Review report, obtained by CBC News through a right-to-information request.

"If the Centennial Building is refurbished, the Province would be in a position to surrender several expensive leases."

The proposal was part of a broader plan to rationalize government office space that would have saved $4 million a year.

With potential savings of $2.5 million just through the Centennial project, the $60-million refurbishment cost would be recouped in 24 years — only partway through the projected 40-year life of the overhauled structure.

Transportation and Infrastructure Minister Bill Oliver acknowledged the forgone savings but said the government's priority when it cancelled the project last December was to lower long-term debt and avoid a credit downgrade by bond rating agencies.

"It was the short term we were really interested in at that point," Oliver said. "We wanted to get some immediate savings. We wanted to address the situation with our creditors."

The decision triggered short-term cancellation costs of $11 million. But removing the project and other major projects worth more than $200 million from the province's books also helped reduce the provincial debt.

Oliver said if not for those cuts, the province's credit rating might have been downgraded, leading to higher interest costs on borrowing money. So the Tories avoided a potentially larger expense, he said.

The Liberals undertook the study as part of a program review by the Liberal government of Brian Gallant, aimed at pruning government spending.

The study said centralizing civil servants in downtown Fredericton "would be more conducive for government meetings and lead to an increase in productivity."

Travel costs would also go down, the report said. Government employees can claim a $6 travel expense each time they travel by car from one government building to another within Fredericton.

On the downside, it said downtown centralization might create a parking crunch.

Selling health centre now off the table

The proposal also included selling the government-owned Victoria Health Centre and moving the Emergency Measures Organization housed there into another government building, saving $800,000.

But the document pointed out that it would require some non-profit groups, renting space in the building at below-market rates, to relocate.

"There may be significant public outcry as some of these organizations are delivering services on behalf of government," the report said.

Oliver said selling the Victoria Health Centre is off the table for now because of that impact.

"We want to do what we can to help those agencies to operate," he said.

Another proposal was to give up a lease in a rented building on Argyle Street and move the Department of Public Safety to government-owned Marysville Place. That move happened under the Liberals and is saving $1.2 million a year, Oliver said.

The report said the review was guided by a policy established by a previous Progressive Conservative government in 2011.

"The intent is to contain the growth of, and over time reduce, the Province's overall space requirements and associated costs," it said. The goal was "cost effective, equitable and timely delivery of office space and related services across government."

The report also said those goals were difficult because there is no central government agency to enforce policies on office space, "resulting in uneven application of the policy, which drives up costs to government."

Private-sector proposal expected

The Liberals announced a modified version of the Centennial plan in January 2017. It included refurbishing two wings of the building and demolishing a third to build a new attached courthouse. It was due to be finished in 2021.

The price tag for that was set at $76 million, which would mean 30 years before the annual savings equalled the cost, still less than the refurbishment's design life.

The demolition of the back wing of the building took place in 2018 but the Blaine Higgs government cancelled the rest of the project after taking office last November.

In the spring, Higgs floated the idea of moving court services out of the 89-year-old Fredericton courthouse and into the Centennial Building.

But in May, the government issued a request for proposals for private-sector redevelopment of the property, with "no inclusion of public money or risk to provincial taxpayers" part of the criteria.

Oliver said a recommendation is expected "in the very near future."