A parkade has gone $22M overbudget and it's shaking up city hall in Prince George, B.C.
The cost of a parkade outside city hall in Prince George, B.C., has ballooned from an original budget of $12.6 million in 2018 to a projected $34.1 million in just over two years, shaking up the power structure between elected officials and city management in the process.
Since the cost overruns started being discovered, the city manager who approved the project has departed, one councillor is considering legal action and there are calls for the mayor to step down — regardless of whether or not he was aware of the problems.
"The fact that this was going on for years and the mayor didn't know ... I have a hard time believing that," said Prince George Citizen editor Neil Godbout, who called for Mayor Lyn Hall's resignation in a Wednesday editorial. "And if he didn't know, I would say that's negligence on his part."
But in an interview with CBC, Hall said he was "surprised" by the overruns and "hadn't thought about" resignation. Instead, he said, his focus is on getting the information about what went wrong — and how.
From 'game changer' to financial problem
The story begins with what was supposed to be a good-news story for the city: In December 2017, a private developer announced plans to build high-end condos next to city hall on downtown George Street.
The decision was greeted as the "missing piece of the puzzle" for the city's downtown redevelopment plan, which had long called for people to live in the neighbourhood in order to help sustain more shops and restaurants.
To make the deal happen, the city agreed to build a 290-vehicle underground parkade for the condo, with 130 spots rented to developers at a reduced rate over 50 years and the remainder available to other customers.
Ultimately, council approved the plan, with Hall calling it an "absolute game changer" for the city.
Before long, though, it was clear the final price tag for the parkade would be much higher than $12.6 million. Labour shortages, United States steel tariffs and unanticipated road and sewer work saw the price tag rise, first to $17.9 million, then to $22.5 million by December 2019. With costs still climbing in September 2020, Coun. Brian Skakun demanded a full accounting of why the initial budget estimate had been so wrong.
That report was delivered to council Monday night, and it contained a new revelation: city managers knew the parkade would cost more than $20 million as early as July 2018 but didn't pass that information on to elected officials. In fact, when council gave final approval to the $12.6 million budget in March 2019, senior administrators had already quietly committed to the higher price tag and, later formally approved it without council's knowledge.
'Council was intentionally deceived'
The change was able to go undetected because of a revision made to the city's delegated authority policy, which outlines how much money the city manager can spend on approved projects without seeking council permission.
In May 2019 — after she had been told about the cost overruns but before they were presented to council — then-city manager Kathleen Soltis proposed a policy change that would allow her to approve sums of up to five per cent of the city's operating budget. Under the old rules, she was only allowed to approve $1 million extra per project, but once the new rules came into effect, she was able to greenlight approximately $7 million annually — the bulk of which went to the parkade.
For some elected officials, this revelation was a smoking gun.
During a heated exchange Monday with deputy city manager Ian Wells, Skakun asked repeatedly whether senior administration had committed to a $20 million project and then presented it to council as a $12.6 million one.
He had to ask five times before he finally received the answer: Yes, the administration knew the parkade would cost more than $20 million in the summer of 2018, but did not disclose that information to council when it finalized its approval in March 2019.
"That's appalling," Skakun said. "I'm outraged."
Coun. Terri McConnachie asked whether the changes to delegated authority were proposed purposely, so management could approve the inflated costs without council knowledge and was told that was not the case.
But Coun. Kyle Sampson didn't buy it.
"Council was intentionally deceived," he said. "I think we have a further conversation here that might actually involve a legal opinion."
Legal options considered
Notably absent from the discussion was former city manager Kathleen Soltis, who engineered the parkade deal, proposed the delegated authority changes and ultimately approved the cost overruns. She left her position in September 2020, shortly after Skakun demanded a full accounting of what had gone wrong.
No reason was given for her departure, but council will now be reviewing every discretionary spending decision she made under the more flexible rules. Council has again changed the rules around delegated authority spending decisions, limiting them to $100,000 per project and will be reviewing the decisions quarterly.
Sampson said he still intends to hold a private meeting with council in order "to get all the facts in front of us, and that would include legal advice and options, as well."
Meanwhile, the construction outside city hall continues. As of this week, the expected cost for the parkade, including changes to road, sewer and utilities needed to service it, sits at $34.1 million, nearly triple the original price tag.
Timeline
A timeline of the events surrounding the construction of the George Street Parkade:
Dec.18, 2017: Council approves in principal the construction of the George Street Parkade as part of a deal to bring a 151-unit condominium to the downtown core. The estimated budget is $12.6 million.
July 2018: City administration receives a detailed report from contractors indicating the final cost of the parkade will likely be in excess of $20 million.
March 11, 2019: Council votes to add the parkade to the official financial plan. They are presented with an estimated budget of $12.6 million.
April 29, 2019: City management recommends changes be made to Prince George's delegated authority policy allowing the city manager to approve budget amendments of up to five per cent of the operating budget without seeking council approval. The previous policy limited changes to $1 million per project.
May 13, 2019: Council passes the new delegated authority policy.
September 2019: A new estimated budget of $22.5 million to construct the parkade is presented to senior administration by the contractor. The costs are approved by the city manager under the new delegated authority rules.
Aug. 31, 2020: Council receives a year-end report for 2019 indicating the parkade has gone over the initial $12.6 million budget and is now estimated at $22.5 million. Coun. Brian Skakun passes a motion that a report on the cost overruns be prepared for council.
Sept. 25, 2020: City manager Kathleen Soltis leaves her position in what is described as a "mutual agreement."
November 2020: More management positions are eliminated, including the director of public works and director of infrastrucutre.
Nov. 23, 2020: Council changes delegated authority rules once again. The limit is now $100,000 per project.
Jan. 11, 2020: Council receives a report on the cost overruns and timeline of the George Street Parkade project. They are informed that once road and utility work is factored in, the final cost is estimated at $34.1 million.
