A lack of due diligence from the city of Prince George, B.C. left taxpayers on the hook for millions of dollars in cost overruns in the development of a downtown condo and parkade, an independent legal review has found.
The report from Young Anderson, Barristers and Solicitors was commissioned by mayor and council following revelations that the city's share of construction costs had ballooned from an original budget of $12.6 million in 2018 to a projected $34.1 million in just over two years.
While that news had some city councillors floating the idea of legal action against city managers and prompted an editorial from the local newspaper for the mayor to resign, the review places the blame squarely on the initial decision of city council to sign an agreement with A&T Project Developments without considering other potential partners or adequately protecting itself from cost overruns.
"To put it simply, the increased costs incurred by the city ... directly flow from the decision made by the city very early on to accept all risk associated with the parkade," wrote review lead Sukhbir Manhas, who is also an adjunct professor in municipal law at UBC.
"Having made that fundamental decision, the city saddled itself with the additional costs it incurred."
City over-eager to sign development deal
Manhas identified the city's eagerness to spur downtown development as one of the reasons it may have rushed into the deal. In December 2017, the construction of high-end downtown condo units 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.
In his report, Manhas wrote that the city's "longstanding desire for the revitalization of downtown, and its strong belief that the housing project and parkade were a much-needed development to spur on that revitalization" led them to sign a deal without fully understanding the potential costs it would ultimately incur.
While he also concluded the cost overruns "have not necessarily been unreasonable," Manhas pointed out that the terms of the agreement provided little incentive for the developer to stay on budget, as they would not be the ones paying for the overruns.
Changes at city hall
Manhas also concluded that neither Mayor Lyn Hall nor city council were made aware of the cost overruns in a timely manner. Instead, decisions to approve the inflating budget fell to now-departed city manager Kathleen Soltis, who had been given the authority by council to greenlight $7 million annually without seeking approval, something Manhas called "troubling."
Soltis left her position in September 2020 shortly after council began reviewing her spending decisions, and the city has since changed the rules limiting the amount of spending future city managers are allowed to approve without seeking council permission, something Manhas said should help prevent future problems.
The city is also developing rules to encourage whistleblowers to come forward if they have concerns about how municipal finances are being handled.
Though councillors Brian Skakun and Kyle Sampson have both suggested legal action be pursued against Soltis or other managers, Manhas' review does not comment on whether that would be a viable course of action.
In an interview with CBC, Mayor Lyn Hall said he is committed to implementing all recommendations made by Manhas, including undertaking a detailed review of its overall project management strategy.
A timeline of the events surrounding the construction of the George Street Parkade:
Dec.18, 2017: Council approves in principle 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. The information is not passed on to city council.
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, 2021: 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.
Jan. 25, 2021: Mayor and council commission an independent legal review of the parkade project and announce a whistleblower policy to encourage employees to come forward with concerns.
June 4, 2021: The independent review is published to the city's website.