On February 24, City Administration will present a report to Council recommending that the City continue to service and sell suburban land through our Land Enterprise Development Program. I do not support this.
Currently, the City manages its land holdings through an administrative group called Land Enterprise. Within Land Enterprise is the Enterprise Land Development Program. Established in 2004, this program permits the City to acquire land, potentially service that land, and then sell that land to builders. Some of this land is in our industrial areas, but a lot of it is in new suburban areas. The primary target for land sales is for affordable housing, with lot prices 10% less than market value. 50% of single detached lots are sold to individuals and small builders.
This current approach has a positive goal but is poorly realized in practice. In my view, it includes being in competition with the private sector and may artificially inflate land prices.
Edmontonians are asking Council and Administration to better manage our taxpayer dollars, our projects and our people so that we better serve the needs of our citizens and businesses. To do that, we need to focus on our key roles and responsibilities.
Being in the land development business is not one of those things.
Like many city projects and responsibilities, this is a complex issue but it boils down to a simple question: Should the City continue with land speculation for the next 30 years …. or sell an $85M asset that we own?
Option 1: Keep the land. Administration states that our current approach to managing the assets will return $181M in dividends to the City over the next 30 years, which totals an approximate return of 4.5%. This is based on a few long-term assumptions and we would have to wait for a generation to realize this value.
Option 2: Sell the land. If we sold the land now, we could see $85M added to our revenue. But once the asset is gone, it is gone and we only get this revenue once.
I see another way to maximize the value of the land asset sale.
Option 3: Invest for the future. Sell the land, create a reserve fund, infest the fund, and spend only the investment returns. That way the original land value is preserved forever.
Examples of this third option already exist.
The creation of the EdTel endowment fund (the reserve created when Edmonton Telephones was sold) has paid Edmonton a 7.9% return annually since 1995, and 5.8% annually between 2015 and 2018.
And, in reality, land development is a far more risky investment than financial investments.
I believe the pragmatic and best choice is clear: sell the land, create a reserve, invest the money, and stop competing with the private sector.
We can use the reserve investment returns, which may result in closer to $250M in overall revenue in the same 30 year period administration is assessing, and put that money toward city-building goals guided by strong clear investment and governance.
With this approach, we will be far more successful both today and in the next generation.
Let’s get out of our own way, let’s get out of the way of business, and let’s get our money and investments working smarter for us again.