The City of Vancouver has the potential to do so much more with its property assets.
I am no expert on the Property Endowment Fund (PEF), which ambiguously is approximately $2.5 billion of indeterminate assets. I know that it is a significant part of Vancouver’s financial profile, and that it is essential to our credit rating. Outside of that, I am very unclear as to its purpose. So, I started to do some basic reading to get up to speed.
Created by TEAM in the in the 1970s, the PEF took those properties and leases owned by the city which were not in the near term intended to be used for municipal purposes (roads, parks or non-market housing sites) and consolidated them. It was operated through the real-estate division on a market basis (meaning they are able to provide a reasonable return as if they were privately held) and held within the fund to grow it into an endowment producing annual revenues. It is also a means to stablize the city’s credit rating, which in turn allows the city to secure the lowest possible borrowing rate for any loans.
As described by the legendary May Brown:
“The city was selling land every year, putting money into general revenue to keep taxes down. Art Phillips said this has got to stop. We’re cannibalizing our land . . . The value of the PEF in those days was $100 million. The rationale was simple: citizens should share in the profits from any increase in land value.”
A fantastic concept, to be sure.
But the PEF has now grown into a fund that has reached this seemingly untouchable status, with the only money utilized out on an annual basis (publicly, at least) is $7 million to offset increases in property taxes.
I feel there is so much more that the City of Vancouver could be doing with such a collection of assets.
