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.
As an example, Gregor Robertson is going to be fighting an uphill battle in finding partnership with his counterparts in Victoria and Ottawa when it comes to building new housing.
Both governments are in horrible financial shape. One has completely removed itself from any responsibility over the housing file, and the other haggles every year about putting up a measly $4 million for winter shelters for the homeless, never mind building permanent new housing.
So here’s a question – why can’t the PEF be used to protect already existing housing, or leverage funds to build long-term affordable housing options in conjunction with the private sector?
What is stopping Mayor Gregor Robertson from saying “If the provincial and federal governments are not going to step up the plate, then it is time for the City of Vancouver to take matter into our own hands and begin to partner with housing non-profits and private developers to get more affordable and social housing into the city.”
Of course those on the right will come forward with claims that a left-of-centre government like Vision Vancouver’s is going to raid the fund without any kind of public accountability, and that the fund needs to be maintained for the future of the city’s finances.
Now don’t get me wrong – I am not advocating for such an arrangement. A significant portion of the PEF must still be maintained as an anchor for the city’s financial health.
But here is where I agree with COPE, believe it or not, in the following suggestion:
“Vancouver City Council…[should] initiate a public process that could include an independent commissioner, or panel, to develop guidelines and policies around the use of the Fund. The process would involve thorough consultation with the public, with the financial community, with academics and with community organizations in developing guidelines.”
Open the fund up to scrutiny, and give those in charge of it a mandate to make the best use of it for major initiatives like housing.
Right now, three councillors and I believe the Mayor comprise of the PEF’s board. In the past, the City Manager and/or the Director of Finance have also held seats with the elected representatives.
Many within the city humourously refer to the PEF as “Bayne’s Bank” in honour of General Manager of Business Planning and Services Ken Bayne. Bayne has an enormous amount of control over the PEF in spite of board oversight. I also hear many rumours regarding the instances where staff finding mysterious pockets of money from time to time to cover shortfalls or fund specific projects.
In a quote to the Georgia Straight a few years back, Bayne said this about the fund:
“It has an expectation that it will earn a return on its investment. When it spends money, it expects to get something back.”
Well, I like that set of criteria, although I am of the mind that this return on investment can’t always be considered in terms of dollars and cents.
It’s time that we start looking at the fund as more than a sacred cow controlled by bureaucrats. It is time that we made the assets of the city work for a broader purpose.
