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3. 800
MONTRÉAL ROAD - LAND ACQUISITION - SURPLUS FEDERAL REAL PROPERTY FOR
HOMELESSNESS INITIATIVE 800, CHEMIN
MONTRÉAL – ACQUISITION DE TERRAIN – BIENS IMMOBILIERS FÉDÉRAUX EXCÉDENTAIRES
POUR L'INITIATIVE D'AIDE AUX SANS-ABRI |
Committee
recommendationS
That Council approve the default provisions of the Contribution
Agreement between Her Majesty the Queen in Right of Canada and the City of
Ottawa pertaining to the acquisition by the City of a parcel of vacant land
at 800 Montreal Road from Her Majesty
the Queen in Right of Canada for $1 which default provisions provide for
payment of the value of the land in the event of default at the fair market value at the time of default and
not at the present fair market value of $1.7M.
RecommandationS du comité
Que le Conseil approuve les clauses sur l'inexécution de l'accord de
contribution entre Sa Majesté la Reine du chef du Canada et la Ville d'Ottawa
portant sur l'acquisition par la Ville d'une parcelle de terrain vacant au 800
du chemin Montréal appartenant à Sa Majesté la Reine du chef du Canada pour la
somme de 1 $, lesquelles clauses prévoient, en cas d'inexécution, le
paiement de la juste valeur marchande du terrain au moment de l'inexécution, et
non sa juste valeur marchande actuelle de 1,7 M$.
Documentation
1.
Deputy
City Manager's report, Infrastructure
Services and Community Sustainability, dated 26 April 2011 (ACS2011-COS-CSS-0006)
Report
to/Rapport au:
Planning
Committee
Comité de l’urbanisme
26 April 2011 /
le 26 avril 2011
Submitted by/Soumis par:
Steve Kanellakos, Deputy City
Manager/Directeur municipal adjoint,
City Operations/Opérations municipales
Contact Person/Personne resource : Janice Burelle, Administrator of Housing Services, Community and Social Services Department / Administratrice, Services de Logement, Services sociaux et communautaires (613) 580-2424 x44239, Janice.Burelle@ottawa.ca
REPORT RECOMMENDATION
That Planning
Committee recommend that Council approve the default provisions of the
Contribution Agreement between Her Majesty the Queen in Right of Canada and the
City of Ottawa pertaining to the acquisition by the City of a parcel of vacant
land at 800 Montreal Road from Her
Majesty the Queen in Right of Canada for $1 which default provisions provide
for payment of the value of the land in the event of default at the fair market value at the time of default and
not at the present fair market value of $1.7M.
RECOMMANDATION DU RAPPORT
Que le
Comité de l'urbanisme recommande au Conseil d'approuver les clauses sur
l'inexécution de l'accord de contribution entre Sa Majesté la Reine du chef du
Canada et la Ville d'Ottawa portant sur l'acquisition par la Ville d'une
parcelle de terrain vacant au 800 du chemin Montréal appartenant à Sa Majesté
la Reine du chef du Canada pour la somme de 1 $, lesquelles clauses
prévoient, en cas d'inexécution, le paiement de la juste valeur marchande du
terrain au moment de l'inexécution, et non sa juste valeur marchande actuelle
de 1,7 M$.
BACKGROUND
On September 8, 2010, Community and Protective
Services Committee and Council delegated authority to the Manager of Housing
Services and the Manager of Realty Services to apply to the Surplus Federal Real Property for Homelessness Initiative (SFRPHI) to
acquire a parcel of vacant land at 800 Montreal Road (shown hatched on Document
1 attached) from the federal government (Her Majesty the Queen-Public Works/Canada
Lands Company CLC Limited) for $1.00.
This approval also delegated authority to such staff, subject to
approval of the application, to proceed with the negotiation and execution of
the required agreements to purchase the land for $1.00 for affordable housing
under the Action Ottawa program.
The City’s application under SFRPHI was successful and the acquisition of the land was completed on March 28, 2011.
During the negotiations to finalize the agreements with Canada Lands and Her Majesty the Queen (HMQ), a discrepancy arose between the September 8, 2010 Council approval and the Contribution Agreement between HMQ and the City. The Council approval referred to the City having to pay HMQ the current value of the land, estimated in the Report to be $1.8M (and in HMQ’s documents to be $1.7M), upon default whereas the Contribution Agreement requires the City to pay fair market value of the land at the time of default but not less than $1.7M, in the case of any future default.
As the amount to be
paid in the event of a future default could potentially be more than the $1.8M
authorized in the September 8, 2010 Report, City staff do not have authority to
requisition a higher amount of funds in the event that a future default occurs.
Default includes the land not being used
for affordable housing during the 15 year period from March 28, 2011 or construction
not commencing within two years from March 28, 2011. However, the SFRPHI
program also allows the City to apply for extensions if required.
It was imperative to close the
City’s acquisition of the land no later than March 31, 2011, this being HMQ’s
fiscal year end. To accommodate this deadline and to allow City staff time to
obtain approval from Council authorizing payment upon a future default of fair
market value at the time of default, the City entered into an Agreement whereby
the City took title to the land on March 28, 2011. This Agreement requires that such Council
approval be obtained within 60 days from March 28, otherwise the City is
obligated to convey the land back to Canada Lands and the opportunity for
affordable housing at this location will be lost.
Housing staff advises they are confident that the Action Ottawa program will result in the selection of a successful housing provider to develop this site and therefore the risk of a future default is minimal. The default provisions contained in the Contribution Agreement will be passed on to the successful housing provider but the City will remain primarily liable to Canada Lands and HMQ under the various agreements signed by the City for this transaction.
RURAL IMPLICATIONS
There
are no rural implications with this report.
CONSULTATION
This report was not subject to consultation.
LEGAL/RISK MANAGEMENT IMPLICATIONS:
Legal Services was consulted throughout this matter and, due to the
extenuating circumstances described in the report, worked with other City staff
and staff in the Federal government to reach a tentative resolution on this
matter. Specifically, the tentative
resolution allows Committee and Council the flexibility to decide whether to
accept a default provision in the Contribution Agreement between the parties
that, according to the Federal Government, will be the new standard in such
transactions. It provides that in the
event of a default, which in this particular transaction is considered to be
remote, the City’s obligation would be to pay the fair market value of the
property at the time of any such default and, thus, the City’s liability would
not be limited to the fair market value of the property at the time it was
conveyed to the City for the nominal consideration of $1. City staff did not have delegated authority
to resolve the matter given the prior Council approval noted in the report.
Should Committee and Council approve this report then the City will
retain ownership of the property. Should this report not be approved by Council
on or before May 27, 2011 (i.e. within 60 days after the City acquired the
property), then the City must immediately reconvey the property back to Canada
Lands for the nominal consideration of $1 and the opportunity for utilizing the
site under the Surplus Federal Real Property for Homelessness Initiative will
be lost. Legal Services and Realty
Services can confirm that the requirement by HMQ that the City pay the fair
market value of the land at the time of a future default, if applicable, is a
requirement that other organizations are also seeking in similar types of
transactions and, consequently, can be considered a valid or defensible
business practice.
FINANCIAL IMPLICATIONS
There are no anticipated incremental costs associated with the report recommendation. If the land is not used for affordable housing, the City would be required to pay fair market value for the land at the time of default. In the event this occurs, funding currently exists in the Housing Reserve which has a balance of $7.5M as of Jan 1st, 2011.
SUPPORTING DOCUMENTATION
Document 1: Property Sketch
DISPOSITION
Should Council approve the Recommendation contained in this Report, Legal Services will so advise Canada Lands and HMQ. Housing Staff will proceed with the land development process as contemplated by the September 8, 2010 Council Approval.
Should Council not approve the Recommendation contained in this Report, Legal Services will so advise Canada Lands and HMQ and the City will immediately convey the land to Canada Lands.
Document 1
Property Sketch
