One year after announcing it would move its headquarters to downtown Winnipeg, Manitoba Liquor and Lotteries has scrapped that $75-million plan, saying it would not be a responsible use of public money.
The Crown corporation announced Monday that the relocation plan, which would consolidate its offices and 400 employees at the former Medical Arts Building on Kennedy Street, is unnecessary and "at risk of significant cost overruns."
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Polly Craik, chair of the liquor and lotteries board of directors, said the corporation reviewed the plan and decided to abandon it over concerns about renovating the building and connected parkade.
"I think it's a little bit different if you're building new, but this is a building that is older and needs retrofitting as well as the work on the parkade, so cost overruns and items out of budget … any delays would certainly negate any of the savings," she told reporters.
The NDP government announced in September 2015 that the corporation's new home base would be the Medical Arts Building on Kennedy Street. It's currently headquartered on Empress Street near Polo Park.
The purchase price for the 15-storey building, an attached parkade and a surface parking lot was $7.9 million and officials estimated it would cost another $66 million to renovate and expand it to accommodate about 400 employees.
But the Progressive Conservatives, who replaced the NDP after the provincial election in April, appointed a new board of directors and ordered a review of the purchase and relocation plan.
On Monday, Craik said the review concluded that the "corporation's existing office space is sufficient to meet the ongoing needs of staff."
She added that it does not make sense for the Crown corporation, which sells alcohol and gambling, to be in the property development and management business as well.
"The way we're looking at it is what is in the best interest of the corporation to run the businesses at hand, and what is going to allow us to deliver the most money back to the province? Because our job is to look after the public's money," Craik said.
"We don't see that spending $75 million on corporate offices is the best use of public funds."
Support for downtown
When they announced the move last year, the NDP hailed it as a fiscally smart decision that would result in $23.6 million in cost savings over the next 20 years.
The savings would come through efficiencies found in centralizing the five offices currently being used around the city — at Buffalo Place, Empress Street, Milt Stegall Drive, St. James Street and Pacific Avenue — for the corporation.
In addition to that, injecting 400 more people into downtown would boost the city's economy, the NDP said.
'We are disappointed'
Downtown Winnipeg BIZ executive director Stefano Grande said he was discouraged to hear the current administration had a change of heart.
'We hope the current [provincial] government will maintain a downtown-first policy.' - Stefano Grande
"We are disappointed to not see 400 jobs ... coming downtown, but we have to respect the decision of the board of liquor and lotteries," Grande said.
Grande called the Medical Arts Building a great asset and said "there are a number of opportunities to redevelop that building."
Grande described the downtown as the "employment centre of our city," and acknowledged that the arrival of as many as 400 well-paid employees would have an impact.
"We hope the current [provincial] government will maintain a downtown-first policy," Grande said.
NDP Crown services critic Ted Marcelino on Monday called the decision "pure politics" by a Tory government focused on wiping out NDP decisions.
The liquor and lotteries board took many months to do their due diligence before choosing the Kennedy Street location, he said.
"The savings of almost $24 million that was envisioned when the due diligence process was made by the corporation is now down the toilet. I don't know the thinking behind the decision to get it out of the way," Marcelino said.
He added that Monday's announcement shows the Tories are not committed to developing Winnipeg's downtown.
'Keep in mind the Medical Arts Building is an older building and it could hold all kinds of surprises.' - Ron Schuler
But Crown Services Minister Ron Schuler disagreed, saying the government already has "a significant presence" downtown through the Manitoba Hydro and Manitoba Public Insurance headquarters.
The PCs believe in downtown Winnipeg and believe in promoting it "but it's also got to be smart for taxpayers," he said.
All boards of directors for the province's Crown corporations were tasked with doing facility reviews after the Tories were elected. In this case, Schuler said the liquor and lotteries board decided its "core business isn't being a construction company [and] it's not being a landlord" — a decision that his government fully supports.
"Keep in mind the Medical Arts Building is an older building and it could hold all kinds of surprises," he said.
"We think that there are companies that could take on that building, could probably renovate it very well and could make good money, because that's their business."
Employees who were supposed to move into the downtown building will stay in the existing locations, most of which are leased and easily renewable, said Manitoba Liquor and Lotteries board member James Morden.
A total of $10.25 million was spent on the project, including the $7.9-million purchase price for the building, taxes, other fees and initial development costs, Craik said.
She added that she believes the building can be sold at market value for approximately $11 million, and the sale could recoup some of the initial costs related to the purchase.
Parkade the 'jewel'
Shelter Canada president Arni Thorsteinson used to manage the Medical Arts Building and said liquor and lotteries can reasonably expect to make $11 million or more on the sale of the building.
Thorsteinson said the value has gone up since the Crown corporation acquired the building in part due to construction plans for True North Square, a $400-million mixed-use development on Carlton Street behind the Medical Arts Building.
Demand for parking in the area is expected to rise when that project is completed, making the Medical Arts Building's 450-stall parkade a revenue generating "jewel," Thorsteinson said, adding it costs between $35,000 and $40,000 per stall to build a new parkade.
Schuler added that the building will be sold "through the proper channels."