Frequently Asked Questions

Proposed Convention Centre

PROCESS

What's Next?

On December 13, 2010, Regional Council voted 18 to 5 in support of an agreement to allow HRM and the province to present a unified voice to the Federal government for funding to make the proposed new convention centre a reality. 

An agreement is now required from the federal government to contribute the remaining one-third of eligible construction costs, a lump-sum payment to the developer when the new centre is substantially complete.

What is being requested of the municipality by the Province in terms of support?

Under the Dec. 13 agreement, the province and HRM will each contribute about $56 million toward capital construction costs, and cost share equally on any operational costs not covered by revenue generated by convention centre operations. An agreement is required from the federal government to contribute the remaining one-third of eligible construction costs, a lump-sum payment to the developer when the new centre is substantially complete.

Property taxes will be treated as a shared cost between the province and HRM, with the current property tax on the existing convention centre used to determine the taxes for the new one.   Beginning in 2015-16, the amount payable will increase at the lesser of the rate of inflation or two per cent annually.

Is HRM interested in taking over the existing WTCC building, for alternative use, from the province once the new facility is up and running?

When the new centre is complete, HRM has agreed to buy the existing convention centre at the book value, if the province is not able to sell it before then. 

If the project moves forward, will there be opportunity for public input on design?

Yes.  This is a requirement of the EOI to undergo a public consultation process.  In addition, it is also a requirement within the Design Review Committee and the Development Approval Process.

The province, in a release dated Nov. 4, stated that, “Hearing from the public on the design of the proposed convention centre is a key component of the development process of the new centre.  Developer Rank Inc. was required to submit a comprehensive public consultation plan that will allow Nova Scotians to be part of the design process as part the project submission.”

Why were some meetings leading to the agreement's approval in-camera?

Governing legislation stipulates that certain matters are deemed to be in-camera.  It states that  Council or any committee of Council may meet in closed session to discuss matters related to:

a) acquisition, sale, lease and security of Municipal property

b) setting a minimum price to be accepted by the Municipality at a tax sale

c) personnel matters

d) labour relations

e) contract negotiations

f) litigation and potential litigation

g) legal advice eligible for solicitor-client privilege

h) public security

These aspects which relate to issues as noted in the legislation will remain in-camera to ensure the best interests of the tax-paying public.

FINANCE

Can HRM afford this project?

Following due diligence and a thorough financial analysis, Council examined what was proposed, what the benefits would be for the downtown and for the whole municipality before making its decisions on behalf of HRM residents. 

No funds will be spent until 2015-16 at which time we expect commercial property tax revenues to pay for HRM's share of the project.  No residential property taxes are expected to be used for this project. 

Like the new Central Library, HRM feels this new proposed centre is exactly the impetus needed to help revitalize the downtown and create far-reaching economic spin-offs.

What is the proposed cost breakdown?

The province and HRM have put forward the following:

The cost to HRM, the province, and the Federal government includes only the cost of building, designing, and operating the convention centre - not the construction of the entire project. Also, under the proposal, HRM and the Province would share equally on any operational costs not covered by revenue generated by convention centre operations.

How does it stand up to the shadow bid requested by the province?

According to the provincial government’s shadow bid, which was used to evaluate the proposal, the developer could build the new integrated centre for $26 million less than the province could build a stand-alone convention centre.

Is the agreed upon level of municipal participation justified?

There is no consistent approach or industry standard for municipal participation in convention centres, although research points to increasing levels of municipal participation based on the role these facilities play in the local economy.  Most convention centres are an integral part of municipal strategies for visitor and business attraction and economic growth.  They are a relatively inexpensive way to generate economic activity when compared to other economic development programs funded by government. 

It is difficult to compare the cost-sharing model for this project to others, because the financial situation in Nova Scotia is very different.  It is fair to say that without a significant level of financial participation from HRM, a new WTCC would not proceed.

What due diligence has been conducted?

Due diligence has been provided through:

• Business case by Deloitte Canada
• Shadow bid by Deloitte, with input from PNS, HRM, TCL
• Hanscomb quantity surveyors reviewed RFP submission
• Gardner Pinfold Consulting Economic Impact Assessment
• Province of Nova Scotia economic impact assessment based on the response to the RFP
• Professional standards and qualifications of the consultants involved, and also professional staff of Province, TCL, and HRM
• Review and validation of key assumptions and estimates by staff of Province, TCL, and HRM

What would the property tax arrangement be for the new convention centre?

Property taxes will be treated as a shared cost between HRM and the Province.  The current property tax model for the existing convention  centre will be used to determine the taxes shared on the new centre - based on a per square foot calculation.   Beginning in 2015-16, the amount payable will increase at the lesser of either the rate of inflation or two percent anually.

What are the risks around the proposal?  How can we manage them? 

The main risks from HRM’s perspective are regarding the amount of property taxation from this development site.  HRM has taken reasonable steps to mitigate its exposure.  For one, HRM and the province will work with the developer to ensure all parts of the development - including the Hotel and the office tower - come out of the ground at the same time.

No project is without risk.  Both sides have taken a great deal of time to make sure there is a business case and an economic development argument to move ahead.  Without moving forward, we risk losing more convention business and we risk hollowing out the downtown - which would lead to a loss of investor and developer confidence.

How would this impact the municipal budget? 

Payments will start five years from now.  None of the services offered today, or projects planned, should be impacted by this decision.  However, HRM’s overall financial capacity may cause changes over the next five years.  The impact of this decision will have more impact on tying up capacity to do other things, versus impacting existing services.

What protections are in place if the costs go up during construction?

The construction price is fixed, meaning the developer would be responsible for all cost overruns.

What would the impact on HRM’s Standard & Poor's rating be? 

HRM’s S&P rating depends on many factors.  HRM has developed a delivered very significant capital projects such as the Harbour Solutions project, Canada Games Centre, 4 Pad Arena, and now the Central Library.  We have a demonstrated ability to develop sound financial strategies that have not compromised our fiscal health to date.  Current risks noted by S&P for HRM, are largely outside of our control: future requirements to finance water and waste water to meet CCME requirements, and the amount of transfers from other levels of government. 

Would this be a P3 arrangement?

No.  This is leased space.  Governments lease space all the time.  No public sector service is being contracted out to the private sector.  A private sector developer is building and will own the asset.  The Province will execute a capital lease for the new Trade Centre.  HRM would enter into a funding agreement with the Province.

Is the Province, HRM negotiating with the Federal government?

A negotiating committee with representation from both the Province and HRM willbe set up to secure federal participation in the project.  There have been discussions with the Federal govenrment to gauge their interest in the project but we cannot comment any further while discussions are on-going. 

Under the arranagement, any project cost over-runs will be the responsibility of the developer and payments may be reduced for non-performance.  Leasing offers flexibility to end the arrangement or renew, or to purchase at the end of the lease.

The convention centre would be unique as it would be built as part of a hotel and office complex, allowing for efficient, shared services and appeal to the convention industry.

Will you meet the development company's January 15, 2011 deadline?

The December 13 agreement is an important step forward.  HRM and the Province believe that deadline can be met.

How did HRM produce projected property tax estimations?

The estimate used for property taxes is based on the most comparable properties for which information is available.  The assumptions used are reasonable, based upon what is known today.

Why doesn’t HRM base its property tax assessment of the site on Consumer Price Index (CPI)?

It is inappropriate to use the Consumer Price Index (CPI) to increment commercial assessed values.  Since 1997, the average assessed commercial property has increased 4.8 percent annually.  For conservatism, the increment used is only 75 percent of that historic amount.  Estimated costs are based in 2015-2016 dollars or the relevant dollar basis.

Will citizens get a fair deal if the project proceeds?

While there has been a  great deal of evidence surrounding the idea of a new convention centre, Council is negotiating with the other levels of government about just how much HRM and its citizens should contribute if the project proceeds.    Council has been clear that those negotiations must produce a fair, affordable result or the project cannot proceed with HRM participation.  

ECONOMY

Why should we trust TCL’s business projections and business case? 

Trade Centre Limited is a provincial Crown Corporation.  Its sole shareholder is the Province of Nova Scotia and it reports to a publicly-appointed board of directors, including HRM Council representatives.  The corporation has carefully tracked lost business opportunities, identified specific market opportunities to pursue for a “right-sized” venue and has backed up its business case assumptions and projections with research and analysis prepared by firms with experience in this specialized industry.

Since 2007, Trade Centre Limited has tracked the number of qualified bookings lost due to lack of suitable space in the current WTCC.  Between June, 2007 and June, 2010, that figure totalled 80 conferences and over 75,000 potential delegates.  One-third of these lost events had projected attendance of 1,000 or over.  This represents $ 10 million in lost revenue to TCL, 129,000 room nights lost to local hotels and $108 million in direct expenditures in the community. According to a recent survey by Thinkwell Research, 87% of lost/cancelled business is likely to be hosted at a new facility.

Already those in our region are expanding – Fredericton has a new convention centre; Moncton has just completed a Coliseum expansion; and Charlottetown has a new convention centre in the works.  Nationally, 13 of 20 convention centers in Canada - including Halifax’s main competitors - are undergoing major redevelopment and/or expansion.  

If Halifax does not regain its market position, the current WTCC runs the risk of becoming  financially unviable or competing directly with facilities operated by the private sector.  As a result of a March 28, 1981 agreement, financial shortfalls for on-going TCL operations are the responsibility of HRM and the Province.

Why not just continue to rely on the current convention centre space?

Part of the job of the municipality is to promote economic prosperity for the region.  That includes supporting capital projects to help spur business and development growth, such as the new Central Library project. 

Simply stated, the current facility is too small to fulfill its intended function which is to generate incremental economic benefits.  Expanding the facility on the current site is not an option.  This would negatively impact existing WTCC and Metro Centre operations and still yield a facility of insufficient area and configuration called for under the RFP that was issued to Rank Inc. This conclusion is supported by an architectural analysis included in the list of research documents posted on TCL’s project website.

What are the advantages to HRM in this proposal?  To the Province? To TCL?

A new convention centre would be an important piece of public infrastructure.  The proposal could provide significant revenue flows to government during construction and operation.  HRM would become more attractive for inward investment in the financial sector.  It would provide a positive signal that would stimulate new developments downtown.  Convention centre visitors turn into migrants, visitors, business owners, and return visitors.  It could also help prevent decline in the downtown. 

Convention centre facilities generate economic benefits through revenues from visitors their activities attract.   They provide a means to bring in external investment and global opportunities.  As well, a new centre would generate confidence in the downtown.

A conservative estimate of the full impact of the entire project could see all benefits, GDP, employment and federal and provincial tax benefits magnified by two to three times the impact of the convention centre cost. 

How does the proposed centre differ from the current facility?

The proposed design offers space for up to 2,000 or three events with 700 people/room.  The multi-level facility covers three floors and the ballroom has 35,572 sq ft of column-less space, along with multi-purpose space = 52,000 sq ft.  The arrangement can also allow for 24 meeting or break out rooms that can be reconfigured.  There are pre-function and reception areas for 2,000.  The critical difference is the space available to hold concurrent conferences and major national conventions.

Will agreement to the convention centre and, hence, support for the development company’s hotel and office tower components for the vacant land hurt other proposed developments the downtown?

There are two schools of thought on this question. One is that there is limited demand for new office and hotel space, so if a large project is constructed, then demand will be satisfied for some time to come and no new projects will proceed. The construction of the Purdy's office towers are often hailed as an example of this possibility. The other school of thought is that a significant project - such as the proposed Nova Centre (in conjunction with other initiatives such as the new Central Library, and other substantial public investments in the urban core) - will push downtown Halifax over the tipping point and it will become a sought-after destination for commercial activity. This is the "critical mass" argument that has been successful in many cities that have embraced the theory to a significant enough degree.

Regardless of which school of thought one follows, HRM has been experiencing acceleration in the migration of downtown office space to the suburbs over the past five quarters. Today, downtown office vacancy is at a record high (10.3%) and suburban office vacancy is at a record low (7.5%) with these trends continuing (source: CB Richard Ellis).

There is no single silver bullet that will stimulate interest in downtown office uptake, rather a number of things must be done. But two of the most important things that must be undertaken to reverse this suburbanization trend are:

- construct new Class A office space downtown that can accommodate the contiguous floor area requirements of major tenants; and

- the public sector must make significant investments in the downtown core (on the scale of the proposed convention centre) to inspire private sector investment to follow.

HRM stands the best chance of re-establishing the urban core as the economic engine if projects like this one proceed in conjunction with other efforts such as the "Capital Ideas" initiative that was approved by Council in July 2010.

OTHER

How would the proposed centre impact views from Citadel Hill?

The development does not impact upon any protected views from Citadel Hill.

Does it make sense to propose to have the convention centre underground?

This is the preferred practice.  A number of convention centres in Canada are underground, including the current WTCC. The planners suggest the requirements of the convention business are often presentation-oriented and any windows would most often be covered up so are not be required.   The common area at the entrance to the Centre is designed to offer tremendous light for convention-goers.  To have walled space for the convention centre at street level would not make for an aesthetically –pleasing structure.

Examples of centres following the same practice include:

• Edmonton’s Shaw Centre - has seven of its ten stories underground;
• Toronto’s Direct Energy Centre - predominantly underground, extending under the city street system and adjacent rail yards. The facility is part of Exhibition Park, which includes some 20 buildings of historical significance. An underground facility helps preserve the character of the historical building campus;
• Recent expansion to the Metro Toronto Convention Centre (south building) - constructed both under and over an adjacent rail yard;
• Vancouver’s new Convention Centre - below ground with a large public plaza at street level and a green roof and sloping green wall visible from its boardwalk. The building was purposely designed to appear like it was constructed into the side of a hill.

The development company’s latest proposal shows a Grafton Street galleria – will this still be publicly-owned land if this proposal goes through? 

There are two possible options for Grafton Street between Sackville and Prince if this project proceeds:

1) Under the present proposal, Grafton Street would remain a "street" under the legal definition and would remain in HRM ownership. Under this option there are two sub-options:

a) The street is redesigned to be primarily a public pedestrian space in which select vehicles would be permitted (eg. emergency and maintenance vehicles, special event vehicles, etc.) This approach would be similar to the current Granville Mall arrangement, and is the preferred outcome at this time. 

b) The street would remain as-is, open to all vehicles without restriction. Under either sub-option, the proponent would have to enter into an encroachment agreement (pursuant to By-law E-200) with Council because of the new structure proposed to be built beneath Grafton Street, and because of the structural arches that are proposed to span above Grafton Street. The details of the agreement would cover such matters as liability, construction requirements, maintenance, and other such conditions as may be negotiated (i.e. streetscape improvements).  A public hearing is not required for an encroachment agreement, rather simply a resolution of Council.

2)  HRM could permanently close the street for public use and convey ownership to the developer.  This process would require a public hearing and the approval of HRM Council.