Browsing the archives for the Reasonable Person tag.

Why is Ottawa Overpaying Developers for Land?

Green Reality, South March Highlands

The City’s scarce environmental purchase funds appear to be used to overpay Urbandale and other developers when buying lands designated Urban Natural Area (UNA).

According to the Oct 12, 2012 staff report to the City’s Finance Committee, the going price for environmental land acquisition is $160 K / acre which is up 50% over the originally budgeted amount in 2010.

Considering that UNA lands are already undeveloped and cannot ever be developed, you have to wonder how this exorbitant price increase was justified over only 2 years.

Even if staff are using recent price increases for developed land, the math doesn’t work.

  • According to the Ottawa Real Estate Board, the average price of resale homes in Ottawa increased only 2.3% in 2012 over 2011 compared to 7.7% in 2011 over 2010.
  • Inflating the 2010 budget estimate of $101, 250 / acre x 1.077 x 1.023 = $111,554 / acre  in 2012
  • So why are staff agreeing to pay $160,000 / acre?

But is it even believable that land price increases for developed real estate should be used to justify massive increase in value for land that can never be developed?  On what basis would any reasonable person expect there to be any increase in value at all beyond inflation?

  • Allowing for inflation results in only a compounded increase of only about  4%

So how can a price increase of 50% be rationally justified?

  • It seems that either the process is corrupt  or the City managers that are responsible for these funds are so incompetent that they should be dismissed.

A review of land acquisitions from 1998 – 2010 reveals that the most that the City ever paid in the past was only $86 K /acre and that the only transaction in 2010 was at $71 K / acre.

What seems particularly odious is that the same staff were busy justifying a price ranging between $231 K /acre t0 $363 K / acre in Nov 2010.  The Coalition to Protect the South March Highlands asked the City to purchase 74 acres of KNL’s land in Beaver Pond Forest prior to it being clear-cut:

  • KNL Phase 9 is 110 acres of which KNL had already agreed to convey 40% to the City for free as UNA
  • City staff had estimated the value of the remaining 66 acres at $18 M or $231 K / acre for unserviced land that had previously been designated as NEA prior to granting Campeau development rights in the SMH
  • Note that KNL is a joint venture between Urbandale and Richcraft.  It seems that Urbandale has remarkably good fortune in extracting top-dollar from the City for land acquisitions and that City staff are often willing to pay it.

Since UNA land cannot be developed, and tax assessments are supposed to be never more than 3 years out of date, why does the City ever pay more than the assessed value of the land for taxes multiplied by the appropriate inflation adjustment?

So it appears that staff has misled Council on several occasions:

  • By using an estimate of $100 K /acre in the 2010 budget when the City had only paid $71 K / acre that year
  • By reporting to City Council  in 2010 that a fair price was effectively $231 K / acre or higher when Council was deliberating on the Beaver Pond Forest acquisition
  • By consistently overpaying developers by 50% when acquiring UNA land post-2010
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The day the music on hold died

Canadian Politics, Economic Reality, Virtual Reality

Helping Nortel

Today Nortel became another casualty of the deepening financial crisis by filing for creditor protection.  Amazingly the Canadian federal government, fresh from extending billions of dollars of credit to the auto industry of the past, managed to scrounge up all of $30 M in credit financing for the digital industry.

What a joke.  $250 Million for GM vs $30 M for Nortel.  GM with all of 19,000 employees in Canada is smaller than today’s Nortel that weighs in with 26,000 employees (mostly in Canada) – let alone the Nortel of yesteryear that once employed 95,000 with over 20,000 in Ottawa alone. 

Perhaps the fact that our federal finance minister is the member of parliament representing the GM employees in Oshawa has something to do with the smell of conflict of interest in this.

Meanwhile, McGuinty’s Ontario government is actually bragging about how they turned down Nortel’s application for financing under the NGOF pork barrel.  But McGuinty can find easily find $8 M to create 133 jobs at some outfit called Cyclone Manufacturing – is this a way to ensure that Ontario is a global leader in anything?

When, Nortel, the largest and one of the oldest companies in Canada is in trouble, our politicians don’t give a shite.  As recently as 2001, Nortel alone was 1/3 of the entire value of the TSX.  If job creation was actually important to our provincial government, a reasonable person might expect them to consider helping companies that actually have proven that they can employ Canadians in high tax-paying jobs.

Nortel’s Legacy

The impact of Nortel on the global economy across the 115 year history of the company is impossible to count. 

Every time you pick up a touch tone phone, use digital communications of any kind, experience broadband Internet access enabled by optical technology, or DSL, or high speed wireless – you are using technology invented by Nortel.

Every time you access your bank or brokerage account online, or use your mobile phone, you are riding on one or more protocols designed by Nortel. 

The first corporate email system in the world was built by Bell Northern Research.  So was the first use of digital packet communications, high-speed fibre optic rings, etc.  These are the very foundations of the Internet.

Nortel’s impact on the tech sector extends far beyond communications.  Engineers at Bell Northern Research contributed enabling technology to the electronic design community, distributed computing, advanced man-machine interfaces such as speech recognition, visualization graphics, dignital signal processing, etc. 

Nortel’s patent portfolio extends across Wireline, Wireless, Datacom, Enterprise and Optical technologies and services.  As of December 31, 2007, Nortel had approximately 3,650 US patents and approximately 1,650 patents in other countries. In fact Nortel has consistently ranked in the top 70 in terms of number of granted U.S. patents since 1998. 

Nortel has received patents covering standards-essential, standards-related and other fundamental and core solutions, including patents directed to CDMA, UMTS, 3GPP, 3GPP2, GSM, OFDM/MIMO, LTE, ATM, MPLS, GMPLS, Ethernet, IEEE 802.3, NAT, VoIP, SONET, RPR, GFP, DOCSIS, IMS, Call-Waiting Caller ID and many other areas.  The term “standards-essential” means that the technology would not be viable without the contribution of Nortel’s engineers.

My own career at Nortel was relatively brief, but in the less than 10 years that I was there I personally witnessed meetings where Nortel’s engineers educated IBM, HP, Intel, Cadence, Mentor Graphics, Microsoft, and a hundred other companies on advanced technology.  The spin off impact of those meetings alone on the tech industry was incalcuable.  Intel actually modified silicon designs, HP introduced new products, and Cadence & Mentor acquired new technology to rev up their revenues.  These were non-patent related discussions.

Nortel was the largest spender on R&D in Canada through both direct investment in its own labs and through leveraged investment in university interaction.  Literally thousands of doctoral degrees in Canada were made possible though collaborative research with Nortel over the years.  Even the scaled back Nortel of today spends more than 1/3 of its salaries on R&D jobs for Canadians.

Yet McGuinty is proud of denying Nortel’s call of distress?  Shame on him.

Broken Backs

We get what we vote for.  Our politicians both federally and provincially have demonstrated that they would rather prop up the resource sucking industries of the past than enable a modern Canadian economy of the future.

The fact that the digital economy can create more numerous, more interesting, and higher paying jobs for Canadians compared to the back-breaking and mind-numbing jobs of the resource and manufacturing sectors is completely lost on our politicians. 

Perhaps it is because we elect lawyers and not engineers to parliament?

Is the real problem with Canadian voters who sleepwalk their way to the polls if they bother to vote at all? Do Canadian parents not care about the quality of jobs that will be available for their children? 

Why do we tolerate this ineptitude from our politicians?

Yes Nortel’s management laid the seeds for its destruction.  John Roth in particular is to blame, as is his successor Frank Dunn who is now facing charges for misleading shareholders and gross stupidity. 

Nonetheless, allowing Nortel to die is the wrong policy decision for both the Canadian economy and the high technology sector of Canadian industry.  Write your MPP and MP and give them a shake!

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