Why is Harper privatizing federal office towers?

Public Service Alliance of Canada President John Gordon wonders what the feds are up to by selling buildings they own so that they can become tenants. This policy sounds a lot like P3s, where new infrastructure is built, owned and run by the private sector, who act as a landlord to the government using the facility. And with a veil of secrecy, no one really knows what is going on.

Here’s an excerpt of Gordon’s piece in the Globe’s online edition:

By the end of the summer, the federal government will pick a new owner or owners for nine of the best federal office buildings located in major cities across the country … then guarantee the new owners that the federal government will lease back 100 per cent of the space for 25 years.In addition, the government promises the new owners that taxpayers will foot the bill for all maintenance and upgrades to the buildings’ interiors. Tax dollars will ensure that heating systems, windows, elevators, plumbing and electrical systems in these soon-to-be-private buildings are kept in top shape.

Sounds like a sweet deal for the new owners, but is this a good deal for taxpayers? On the surface, the answer would seem to be no. And a more detailed examination of the transaction isn’t possible because most every important detail is secret.

All documents, studies, valuations, and advice about the sale and leaseback are being withheld from the public. The federal government has established a cloak of secrecy so dense that even members of Parliament are being kept in the dark. In fact, a parliamentary committee recently called for the sale to be put on ice until these details are made available to the public.

The public is not allowed to see the study conducted by the real-estate wings of two banks (Bank of Montreal and Royal Bank of Canada) that recommended the sale and leaseback plan for these nine buildings. These same two banks are now acting as real-estate agents in the sale of the buildings — for a commission fee — creating the strong appearance of a conflict of interest.

The identities of the bidders are secret, as are the details of their bids. And taxpayers will pay Deutsche Bank almost $2-million to review the transaction before it’s final. This, too, will be kept secret.

With so much information being withheld, it’s reasonable to ask: What is the government trying to hide? And can taxpayers expect to be treated in this manner by the new owners?

Some details have leaked out. The Globe reported last month that taxpayers could lose up to $600-million if the deal goes wrong and there are irregularities in the valuation of the properties, including one building that was valued at $120-million in excess of the market price.

2 comments

  • The government does these types of things because it provides more profitable outlets for capital. These types of arrangements are particularly beneficial for capital since most of the risk remains with the government so the profits are virtually guaranteed.
    What have the interest of taxpayers got to do with it. Did you think government was in the interest of taxpayers primarily?

  • MP Garth Turner also has a blog on this, he was on the committee responsible for oversight of this sale: http://www.garth.ca/weblog/2007/08/22/gone/

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