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Small Price for New Life at Old Spectator Building

By Jason Leach
Published September 25, 2009

Now this will be a $700,000 loss well-spent.

Canlight Realty, the company that restored the Piggot and Sun Life buildings on James St. and Main St., wants to buy the old Spectator building at King William St. and Catharine St. after the previous developer, Harsuk (Harry) Ganatra, ran out of money.

The city has already loaned $700,000 to Ganatra's numbered company and will not be reimbursed for any of it under the proposed terms of the new agreement. However:

The empty structure pays $15,600 a year in taxes. Condos are expected to bring in $80,000 to $100,000 more, "helping to mitigate our mortgage loss," [Rob Rossini, the city's general manager of finance] said. He told council the original developer was also slated to get a $400,000 grant that will not go to Canlight, reducing taxpayer loss to $700,000.

It's great news for the old Spectator building and the downtown area to get a legitimate builder in there who actually chose a good name (novel idea in an old newspaper factory) and will undo the butcher job that the previous developer was working on before running out of money.

Jason Leach was born and raised in the Hammer and currently lives downtown with his wife and children. You can follow him on twitter.

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By jason (registered) | Posted September 25, 2009 at 10:14:43

not to mention, downtown gets a new building full of residents who are part of the "rest of everyone" as Reg Beaudry put it. We need more middle/upper income folks to gradually bring a balance into our poor downtown.

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By Capitalist (anonymous) | Posted September 25, 2009 at 12:33:55

Glad to see a reputable builder is coming in. Lets hope they don't turn this into any welfare housing.

"Assuming a 5% interest rate, the city will recover the entire $700,000 after about ten years of $90,000/year property tax payments."

Ryan, the city could have put the 700K into cleaning up the downtown and making it attractive to residents and developers instead of handing it out on one single project.

If every project in Hamilton was run like this we would be broke. The city needs to focus on increasing assessment as our residential tax rate relative to our avg. household income is very high.

This is just another downtown fly-by-night operater that is leaving Hamilton taxpayers holding the bag.

Developers should not be subsidized period.

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By Tammany (anonymous) | Posted September 25, 2009 at 13:18:09

The loss of the $700,000 is reprehensible. The City should have made subordination of the other loans a prerequisite to advance of the funds. In American cities, tax payer groups sue city bureaucrats over negligence like this. Just shameful.

And again, council held another in camera session. This is getting ridiculous. Is it not possible for them to debate anything of any importance to this city in open view of the public?

All that being said, I am actually extremely pleased, and somewhat surprised, that the project seems to have gotten back on track so quickly.

I hope Canlight gets their act together this time. The Pigott conversion was really quite poorly done. The fact that they are changing the name (Trinity Landing? WTF?) is a good sign though. The Trinity Landing project was amateurish from the start and never should have qualified for City funding.

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By Tammany (anonymous) | Posted September 25, 2009 at 13:28:05

Capitalist, I agree with you in principle that developers (particularly developers in this town) should not be subsidized. But as Ryan points out, I think there really is a legitimate reluctance on the part of major financial institutions to take a risk on Hamilton projects that aren't massive greenfield sprawl developments. If we want downtown development, opening the public purse strings may be the only option.

That being said, this default will not bode well for other developers seeking funding from private lenders in the future. The city knows this. That's why they're trying to talk down the pain of having to swallow a $700k loss ... that, and the fact that they don't want a negative public reaction or media expose to make it more difficult for them to loan taxpayer money to their developer friends.

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By jason (registered) | Posted September 25, 2009 at 13:59:24

keep in mind, there is a BIG difference between subsidizing a developer and loaning out money that is repaid within 10 years. The city is merely doing what banks won't. The downtown residential loan program is one of the few programs in the entire city that I think is worth it's weight in gold. The new residents downtown, new taxes being generated and increased assessment of these properties has been nothing but good news for downtown. I'd much rather have $700,000 loaned out and then recouped in increased taxes instead of dishing out the hundreds of millions we give to new sprawl developments and never see anything repaid.

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By UrbanRenaissance (registered) | Posted September 25, 2009 at 14:37:30

"keep in mind, there is a BIG difference between subsidizing a developer and loaning out money that is repaid within 10 years. "

Exactly jason, I live in a building that would still be a parking lot if it weren't for this program, and since it was vacant and is now full of new downtown residents it also qualified for a 5 year tax rebate for any of the first unit owners. Hopefully this new owner gets the job done and finishes what I imagine will be great new living spaces downtown.

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By A Smith (anonymous) | Posted September 25, 2009 at 18:36:18

Ryan, I thought that successful cities didn't compete on price? Didn't you say that? Now you're saying that it's a good idea that Hamilton offers developers zero interest loans?

Here's an idea Ryan, if you're going to support programs like "The Hamilton Downtown Residential Loan Program", that's fine, but why not be honest about why they work? And that's because people respond to financial incentives, something you have said many times before.

If we now know that people ARE motivated by keeping more of their money, why not make all of downtown Hamilton a low tax rate environment? By lowering tax rates on each dollar of investment, the cost of investment comes down, thus making the return on each dollar of investment go up.

Furthermore, because lower tax rates are safer than direct loans to developers, the city will get the upside of stimulating investment, without the risk of picking winners and losers. It will simply set an environment where people CAN make money and then home buyers will decide who does the best job.

Ryan, Jason, I'm glad you're finally seeing the light when it comes to giving people financial incentives to invest.

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By jason (registered) | Posted September 25, 2009 at 23:09:04

so you finally figured us out eh?? We've tried to keep it a secret on here that we don't like giving away subsidies to developers. I guess we blew our cover finally.

You're right. We should scrap the residential loan program. After all, I'm sure banks across the country would flock here and beg us to throw millions into downtown projects if the tax rate was a few points lower. Cause after all, that's the only thing that matters....

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By A Smith (anonymous) | Posted September 26, 2009 at 01:29:28

Jason, property taxes are a tax on investment. Whereas Toronto charges a low tax rate on investment, Hamilton charges a high one.
Because people like to make money on their investments, which city do you think will attract more investment, the one that takes a large percentage of the owner's equity, or the one that takes a small percentage of the owner's equity?

Think of it this way, you have the choice between two bond funds. Both of these return 2.5%/year, but one charges a management fee of 0.85%, the other charges 1.59%. Which fund will get more investment dollars?

This isn't rocket science, it's basic math. Banks understand this and that's why they look at Hamilton as being a bad place to invest. If Hamilton stops punishing wealth accumulation with high tax rates, banks will definitely take a second look and so will people looking to invest hundreds of thousands of dollars into a new home/condo.

The bottom line is this, if you want more of something, you tax it less, if you want less of something, you tax it more.

Therefore, as long as Hamilton continues to tax property investments at a high rate, we will get very little of it. That's just reality.

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By randomguy (anonymous) | Posted September 26, 2009 at 23:02:35

A Smith, sure Toronto's property rates are low, but what do you think of their new land transfer tax? Not so hot, eh?

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By A Smith (anonymous) | Posted September 26, 2009 at 23:25:01

randomguy, I think David Miller's announcement says it all.

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By hunter (anonymous) | Posted September 27, 2009 at 09:04:41

Smith is right on this:

"The bottom line is this, if you want more of something, you tax it less, if you want less of something, you tax it more."

The RHT regulars themselves have questioned why empty properties such as the Connaught are taxed less then occupied ones. They know that this policy encourages property squatting/speculation.

Hamilton has to get itself in a position where it can lower investment, business and property taxes. The last decade or so, they've been waiting for industry and their high tax revenues to return to that they can lower the residential tax rates. It's not working. Investment follows the path of least resistance. To encourage employers/businesses you need to create a business friendly climate and that means lower taxes. It will take some courage to lower taxes before the city can afford to. It's a fact that the left-leaning history of the city will make this politically difficult if not impossible. Punishing business owners while still wanting their money has been shown to be unproductive.

You can be progressive and still business friendly. The two aren't incompatible. It's just zealots of the right (Smith) and zealots of the left (?) that make it seem so.

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By Harry G. (anonymous) | Posted September 28, 2009 at 02:07:42

I heard that in court Friday the judge has awarded the building to a company from VANCOUVER called J.Kara Capital Corp. ?? The accepted offer in court was $2.5 million where the newspapers were wrong as they claimed Canlight bought it for 2.2, anybodyelse following this building ?

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By Balance (anonymous) | Posted September 29, 2009 at 21:58:29

I agree that it will be nice to see the project finished finally. But lets not forget how long the developer has been sitting on the loan from the City. This project was started in 2003 and some money was loaned out over the years, the City picked up the carrying cost of the interest. Now we're losing. How the heck did they receive 90% of the loan with only 75% of the building completed.

Look at some of the other projects, they still have outstanding loans because they have not filled up including Terraceview at Napier and Market. Money still out there and the City picking up the borrowing cost. The borrowing costs for the loan program is within the Downtown Renewal operating budget.

I'm finding it hard to believe that RTH is trying to spin this as a positive. Somebody wasn't doing their job again in the Downtown Renewal Department.

I just wanted to point out that it is quite hypocritical of RTH especially when you're always talking about how the City is always losing on suburban development. Non-Downtown developers pay development charges (they don't downtown) and hey look at all the taxes these new developments pay. Guess it's good for downtown but not anywhere else to open the public purse and give away huge sums of money.

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By Balance (anonymous) | Posted September 29, 2009 at 21:59:27

I agree it will be nice to see the project finally finished. But lets not forget how long the developer has been sitting on the loan from the City. This project was started in 2003 and some money was loaned out over the years, the City picked up the carrying cost of the interest. Now we're losing. How the heck did they receive 90% of the loan with only 75% of the building completed.

Look at some of the other projects, they still have outstanding loans because they have not filled up including Terraceview at Napier and Market. Money still out there and the City picking up the borrowing cost. The borrowing costs for the loan program is within the Downtown Renewal operating budget.

I'm finding it hard to believe that RTH is trying to spin this as a positive. Somebody wasn't doing their job again in the Downtown Renewal Department.

I just wanted to point out that it is quite hypocritical of RTH especially when you're always talking about how the City is always losing on suburban development. Non-Downtown developers pay development charges (they don't downtown) and hey look at all the taxes these new developments pay. Guess it's good for downtown but not anywhere else to open the public purse and give away huge sums of money.

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