Can asset optimisation be the key to Ontario’s fiscal issues?

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I keep finding myself absentmindedly doing mental accounting whenever I pass a subway station in Toronto or one of those rather stately old Toronto Hydro buildings.  Maybe it’s because earlier in my career I worked at an advertising agency or maybe it’s because one of my clients is now a property developer.

Either way, I keep finding myself thinking about the value in the government’s real estate portfolio.

As Premier Doug Ford continues to try to go line by line through the province’s books to find waste, I can’t help but wonder if the real benefit to the province’s bottom line is actually in real estate asset optimisation.

According to government reports, the province alone owns some 4,300 buildings and just under 130,400 acres of land.

Now, some of these buildings are schools and hospitals, but others are field offices, storage and maintenance facilities, and other under-utilised spaces.  In fact, the government estimated it generated roughly $27.5 million in revenue and savings from surplus property sales in 2017.  Turns out it makes sense to sell a property rather than pay its hydro bill — who knew.

Speaking of hydro, I do not want to re-litigate former premier Kathleen Wynne’s partial privatization of Hydro One, except to say that the notion of trying to “recycle” an asset to use the funds raised to build new assets sure does beat having to raise taxes.  And, to be fair, former Liberal cabinet minister Brad Duguid did some significant work a few years ago to sell off surplus land, such as the LCBO head offices on the Toronto waterfront.

As Ford embarks on an effort to save the taxpayers’ money, the focus so far has been on potential cuts and privatisation.  Yet, as we learnt all too painfully under former premier Mike Harris, slashing spending on public facilities creates a vicious and more expensive circle when repairs are not addressed.

But asset optimisation — not even necessarily asset sales — is an intriguing prospect.

Let’s take Toronto itself as an example.  Former CEO of Build Toronto, Lorne Braithwaite, estimated the City holds some $15 billion in real estate assets. Just think if even a small percentage of that real estate could be optimised, whether through development opportunities, more advertising or a combination of both.

There are longstanding but largely untapped plans to, for instance, build condos atop TTC stations.

More granularly, the TTC currently has annual advertising revenue of roughly $28.2 million and rental revenue of $11 million.  That accounts for roughly 5% of the TTC’s operating revenue.

Yet, the GO transit system — which has more buses, more stations and is spread out across more municipalities — only raises advertising revenue of roughly $6 million per year and commercial rental revenue of around $4 million.  If the GO transit system could even just go from its current 1% of revenue from advertising and commercial rental to matching the TTC’s 5% of revenue, that would generate millions of dollars more for the system.

In other words, somebody should start installing some more billboards at GO stations and wrapping the sides of buses.  That’s not even to mention the potential for advertising at storage facilities and maintenance yards.  And the TTC is no real poster child itself compared to other metro systems worldwide: a plan to bring some Starbucks into the stations rather than just some sorry little newsstands could generate decent new revenue.  Union Station’s redevelopment is doing a great job bringing in restaurants and stores for commuters to enjoy, and reaping the rental revenue, too (now if only they could finish the renovations in my lifetime).  The City should get serious about building commercial and rental units atop TTC stations, too, at long last.

And it isn’t simply about revenue.  Mayor John Tory’s “rail deck park” is a type of asset optimisation, proposing to build over the rail lines in the downtown to create new acres of parkland.  And his opponent, the impressive former city planner Jennifer Keesmatt, just this weekend proposed converting City-owned golf courses into public parks, which will disproportionately serve under-serviced priority neighbourhoods.

Similarly, the former Liberal provincial government announced plans to develop four provincially owned surplus properties in Toronto into 2,000 units of housing, including 600 units of affordable housing.  This is the kind of common-sense approach that works.

Likewise, as another smaller example, when I attended Trinity College, students voted to invest $250,000 of student fees to install solar panels on the roof of a College office building.  The City matched the funding with an interest-free loan.  Today, the solar panels generate enough revenue to fund $25,000 per year worth of scholarships.  This is a win-win financially and for the environment.  Imagine scaling up such a project on campuses, hospitals, schools and government buildings across the province.  Now there’s an environmental moneymaking plan even the Ford Tories could sure get behind.

Ontario’s affable Finance Minister Vic Fedeli recently tweeted a photo of him hauling out all the old landline phones in his Ministry for the recycling bins.  I love that kind of simple “watch the pennies and the dollars will take care of themselves” approach.

But if Premier Ford wants to be serious about Ontario’s budgetary problems, he should think more broadly than just cuts.  He should strike a commission of inquiry not into past Liberal accounting disputes, but into investigating, calculating and cataloguing ways the broader public sector — the province, the municipalities, universities, hospitals — can find ways to generate more revenue for the vast real estate assets the public already owns.

That’s a smart way to run government like a business. 

More from Jonathan Scott   @J_Scott_

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