Lease buyout casts uncertainty over Trust’s long -term role
With the exception of Councillors Donna Skelly, and Robert Pasuta, Hamilton City Council okayed a plan to buy out the Hamilton Waterfront Trust’s lease on the Discovery Centre for $3 Million. The deal seems to signal the city’s intent to not only take over the land occupied by the Discovery Centre—scene of a $14 Million lawsuit by the owners of Sarcoa Restaurant –but also contains provisions for the early termination of the lease on the Williams Coffee Fresh Restaurant which the HWT has operated for nearly 15 years. The deal calls for the payment to be spread out over 15 years at roughly $230,000 a year after deduction of the tax arrears owed by the HWT. But the staff report allows for an early termination of the leases of both properties in the event they are sold to a developer, which the staff report indicated is the eventual goal. If both properties are sold to developers the Hamilton Waterfront Trust would essentially have no assets to manage unless it were to move its restaurant operations into the proposed new residential commercial complex being planned for the Pier 8 property—at which point the HWT would be a tenant to a private sector operator. Skelly wondered how the City could be paying such a sum for property it already owns, given that the Waterfront Trust is effectively a city agency, and has been dependent on the City’s cash grants and sole-sourced construction contracts for its survival for the past decade.
The news coincided with word that Bob Charters, Chair of the HWT since 2010, had submitted his resignation in December. In his remarks to media, Charters did nothing to diminish suggestions of a disagreement with his fellow board members– Ward Two Councillor Jason Farr who has assumed the chairmanship, and Ward Seven Councillor Tom Jackson– saying, “I’m not sure where they are in the process of what it was they were working on” –an apparent reference to the lease sale to the City. At an October special meeting of council at which Skelly was unsuccessful in getting her colleagues to ask for an audit of the agency, there were hints then of a rift on the HWT board. Councillor Farr told council that he and Charters had strongly disagreed on the need for the agency to release its board minutes to the public—something Farr favoured.
Looking back to its inception, Bob Charters can be credited with the creation of the Hamilton Waterfront Trust. As a member of Hamilton City Council in 2000 he was the lead negotiator for the city in its long-standing financial dispute with the Hamilton Harbour Commission—the forerunner of the Hamilton Port Authority. In the settlement that was brokered by Hamilton MP Sheila Copps, the city dropped its lawsuit in exchange for the eventual surrender of Pier 8 to the City (now fulfilled) and the payment of over $6 Million to the city for the establishment of the Waterfront Trust. Since 2000 Charters had been almost continuously a board member of the HWT or Chair.
While the $3 Million lease buy-out figure was arrived at through the use of an outside appraiser, the HWT was actually only paying the city $12,500 a year in a long term lease that has approximately 36 years to run. In cash terms, the lease would have only yielded approximately $450,000.to the city. On the other hand the Waterfront Trust was reaping a good return on its $12,500 annual investment, charging its tenant Sarcoa almost ten times that amount in rent alone. In addition Sarcoa was charged nearly $9,000 a month in utilities, even though an HWT report in 2010 suggested that utilities were running at about $4,000 a month at that time. Sarcoa co-owner Sam Destro has said in media interviews that he had tried unsuccessfully to get HWT to show him the actual utility bills. With property taxes and a fee for use of common space, Sarcoa ended up paying the city nearly half a million dollars a year for use of the Discovery Centre. Despite the windfall, the Waterfront Trust posted financial losses for most of the years Sarcoa was a tenant. Sarcoa Co-owner Sam Destro told the Bay Observer he believes the rent dispute was used as an excuse to break his lease, allowing the city to realize a much higher return on the property than would have been available under the lease with HWT and Sarcoa. Destro said he and his partner were prepared to step aside to allow development of the property provided they were compensated for their $5 Million investment in transforming the former museum into a night club. They had even brought forward a proposal from a Toronto developer who was prepared to cover Sarcoa’s rent arrears in exchange for an opportunity to conduct some due diligence on future development but before those discussions could go anywhere a notice was posted on the building and Sarcoa was locked out. The Sarcoa lawsuit with the city is expected to go to discovery in April.
With the latest pledge of $3 Million to the Hamilton Waterfront Trust, and the $15 Million worth of sole-sourced construction work council has recently awarded the agency, Hamilton council will have committed nearly $23 Million in public funds to the Trust, just since 2010. All of this has been extended to the HWT without council seeing, or asking for, a long-term business plan. This comes as city budget staff have introduced a new budget process that calls for all in-house city departments to submit business plans to support their expenditures. The staff report also recommended against taking the HWT operations in-house; although details of the widely- predicted recommendation were kept confidential due to the requirement to protect identifiable individuals. The Trust essentially consists of Executive Director Werner Plessl and a small administrative support staff.