Report to/Rapport au :
Corporate Services and Economic Development
Committee
Comité des services organisationnels et du développement économique
and Council / et au Conseil
Submitted by/Soumis par : Stephen Finnamore, Executive Director,
Business Transformation Services / Directeur exécutif, Services de
transformation des activités
Contact
Person/Personne ressource : Gordon MacNair, Manager, Real Estate Services
Real Property Asset Management/Gestion des
actifs des biens immobiliers
(613) 580-2424 x21217,
gordon.macnair@ottawa.ca
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SUBJECT: |
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OBJET : |
REPORT RECOMMENDATIONS
That the Corporate Services and Economic Development
Committee recommend Council approve:
1.
The acquisition of 25 Esquimault Avenue, described as
part of Lot 70, all of Lot 71 and Block A, Plan 479669, former City of Nepean,
now City of Ottawa (PIN #046960138) shown as Parcel ‘A’ on Document 1, for the
amount of $2,500,000.00 plus GST from 770 Holdings Ltd. pursuant to an
Agreement of Purchase and Sale that has been received;
2.
Demolition of the existing structure and remediation of
the site and an interim solution for the replacement of the Community Centre
estimated at a cost of $1,305,000.00; and
3.
Direct staff to prepare a redevelopment proposal for
the lands, which is to include a Community Centre and residential development,
as outlined in this report, and report back to Council in 2008 – 09.
RECOMMANDATIONS DU
RAPPORT
Que le Comité des services organisationnels et du
développement économique recommande au Conseil :
1.
d’approuver l’acquisition de la propriété située au 25, avenue
Esquimault, décrite comme une portion du lot 70 et tout le lot 71 et bloc A,
plan 479669 , de l’ancienne Ville de Nepean, maintenant de la Ville d’Ottawa
(NIP no 046960138) illustré par la
parcelle « A » dans le document 1, au montant de
2 500 000 $, TPS en sus, du 770 Holdings Ltd., conformément à
une convention d’achat et de vente reçue;
2.
de démolir la structure existante et de remettre en
état le site et d'établir une solution intérimaire pour le remplacement du
centre communautaire au coût estimé de 1 305 000 $; et
3.
de demander au personnel de préparer une proposition de réaménagement des
terrains, qui comprendra un Centre communautaire et un
lotissement résidentiel, comme il est expliqué dans le présent rapport, et de faire rapport au Conseil en 2008-2009.
BACKGROUND
The former City of Nepean occupied space at 25 Esquimault Avenue for programming and community use purposes since 1988, with the new City of Ottawa assuming Nepean’s obligations at the time of amalgamation.
In 1995, the City of Nepean entered into a 20-year lease for part of this facility. However, as a result of environmental issues and the City’s requirement to obtain a non-disturbance clause in that initial lease agreement, a subsequent interim lease arrangement was necessary pending resolution of these issues. However, no rent has been paid since 2001, due to a dispute between the former first mortgagee and the Canada Revenue Agency, whose claim has recently been foreclosed. The property title is now clear of any mortgages or other liens. The outstanding rent owing is $126,000.00.
During construction of an addition to the school, which was built by the former City of Nepean for community use purposes as part of the lease arrangement, furnace oil was discovered in the soil, which had an adverse impact on the soil and groundwater. The City of Nepean was required to address the soil and groundwater contamination issue at the site by an Order of the Environmental Appeal Board dated 12 August 1997, and the new City has continued the required environmental work. There are currently no public health risks associated with this contamination.
On 23 October 2002 (Report No. ACS2002-CRS-RPR-0033) Council approved a staff recommendation for the environmental cleanup of 25 Esquimault Avenue in accordance with an Order of the Environmental Appeal Board. Council also approved the continued use of a portion of the leased premises for programming and community use purposes at this location.
The
current risk management approach includes operation of a pump and treat system,
quarterly groundwater monitoring as well as drinking water and indoor air
monitoring in the school. No impacts to
drinking water or indoor air quality have been identified through the
monitoring program. However, the life
expectancy of the current approach to reduce the mass balance of the residual
petroleum hydrocarbons to the MOE site-specific criterion of 50,000 ug/L is
estimated at 25 years. The current cost
to implement this risk management program is approximately $100,000.00 annually.
It
now appears that the original school building on the site has reached a state
of repair that makes its retention uneconomical and demolition of the building
and sale of the property in the near future is likely. In that event, the sale of the property will
continue to require full environmental remediation by the City because of the
MOE order. Also, there would be no
guarantee that the current owner will not seek further damages from the City or
that a new owner will cooperate with the City in providing a replacement
Community Centre.
The
purpose of this report, therefore, is to outline an alternative to the ongoing
risk management approach, which has not resolved the contamination issue at
this site. As a result, staff is
recommending the acquisition of this property to bring resolution to the
ongoing environmental liability. The
acquisition option also provides a potential long-term opportunity for the
residents of Qualicum – Graham Park with the development of a new Community
Centre.
DISCUSSION
As
noted in the 23 October 2002 report to Council, there were a number of issues
surrounding the question of who was responsible for the clean up of this
site. Ultimately, after some litigation
and negotiation, an Order of the Environmental Appeal Board dated 12 August
1997 established that Ecole Maimonides was to supervise and manage the clean-up of the subject site and abutting properties and
the City of Nepean was to pay for the clean-up, without prejudice to its
right to pursue the recovery of costs from any other party in the future.
It
is important to note that this is a privately owned property, which consists of
a building that is approximately 31,000 sq. ft. including the City’s community
space of approximately 3,000 sq. ft.
Since
the discovery of contamination, the former City of Nepean and City of Ottawa
have attempted a series of remediation options, which have not resulted in
satisfactory outcomes. The challenge is
that the majority of contamination is located beneath the building.
There is no prospect of recovery of costs from any
other party (Ecole Maimonides went into default on its mortgage, and was
foreclosed by an assignee of the first mortgagee, 770 Holdings Ltd). A default
judgment was obtained against Ecole Maimonides for clean up costs, but it is a
shell, with no assets.
The rationale for recommending the acquisition of 25
Esquimault Avenue is to bring resolution to the ongoing environmental
liability. This can be completed by
demolishing the building and removing the majority of contamination which is
located beneath the building. As well,
the acquisition option also provides a potential long-term opportunity for the
residents of Qualicum – Graham Park with the development of a new Community
Centre. There is a risk that the
current Community Centre lease arrangement could be terminated in the
foreseeable future.
Two
independent appraisals were commissioned to estimate the market value of this
site. The current Zoning is – IS - Institutional School with a Proposed Zoning
– IA2 – Minor Institutional permits similar institutional uses. While one
appraisal considered the highest and best use of the site to be for a
retirement home, which is an institutional type use, it also recognized that
the site had potential for residential development with a low to medium density. The other appraisal considered the highest
and best use of the site to be a residential redevelopment likely for a
single-family detached development. A
reconciliation of both appraisals based on residential redevelopment results in
a market value estimate of $2,500,000.00, which assumes no environmental
contamination.
The
cost to demolish the existing structure is estimated at $650,000.00 while an
additional $600,000.00 is required for the remediation of the site. DST Consulting Engineers completed a demolition
assessment while the remediation estimate is provided by AMEC Earth &
Environmental. Additional funds of
$55,000.00 are required for the development of an interim solution for the
replacement of the Community Centre.
The future redevelopment scenario would envision a portion of the land being retained for a Community Centre with the balance being sold to defray part of the acquisition costs. Until a new community structure is built on site, staff will explore options of providing an interim solution such as providing a portable on site.
Table 1 summarizes
the cost to acquire and develop the site.
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Table 1 |
Acquisition & Redevelopment |
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Acquisition Cost (3.5 acres) |
$ 2,500,000.00 |
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Demolition Cost (bldg is 30,900 sq.ft.) |
$ 650,000.00 |
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Remediation Costs
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$ 600,000.00 |
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Temporary relocation of community centre |
$ 55,000.00 |
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*Construction of New Community Centre (3,000 sq.ft.) |
$ 1,000,000.00 |
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Restore property tax base |
($ 575,000.00) |
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**Potential Resale Value (3.0 acres) |
($2,000,000.00) |
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Outstanding payment of rent |
$ 126,000.00 |
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TOTAL |
$2,356,000.00 |
* This assumes a basic design with details to be finalized through the public consultation process as part of the redevelopment proposal
**This assumes that 0.50 acres of the original 3.5 acres would be retained to offset the requirement for a new Community Centre while the balance of the land would be redeveloped for low / medium density housing.
The acquisition proposal allows the City to have control of the environment liability, avoid potential litigation, build a new Community Centre, and direct the future development of the site.
Legal Services will be providing the legal background and opinion to support the recommendations in this Report by way of a confidential Report.
ENVIRONMENTAL IMPLICATIONS
It is anticipated that once the site is remediated the site could be redeveloped with the concurrence of the MOE.
CONSULTATION
The Ward Councillor and the Qualicum - Graham Park Community Association have been consulted about this matter. Real Property Asset Management (RPAM) also consulted with Parks and Recreation and Legal Services staff for the preparation of this report.
FINANCIAL IMPLICATIONS
Funds for the acquisition and subsequent demolition of the site are available from within the existing capital budget for the Real Property Asset Management, Real Estate Division environmental remediation program.
Any costs associated with the redevelopment of the site will be identified in a future report to City Council.
SUPPORTING DOCUMENTATION
Document 1 – Site Plan illustrating location of 25 Esquimault Avenue
DISPOSITION
Following
Council’s approval, the Real Property Asset Management, Legal Services and
Surveys Branches will finalize this transaction.
RPAM
will also make the necessary arrangements to demolish the structure after
closing and will follow up with remediating the site.
A
redevelopment plan will be developed by RPAM in consultation with the Parks and
Recreation Branch along with consultation with the Qualicum - Graham Park
Community Association.
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