In my research, I’ve uncovered some classic illustrations of how smart developers can mislead the people North Americans elect to govern their cities and towns. In those cases, their pursuit of their business ensures that it is they, and not the representatives we have elected, who decide the futures of our communities. In this entry I present such a case from Edmonton. It happened in the 1980s, but it is worth understanding exactly what occurred because similar events take place every year in many communities, and awareness is the first step toward self-defence.
My research shows that developers found it easy to manipulate Edmonton’s city council again and again, and to put taxpayers in the position of paying for a development over which their representatives exercised no meaningful control. They used a bait and switch tactic which, though blatantly obvious in retrospect, is not always easy to spot before it is too late. Edmonton’s story is a cautionary tale. It ought to be required reading for city councillors throughout North America, and for anyone concerned with democratic control over the development of our cities.
As I said in the introduction to this series, we should not waste our outrage on the developers, who serve their investors – and therefore do their jobs – by exploiting weaknesses in our institutions of local governance. In our democratic system, we have collectively agreed to allow ourselves to be governed in this way. We need to think about how we can change this system, and I hope to address that question in future, but a good first step is to understand the problem, and a clear illustration is a good way to start.
In the 1970s, downtown Edmonton was the retail centre of the metropolitan area, and the city had a policy of sustaining that role by supporting the viability of residential neighbourhoods near the centre of the city and placing limits on the amount of permitted suburban shopping centre development. That policy was forgotten when the Triple Five Corporation offered to develop the West Edmonton Mall, then the largest shopping centre in the world.
The development of massive amounts of new suburban retail floor space, accompanied by free parking and such attractions as a wave pool and a carnival ride, dealt a crushing blow to the downtown and in the 1980s empty buildings sprouted. As the city government desperately sought some way to restore life to the city centre, the same Triple Five Corporation that had developed the West Edmonton Mall offered a solution to the problem it had created, the development of a downtown mall, to be called the Eaton Centre.
Triple Five’s approach to dealings with the city was the time-honoured bait-and-switch tactic. It involved making an irresistible offer to obtain a massive commitment and then using local politicians’ commitment to keep them on-side, even as the more attractive features of the original offer were withdrawn, and its price increased. The key decisions concerning the Eaton Centre development were taken during two rounds of negotiations, the first taking place in 1980 and the second in 1985-86.
In the 1980 negotiations, Triple Five Corporation, in partnership with T Eaton Co Ltd of Toronto, announced plans for a massive, $500 m residential and commercial development consisting of an Eaton’s department store, a 31,500-square-metre shopping mall, three office towers of 39 to 40 storeys and two residential towers of 51 and 52 storeys, with 1,236 one- and two-bedroom rental or condominium units.
The development, taking in most of two square blocks of prime downtown land, would boast a roof-top restaurant and gardens and the residential part of the development would include a recreation centre with a gymnasium, swimming pool, exercise room, handball and squash courts and a social room. The Eaton’s store was to be the second largest in western Canada, after the downtown Vancouver store.
For Edmonton City Council, the attractions were virtually irresistible: a massive boost to the economy of the inner city, including both commercial and retail elements, together with a formidable increase in housing to help rally the eroding inner city housing sector. A development agreement was signed on October 8th.
The bait was in place. Next came the switch. In December, Nader Ghermezian, managing director of Triple Five, appeared at a council meeting to demand a re-opening of the agreement and the addition of a series of concessions. He warned that if the concessions were not forthcoming that day, the entire project would be cancelled. He had a letter from a solicitor for the Triple Five Partner, T. Eaton, which was said to confirm the urgency of the need for concessions, but which only Mayor Cecil J. Purves and two councillors were allowed to see.
Among the demands were cancellation of a redevelopment levy that the developer was to pay, and of the plans for a roof top restaurant, agreement by the city to fund sidewalks and setbacks for the project and to relieve the developer of the costs of leaseholds covering encroachments upon city property. Estimates of the cost of these concessions ranged from $5 m to $15 m. City council, galvanized by the impending collapse of such a large project, agreed to the concessions.
Enquiries by journalists later established that the letter from an Eaton’s lawyer had been a formality, designed to protect Eaton’s position in case of a break-down in negotiations, and had not been intended as a sign of Eaton’s dissatisfaction with the terms they had received, terms with which they in fact declared themselves satisfied. But the unkindest cut was yet to come. Nine months later, Eaton backed out of the deal despite the concessions, still denying it had sought them. In other words, the city had granted concessions, which it remained obligated to deliver, even as the rationale for them became moot.
With Eaton out of the picture, the development ground to a halt, but in time the bait and switch resumed. In 1983, a promised revival of Eaton Centre failed to materialize once an expansion of the West Edmonton Mall had been secured. In 1985, once again the project reappeared. Eaton declared it could proceed if the city offered further concessions and the negotiations resumed. In the course of those negotiations, the project changed substantially, first becoming grander in the “bait” phase of the negotiations and then contracting again in the “switch” phase, as final agreement neared.
In August, for example, the project’s rhetorical status was elevated from the mediocrity of second place in western Canada to the pre-eminence of world renown. According to the Edmonton Journal, it was touted as including “a major recreation centre with tennis, racquetball and squash courts, an Olympic-size pool, diving tank, indoor jogging track and gymnasium for aerobics… There would be 20 theatres, a 3000-stall parkade, and more than 45,000 square metres of department store and retail space [in place of the 31,500 mooted earlier]. ‘This will be the strongest magnet in the Province of Alberta,’ Triple Five’s Ghermezian said… ‘It will attract tourists from all over the world…'” The two apartment buildings previously promised had been transformed into a 40-storey hotel-apartment. There would be 2,000 apartments [in place of the earlier 1,236 units], and 300 hotel rooms.
By late January, 1986, with negotiations well along but not complete, the project had lost some of that sheen, with the profit-making parts of the project expanding while the non-profit-making elements contracted. It was slightly bigger overall than before (3.9 m sq ft compared with 3.85 m sq ft), but the residential component had been almost halved, from 2.276 m sq ft to 1.269 m sq ft, while the office tower component increased from 850,000 sq ft to 1.536 m sq ft and additional retail space was added. And then the pressure was cranked up. Eaton’s had said it would commit to the project provided excavation started by May 1st. In late February, with the development agreement not yet ready, city council was being asked to approve an excavation agreement in order “to maintain the timetables established by the partners in the project…” Council was becoming more and more deeply committed to the project without yet having had a chance to read the fine print.
Meanwhile, under a new Mayor, Laurence Decore, the city had committed itself to its own plan for the revival of the city’s commercial heart. One of the key elements of its plan was the 102nd St Arcade, a glassed-in mall that would have cut through the centre of the Eaton development. Triple Five was not prepared to make provision for the arcade. Mayor Decore and others argued that Council was too willing to take Triple Five’s claims at face value, that competing bids should be solicited for the development of the Eaton Centre project, that the project should be required to accommodate the 102nd St Arcade, and that the developer should be obligated to include actual housing, as opposed to promises of future housing, in the development.
As negotiations drew to a close, the main issues were the inclusion of residential units, provision for the 102nd St Mall, and the financial concessions demanded by Triple Five. Planners estimated the total cost of concessions at $30.4 m. In May, in a vote that overrode Mayor Decore and his supporters, Council agreed to the concessions, without guarantees of a residential component and without provision for the 102nd St Mall.
In the end, it proved to be Triple Five Corporation, not City Council, whose commitment to the viability of Eaton Centre was shaky. The assessment of a business publication offers some insight. By 1992, the Ghermezians had sold their share in the development to Confed Life for $1. That year, Canadian Business characterized Eaton Centre as a “money-losing mall” that, “In a city vastly overbuilt with malls…” was recovering only because new management had found “ways to steal shoppers from competing malls…” The sale of the property for $1 suggests, as does the other evidence on Eaton Centre, that it was the city that was assuming all the risk connected with the development and that Triple Five had little to lose, regardless of the outcome.
A review of the deal by Edmonton’s Auditor-General concurred that the city was the loser. Projecting the financial consequences 40 years into the future. He concluded that “…the Eaton Centre package… does not result in a positive cash flow to the city until approximately the year 2004. The net present value of this concessions package for the 40-year period is negative.” Even if someone thinks that is a good enough outcome for the public money expended, the lack of council control throughout the development process raises troubling questions about the way we govern our cities.
The facts cited in this entry are documented in detail in:
Christopher Leo. “Global Change and Local Politics: Economic Decline and the Local Regime in Edmonton.” Journal of Urban Affairs 17 (3), 1995, 277-99.
A related article, comparing Edmonton’s situation with the very different circumstances of Vancouver is:
Christopher Leo. “The Urban Economy and the Power of the Local State: The Politics of Planning in Edmonton and Vancouver.” In Frances Frisken, ed, The Changing Canadian Metropolis: Contemporary Perspectives, vol 2. Berkeley: Institute of Governmental Studies Press, University of California, 1994, 657-98.
To read the other two posts in this series click here and here