The Bizarre Marketing of our Surplus Properties
by Hubert Hogle
Last updated to July 13, 2020
Summary: Tax collection in Greater Napanee is so lax that numerous properties have a decade or more of tax arrears. The arrears often exceed the value of the property. Tax sales have been conducted sporadically and often fail when no offer is received equal to the taxes owing. In such cases, the usual practice is to “vest” the property in the municipality, which can be done within 2 years after the failed tax sale, and sell it through a real estate agent in the usual way.
But staff have been neglectful in doing vestings, in many cases have had to repeat the tax sale process after the 2-year period was allowed to expire with no vesting having been done.
Our council has directed staff several times to get this done but the problem continues.
Recently staff have started managing the sales of surplus properties (vested tax sale properties or buildings no longer required for operations) in suspicious ways with one property having been sold for $10,100 to the former mayor who flipped it 79 days later for $100,000.
The public are, quite rightly, starting to howl.
At a meeting on January 23, 2018, Gerry Haggerty addressed council and noted that when tax sale properties are advertised, the property descriptions (lot and concession, roll number) do not give the public enough information to know where the property is located. Mr. Haggerty inquired why civic addresses aren’t used, why a sign isn’t placed on the property or why the notice isn’t listed in the MLS system. There is no record of any response to this inquiry.
On July 17, 2018, the Treasurer reported to Council on 4 unsuccessful tax sales and recommended that staff “carry out due diligence inspection of the property prior to registering a notice of vesting with the view to resell the property at whatever price the municipality wishes.”
The report stated, “If Council approves this approach, at a future meeting, Staff will present to Council options on how to proceed with the future sale of the listed properties.”
Council approved this and directed that the properties be declared surplus once vested by the municipality and advertised for sale.
At the August 21, 2108 meeting, Councillor Harvey (a real estate agent) inquired as to the status of the staff report regarding unsuccessful tax sale properties vested by the Town, but not yet sold and the option to sell them through MLS. The Treasurer said he would bring forward a report to the next Council meeting.
On September 11, 2018, the Treasurer recommended that Council declare surplus 25 vested properties listed in a schedule and that those properties be advertised as such. Council approved,
The Treasurer’s report noted:
Also, per Section 4 of By-Law No 07-59, [Sale of Land By-law] the municipality shall obtain an appraisal of the fair market value of the land and once the properties have been declared surplus to the needs of the municipality, Staff will be able to search for an appraiser and prepare a report to Council as to the priority listing of properties to sell. The report will include methods of selling the properties. Staff will investigate options to list and sell the properties in a fiscal manner that best meet the objectives of having these properties active and contributing tax revenue.
But nothing happened.
The small newspaper ads:
At the first meeting of the new council on December 18, 2018, the following motion was passed.:
RESOLUTION #498/18: Kaiser & Pinnell That Council resolve itself into closed session pursuant to Section 239 of the Municipal Act in order to discuss… two prospective dispositions of land…
Subsequent events would indicate that the two pieces of land were 32 Oke Road (a Butler Steel building) and the 16 acre Heritage Park Subdivision, now de-registered as a subdivision.
In light of what is now known, I am suspicious that the five new councillors were unwittingly recruited to approve the sale of 32 Oke Road and Heritage Park Subdivision in the way that subsequently occurred. – with the only advertising a small newspaper ad. (I think it is fair to characterize the small newspaper ads to be a charade.) It is not known if the closed session was somehow used to exempt the sales from the safeguards set out in the sale of land by-law.
The Dithering and Stalling Continues
The Service Area Update on December 18, 2018 noted that a report to council would be forthcoming as to options to sell remaining surplus properties
The Service Area Update on January 22, 2019; February 26, 2019; March 26, 2019 and April 23, 2019 each indicated that staff was still “reviewing other options to sell surplus properties.”
On February 26, 2019 James Ward and Alex Adams of Rogers & Trainor made a detailed powerpoint presentation to council, regarding the sale of surplus properties.
On March 12, 2019, a report was made to council which included the proposal of Rogers & Trainor sell the remaining 23 parcels of land which had been declared surplus. It noted that of the available properties, three parcels (25.9 acres) are currently in the process of being offered through a sealed public tender process.
It is not clear what those 3 parcels were. Only 2 parcels, 32 Oke Road and Heritage Park were offered for sale by sealed tender.
It is unclear how or why those two properties were selected for special treatment by sealed tender.
It was also not clear why staff were dithering on selling the remaining surplus properties.
In any event, council dutifully passed the suggested resolution 163/19
…that Council acknowledge that existing By-Law No. 07-59 [Sale of Land By-Law] is adequate for the purpose of sales and other disposition of Town land; And further that Council authorize staff to enter into a pilot project with Rogers & Trainor Commercial Realty Inc. for the purpose of developing a process for the disposition of municipal commercial, industrial, and development lands; And further that Council direct staff to provide monthly updates to Council with a final report date due at the Regular Council meeting in December 2019.
Why it should take 9 months to list these properties is totally baffling. It seems that staff were stalling on the clear direction of council on July 17, 2018 and September 11, 2018 to advertise and sell them. Why they would do this creates suspicion in light of what happened with 32 Oke Road and Heritage Park.
The Former Mayor buys 32 Oke Road… and flips it for a Tidy Profit:
In April, 2019, two small ads appeared in the Napanee Beaver calling for tenders on short notice for 32 Oke Road and Heritage Park. The ads identified the properties by assessment roll numbers with no map or any indication of the nature of either property. No one, except those with an inside track would have had any inkling what the ads referred to.
The tender forms required a deposit equal to 100% of the bid, an unusual term by any measure. The short time frame, the minimal advertising and the demand for 100% deposit no doubt had the effect of suppressing outside bids. Perhaps that was the intention of staff, in which case the small newspaper ads were a charade.
32 Oke Road was sold to the former mayor for $10,100 (an undervalue by any measure) even though there was a cash offer for $32,500 which could have been accepted. The provisions of the sale of land by-law requiring an appraisal, and council oversight of the sale process do not appear to have been followed.
My Thwarting of the Staff Attempt to Sacrifice Heritage Park
Anticipating that the very valuable 16 acre Heritage Park subdivision property was about to be sold for a gross undervalue, I attended council on May 14 and pointed out to them (most of whom seemed unaware of what was happening) the insanity of trying to market the valuable Heritage Park property in this manner.
Nevertheless staff still proceeded with the sale of Heritage Park which had been advertised only with the small ad in the Town section of the Beaver. But, at before the scheduled tender opening the CAO cancelled the sale on his own ititiative. A bid was submitted by Rapel Patel, owner of an adjacent convenience store (this one on time) but not accepted.
On August 14, the former mayor sold 32 Oke Road (which he had bought 79 days earlier for $10,100) to John Hoy for $100,000. I learned of this shortly after and verified it through Teranet, Ontario’s land titles system.
Council is Ticked. The CAO tries to explain.
On May 28, the CAO felt inspired to respond to my complaint about the sale process for Heritage Park in an unusual and unscripted verbal report. It was summarized in the minutes as follows:
CAO provided a detailed verbal report regarding the timeline for the former Heritage Park subdivision lands, why the land sale public tender was cancelled, and highlighted the following:
▪ the public tender process for the sale of the lands was in place prior to the Rogers and Trainor process coming into effect
▪ the tender was advertised in the newspaper, on the Town’s web site and through a professional real estate FACEBOOK site
▪ the requirement for the full tender amount to be submitted as the deposit is to ensure that the bidder has serious intentions and the financial ability to develop the lands
▪ moving forward the Town will benefit more from the property taxation that will be generated than the price paid for the land
▪ a request for an extension was requested by a potential bidder the day before the closing and after legal consultation the process was cancelled as not all interested parties could be notified
▪ a report will come forward to Council regarding the future process for the disposition of these lands.
This explanation does not cut it. No serious vendor would try to sell a property worth $1-million, demanding a deposit with each offer of the full purchase price. It’s common to ask for a 5 or 10% deposit, but not 100%, especially on a transaction of this magnitude.
It was clear that staff had been conducting private negotiations for the sale of Heritage Park for some time and they seemed to me to have an agenda. A neighbour reported that that NV, a builder/developer, had been allowed on the property in February to dig test holes. I viewed the test holes and later quizzed a staff member who confirmed that only NV had done an inspection, no one else had and the Town did not have the results of the soil tests.
I suspect that the planned sale to NV by staff (with the small newspaper ad just a charade) had been thwarted by my attendance at council to object.
Staff Lists Heritage Park, well sort of…
On July 24, Heritage Park was listed with Rogers & Trainor for $1.1-million. But it was not a normal listing by any measure.
Potential bidders had only 28 days to get their bids in. The listing required bidders to submit bids using the Town’s form. But the realtor didn’t get the form until 8 days before the time limit for bidding expired.
The Heritage Park property is a complex property and any serious developer would need time to do due diligence (soil testing, EAs, check utilities connections, drainage, grades etc.). This can’t be done in such a short time frame. A property like this should be advertised widely and exposed to the market for 3-6 months to attract the best price. Any serious purchaser would need full access to the property to do due diligence. Anyone without advance knowledge is being asked to buy a pig in a poke. Once again, the short time frame has the effect of suppressing outside bids.
Perhaps that was the intention.
It seems strange that this sale of Heritage Park proceeded with such haste after the property had languished for 20 years with unpaid taxes.
The lengthy negotiations with Selkirk:
On September 10, council approved a sale of Heritage Park to James Selkirk Custom Homes Ltd in closed session. The decision was ratified in open session and authorized the Mayor and Clerk to execute all documents and take all actions necessary to complete the sale of the former Heritage Park Subdivision property as outlined in the confidential report of the General Manager – Community & Corporate Services received by Council in Closed Session.
It took 227 days for this to happen. During that time staff continued to negotiate with Selkirk. What happened during that time is a mystery.
The Service Area Update on September 24 stated that the closing was anticipated in November and a “pre-consultation meeting” was being scheduled between municipal staff, consultants and the prospective developer’s team to discuss a revised plan of subdivision.
The Service Area Update on November 26 stated the sale would close in January.
It didn’t. Negotiations with Selkirk dragged on and the closing took place on on April 24, 2020. Teranet records indicate a sale price of $1.15-million which I am certain was much more than NV would have paid.
What additional documentation was signed during that 227 days has never been revealed. We do know that two parcels were conveyed in separate transfers thus enabling the purchaser to build four semi-detached units which can then be split without a severance creating 8 separate saleable units thus alleviating the purchaser from the need to apply for severances and allowing him to extract a good part of the purchase price before a new subdivision has been approved.
What other concessions were made? Were impost fees and development charges waived as was reputedly done with Hampton Inn? We probably will never know. And council, if they know, is prohibited by by-law from ever telling us.
A media release was issued on the day of closing touting the benefits of the project. Nothing was disclosed about the lack of transparency or what inducements, if any, were given to get the deal done.
I am delighted to see this property being developed after it had been allowed to grow up in weeds and brush over the last 20 years. $1.15-million is significant but it was insufficient to recover the $1,307,150.27 of tax arrears which were written off on January 9, 2018 on vesting.
The Listing of the remaining properties drags on… and on
In the meantime, what was happening with the listing for sale of the other surplus properties which had been postponed back in March? Well, not much. On Dec 17, 2019 staff did another stall on the sale of the other surplus properties, with the exception of the Old Library. They put forward the following resolution and council dutifully passed it.
RESOLUTION #634/19: Kaiser & Pinnell That Council receive for information the Community & Corporate Services -Rogers & Trainor Pilot Project report; And further, that Council acknowledges the December 31, 2019 end of the Rogers & Trainor Pilot Project with a final report due to Council once the Agreement for Purchase and Sale of the former Heritage Park subdivision is complete…
The reason given by staff for the stall makes no sense at all. Here’s what the staff report said:
To date, not enough data has been gathered to accurately assess a process for the
disposition of municipal commercial, industrial, and development lands. However; initial
observations are that consideration should be given to:
A. Publishing an RFQ for an Agency-of-Record for Commercial/Industrial and multiresidential parcels;
B. Publishing an RFQ for an Agency-of-Record for viable single lot residentially
C. Consider using GovDeals for limited residential properties; and
D. Holding properties for the competition of the review of the Official Plan.
Nine months after Council had authorized staff to enter into a pilot project with Rogers & Trainor Commercial Realty Inc. for the purpose of developing a process for the disposition of municipal commercial, industrial, and development lands, essentially nothing had been done and now staff was now presenting a smorgasboard of bizarre excuses to stall the sale of surplus properties even longer with proposals to sell them in even more bizarre ways.
Council gave staff until The Heritage Park sale closed (April 24, 2020) to get this done.
It still hasn’t been done.
The Old Library:
On April 23, 2019, council approved a staff recommendation and declared the Old Library, 37 Dundas W surplus. Mayor Isbester declared a conflict of interest giving as a reason that it “may involve a future land transaction with a family member”, left the chair while this was dealt with and took no part in the decision of council.
Seemingly, by June 25, 2019, Mayor Isbester’s family had lost interest in the property. On June 25, 2019, council receive a report regarding 37 Dundas W and directed staff, via the Rogers & Trainor pilot project, to list it for $229,000. Mayor Isbester did NOT declare a conflict of interest on this or on subsequent dealings with the Old Library.
It took staff over a year to list it with Rogers & Trainor.
The June 25 staff report suggested, for the first time that the property be rezoned from CF (Community Facility) to C3 (General Commercial). This seemed strange since either CF or C3 zoning would be compatible with surrounding uses. And it suggested that staff was zoning the property to suit a particular buyer who had already been picked.
The June 25 resolution to list the property for sale with Rogers & Trainor contained the following clause that I viewed with alarm:
And further that the General Manager – Community & Corporate Services be authorized to act on behalf of the Town of Greater Napanee during the sales process; And further that the final sales agreement(s) be approved by Council.
To me, this sounded like a complete abdication of council’s duty of oversight and it carried risks. Why staff requested this unusual authority created suspicions in my mind of their intentions. I’m not even sure it was legal for council to do this without a change in the Sale of Land By-Law.
The rezoning was completed on March 10, 2020.
On May 19, 2020, staff did another stall. Eleven months after having been directed by council in very clear terms to list the property for sale, staff proposed to lease it for a year, possibly to their pick for buyer (they never said).
Council finally balked and decided to deal with this in closed session later. The closed session took place on June 9, 2020 which continued until almost midnight. Council looked exhausted when they came out. A resolution was passed directing staff to list the property at 37 Dundas Street West for sale through Rogers & Trainor.
In other words, a year after staff had failed to deliver on council’s clear direction to sell the property, council told staff once again to … do what we told you to do in the first place.
I am told by three reliable sources (yes, people are leaking stuff to me) that the property was shown by a number of realtors to several potential purchaser months earlier and that staff already has a preferred purchaser.
I am not sure if any of this has been communicated to council.
The property was not in fact listed for sale until July 2020. When it was, it was not a regular listing but another one like the Heritage Park listing.
The listing has a cut-off date of August 11, 2020. All offers must be submitted by that date. The Town’s form must be used which has a lot of special conditions, not shown on the Rogers & Trainor website. After the bids are in staff may request additional info and negotiate with the various bidders. There’s no guarantee they will accept the highest bid.
To me this process doesn’t sound like it’s designed to get the highest price for the benefit of the taxpayers, in a fair, open and transparent process. I believe there’s every reason to be suspicious. There’s every reason to suspect that the listing is just a charade, designed to legitimize staff’s attempt to steer this to their preferred purchaser.
Staff recommendation will, no doubt, be presented to council in a secret session which muzzles all councillors. Council may or may not be told about the other bids. We’ll never know. Councillors are prohibited by Town by-law from disclosing what happens in their secret session.
Staff cleverly inserted into the offer form a clause which muzzles all bidders too.
All people making offers must sign a confidentiality agreement as follows:
If this transaction is not completed for any reason, the Buyer shall promptly deliver to the Seller all Closing Documents, information and materials relating to the Lands delivered to the Buyer by or on behalf of the Seller and all reports and information prepared by or for the Buyer in regard to the Lands, including but not limited to, any environmental reports and soil tests commissioned by the Buyer, and shall keep in confidence all such information and all discussions between the Seller and the Buyer with respect to the Lands in connection with the review by the Buyer of the Lands.
It’s bad enough that your councillor can’t tell you what happened. But staff have taken steps to make sure bidders can’t tell you either. We’ll never know if the successful puchaser received any inducements such as waivers of devlopment charges or impost fees. The only thing we will find out is what we learn from a carefully worded press release issued after closing.
How was this process developed?
We don’t know.
That was done in secret session too.
But, don’t blame your councillor. They may have opposed it. They’re not allowed to say. Even after the sale has closed. That’s what the by-law says.
This page will be updated as events unfold.