Downtown Hamilton entertainment consortium in line for 30-year tax break on redevelopment properties
A 30-year tax break is in the works for a private consortium tapped to revamp Hamilton's entertainment venues as part of its sweeping multimillion-dollar deal with the city.
The tax-based grant is designed for three downtown properties the consortium will acquire from the city in exchange for the $62.5 million minimum it plans to spend on overhauling the arena, convention centre and concert hall.
The rebate is a key component of the overall agreement, PJ Mercanti, who leads the Hamilton Urban Precinct Entertainment Group (HUPEG), told The Spectator.
It was a whole package where we wouldn't do the deal without this program being at play," Mercanti said.
City staff touched on the tax grant in a recent overview to councillors of new and existing incentive programs meant to spur redevelopment in Hamilton.
The HUPEG grant in particular springs from a confidential master agreement the city finalized with the consortium in June to refurbish and operate the aging municipally owned entertainment venues.
City officials won't share the master agreement, citing a need to protect the municipality's competitive advantage in potential future ventures with private partners, despite the millions in public assets at play.
In August, the city rejected The Spectator's freedom-of-information request for a confidential report and appendices related to the deal, noting they were discussed in camera under a clause of the Municipal Act that allows private discussions for real estate matters.
However, the city has described major components of the agreement. It will see HUPEG lease downtown's FirstOntario Centre, FirstOntario Concert Hall and the Hamilton Convention Centre from the city for a guaranteed 30 years and as long as 49.
Based on a consultant's study, city officials say the deal will save taxpayers at least $155 million over 30 years by shifting operating and capital costs to its private partners.
This year alone, the city budgeted just over $4 million to subsidize the operations of the three venues and $800,000 for capital needs.
Also as part of the deal, HUPEG will acquire three downtown properties: the city's York Boulevard parking garage, a municipal parking lot at 14 Vine St. and 191 York Blvd., where a social-service agency leases a building.
That's effectively ... an exchange of property for investment and ongoing liability," said Ryan McHugh, the city's lead on the entertainment precinct negotiations.
HUPEG plans to spend at least $62.5 million on the entertainment venues, while the properties are worth considerably less" than that, not to mention the operating subsidies and capital costs the city sheds through the deal, McHugh added.
In July 2020, council chose HUPEG - which includes the Mercanti-led Carmen's Group, labour union LIUNA, Meridian Credit Union and Paletta Group - for the venues revamp over a pitch by developer Vrancor.
HUPEG plans to spend at least $50 million to renovate the York Boulevard arena - a refurbishment that includes a new facade and video board, transformed lower bowl, expanded concourse level and flexible curtaining mechanism for the upper balcony.
Another $12.5 million worth of work is planned for the convention centre, which Mercanti's Carmen's Group already operates, and the concert hall.
The 30-year tax grant - also contingent on that minimum $62.5-million investment - is to apply to the three downtown properties (the Vine parking lot, York garage and 191 York Blvd.), which HUPEG plans to transform into high-density residential buildings with commercial space.
In the first year, the grant would cover 100 per cent of any increase in assessment that results from the redevelopments, but by Year 5, decrease to 20 per cent. The grant sits at 39 per cent and 35 per cent for the remaining years.
Mercanti noted the final value of the grant will depend on the scope of the still-undefined redevelopment plans.
For years, the city has offered developers tax breaks to spur economic activity downtown and in other parts of Hamilton, including Barton Street East and Kenilworth Avenue.
In 2017, for instance, council approved a five-year grant worth an estimated $1.8 million for Vrancor's 32-storey residential building at George and Caroline streets.
The highrise project, estimated to cost $67 million, was expected to increase the vacant property's assessed value to roughly $50.5 million from about $1.2 million, a staff report noted.
McHugh declined to share details of the lease for the entertainment venues but noted HUPEG's primary form of payment" will be a surcharge on tickets sold for events at the entertainment venues.
The city will hold those funds in trust and put them toward agreed-upon" work for the three buildings, he said. There are different steps taken to protect the taxpayer and that's one of them."
Staff expect to provide councillors with more details about the grant program before the end of the year. Those terms will require council's approval. HUPEG will have to formally apply for the grant.
Mayor Fred Eisenberger described the tax grant and three downtown properties as an advantageous trade-off" for the city given the benefits of the overall entertainment venues deal.
Taxpayers avoid $155 million in costs over 30 years, Eisenberger said, referring to figures presented in the 2019 Ernst and Young consulting report.
It's nothing but benefit, and at the end of the day, there's always some compromise in terms of what's offered up."
But a 30-year agreement that subsidizes a private consortium to the tune of millions during a housing crisis raises questions, said Tom Cooper, director of the Hamilton Roundtable for Poverty Reduction, acknowledging he wasn't privy to the deal's details.
At a time when the city is tearing down encampments and low-income tenants are fighting against renovictions and the aggression of property-management barons," Cooper said, there's a not-too-subtle message that the well-heeled and influential in our community can expect sweetheart deals, while those without power will continue to struggle."
The revamped arena, concert hall and convention centre form part of HUPEG's overall vision for a downtown arts and entertainment district. New shops and eateries in the York Boulevard area are intended to draw patrons from the residential buildings the partners plan to build.
The whole concept is to create a live, work, play environment," Mercanti said.
Upgrades to the venues and private-sector management efficiencies and principles" should make them more viable, he said, expressing optimism that the battered hospitality and entertainment sectors will recover from the COVID-19 pandemic.
Some of the FirstOntario Centre's renovation projects are expected in 2022, while anchor tenants like the newly relocated Toronto Rock professional lacrosse team and Hamilton Bulldogs OHL hockey squad play in the building.
But the arena will likely be shut down in 2023 to do the rest of the work, which is expected to wrap up in early 2024, noted HUPEG partner Jasper Kujavsky.
The timing of the residential redevelopments on the three downtown properties is a subject of continued discussion among the consortium's partners, Mercanti said.
Teviah Moro is a Hamilton-based reporter at The Spectator. Reach him via email: tmoro@thespec.com