Thursday, January 11, 2018

Options for the Sale of the Old Firehall

Old Downtown Firehall

Equity Rental Ltd.'s proposal 

Design Works/Grain Bin's proposal

So I’ve heard quite a bit of chatter about the City’s sale of the old downtown firehall.

There seems to be some misunderstandings about the RFP process and where Council can take it from here. I thought it’d be worthwhile to get some facts out there.

Here’s the background in a nutshell:

The previous Council decided to sell the old downtown firehall last summer, of which I was supportive. Council chose to put this out in the form of a request for proposals (RFP) as opposed to a straight out bid process where the highest value bid would get to buy the property. An RFP process allows for considerations other than purchase price to be taken into consideration in selecting a buyer. The Community Growth committee was then asked to give input on what considerations should factor into the RFP. These considerations and their weighting were made available to those interested in submitting a proposal. The RFP was then sent out asking interested bidders to submit proposals for what they would do with the space. Two valid proposals were received and graded.

Equity Rentals Ltd. proposed converting part of the building into a restaurant and adding an additional story on the office tower portion for additional office space. They proposed a buying price of $855,000 and indicated that the value of their renovations would create a net economic impact of $5.5 million.

Design Works Engineering & Inspections and Grain Bin Brewing Company proposed locating their brewery there along with a taproom and retail space. They proposed a buying price of $900,000 and indicated that the value of their renovations would create a net economic impact of $1.8 million.

I was very pleased to see the companies who submitted the proposals. Each one has a wealth of experience in the local construction industry and I believe each would do an excellent job of revitalizing the old building and that area of downtown.

The report indicates that Equity Rentals Ltd. received the highest score and administration is recommending that the City enter into negotiations with them for the sale of the property.

While a breakdown of the scores is not made public, I suspect that the much greater proposed net economic impact of Equity’s bid was a significant factor in their greater score.

So big deal, can’t Council just choose which proposal they like better?

Not quite.

An RFP is a legally binding process.  All potential bidders knew the weightings before they submitted. All proposals were evaluated against those weightings and scores were derived. Council had influence over the decision when the weightings were developed and then gave administration its marching orders. If Council were to award the RFP to a bidder with a lower score, they would be opening themselves up to a legal challenge by other parties who submitted. And those parties would likely be successful.

So what are Council’s options at this point?

        1. Accept the recommendation and enter into negotiations with Equity Rentals Ltd.

If Council goes with this option, they still have the ability to influence the negotiations of the property sale. As Council did with the York/Germain site, there would like likely be a condition that work has to be completed in ‘x’ amount of years. There would also likely be some verification of the proposed $5.5 million economic impact.

2     2.  Reject the recommendation and cancel the RFP

If Council entertains this option, there are three directions Council could then go if it wants to continue down the path of selling the firehall (probably more, but these are the ones I’m most familiar with)

        a. Substantially change the RFP and re-issue

If Council feels that what was put in the RFP does not reflect this Council’s values and priorities, they could choose to substantially change the criteria in the RFP, re-issue it, and accept new proposals. The risk with this option is that Council can open themselves up to accusations of bid shopping. If they re-issued and the new weightings were to heavily favour a lower-scored bid from the first RFP, there would be grounds for a legal challenge from other bidders. Also, if a bidder felt that the RFP wasn’t changed substantially, but only tweaked to get a certain outcome that differs from the first RFP, Council could again open themselves up to legal action.

        b. Wait a year and re-issue

Council can always choose to wait a year and re-issue. This is normally done when Council is not impressed with any bids or if market conditions produced bids out of line with Council’s expectations. By waiting a year, the risk of being accused of bid shopping is significantly reduced. However, you do run the risk (as you do in option a. and c.) of turning away potential bidders. There is a significant amount of work that is put into developing these proposals and to just cancel the process and make everyone start over can be quite frustrating. If this becomes a pattern, potential bidders may simply choose to skip on bidding in the future.

        c. Choose another method selling the property

Council could list the building at an appraised price and entertain offers. Or Council could set up a bid process by which the highest bidder gets the property. The advantage with these methods is that there is less subjectivity and could generate a higher purchase price for the property. However, Council would not have as much ability to influence the future development of the property once it is out of their hands. This includes evaluating future economic impact of any development.
So there you have it.

Personally, I was very excited to see the quality of proposals. If only the City had two downtown firehalls to sell…

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