BREAKING: City looks at spending $4.75M to buy old hospital site

Italo Ferrari should be grinning ear-to-ear next week if city council approves a proposed $4.75-million purchase of the old hospital site.

Ferrari is general manager and the public face of Leisure Meadows Community Living Inc., which bought the former General and Plummer Hospital sites on Queen Street East for $1.3 million in 2019, promising to redevelop the waterfront properties into condominiums and a long-term care facility.

It never happened.

After five years of frustrating legal battles trying to get the property secured and properly maintained, Tom Vair, the city's chief administrative officer, now wants the city to buy the former Sault Area Hospital sites at 995 and 941 Queen Street East.

Under a negotiated deal to be presented at a city council meeting on Tuesday, Leisure Meadows and 1667271 Ontario Inc. would be paid $4.75 million for the properties.

1667271 Ontario Inc. is linked to Mike Anobile, who is also president of Leisure Meadows.

In 2013, TVM Group bought the properties (including 10 Lucy Terrace) for $65,000.

Municipal Property Assessment Corp. values the former General Hospital building at $199,000 and the Renal Building at $609,000.

Here's how Vair will pitch the objectives of the deal at Tuesday's council meeting:

• it will redevelop two blighted properties on the community’s waterfront (through the demolition of the former General Hospital site and refurbishment of the former Renal Building)
• it will enable development of new residential units in the community required for housing needs and to meet provincial housing targets
• it will stimulate new development which will generate additional assessment and increase tax revenue for the city
• it will mitigate staff time and expense on property standards violations and the legal costs associated with said violations

Under the proposed deal, the city would acquire ownership of the former General Hospital building, the former Renal Building, as well as lands along the waterfront.

Vair says a full demolition, including foundations and abatement is estimated to cost about $4.5 million to $4.7 million.

"Through discussions with multiple demolition companies, an opportunity could exist for a negotiated agreement where demolition services would be provided at a reduced cost in exchange for a portion of the land," Vair says in a report prepared for Mayor Shoemaker and city councillors.

The mayor is describing the proposed purchase as "a big step forward."

"I think it's important to note that the municipality never owned this building," Shoemaker told SooToday.

"We're often accused of having sold it for $65,000 in the first place. I think it's critical to note that Sault Area Hospital essentially owned the property, and it was sold.

"For a while there, it looked positive. I mean, the Plummer Hospital was redeveloped. It looked like there could be some activity on the rest of the sites.

"But as things have dragged on, have gotten worse, have deteriorated to such a degree that a barbed wire fence needed to be put up around the property, it became obvious that the municipality needed to step in and do something, or the current situation was just going to continue for the next decade or more," Shoemaker said.

"We are trying to be the drivers of redevelopment of that property. It negotiated what we think we can recover within a short period of time.

"On an average rate of return, the scenario had it returning our investment within a decade. In the best case scenario, it was within a year or two of redevelopment.

"So we are confident that we are doing the most fiscally responsible thing that we can do for the community," Shoemaker said.

Here's how city staff figure taxpayers are best served by buying the old hospital:

Analysis

Staff have completed analysis on the potential of this site to host additional residential units and generate tax revenue.

It is estimated that the site has the potential to host 140-422 residential units based on medium-density and high- density scenarios.

The annual municipal portion of tax revenue for this number of units will be dependent on the tax increment equivalent grant being utilized and also the number of affordable units constructed.

Over 20 years in a high-density scenario, the total incremental tax revenue (assuming a two per cent average annual tax increase) would range from $3.6M to $20.9M depending on the number of affordable housing units built.

The medium density scenario would generate $1.2-$6.9M.

Based on current experience, staff believe the scenario with 30 per cent affordable units would likely be the highest number of affordable units for a new development on this property.

In the high-density scenario, this translates to $15.3M over twenty years with a two per cent average annual tax increase.

The medium density scenario would generate $5M over that same period.

Staff believe this property is more likely to see a high-density development than a medium-density development, but provides the medium-density figures as a conservative estimate for the potential revenue.

Market interest

The outreach conducted to assess interest in the land and former Renal Building confirmed there is serious interest in the acquisition and future development of the property.

Based on these conversations, staff have a high degree of confidence in the city being able to sell the property in the immediate future.

It should be noted that in these discussions with interested parties, it was communicated clearly that a competitive request-for-proposals process would be undertaken should the city acquire the property.

Potential Proceeds from Sale

It is estimated conservatively that the city would generate $2.3M to 2.5M through the sales of these properties.

This is a conservative estimate and the RFP process may generate additional sales revenue.

Should the properties generate $2.5M, the city would then be invested into the property for $2.25M at the conclusion of the RFP process.

Depending on the density of development and number of affordable units (with anticipated tax increment equivalent grant, the city's investment would be returned in approximately a decade in the high-density scenario featuring 30 per cent affordable units.

Over 20 years, staff estimate the assessment generated will be a minimum of $5M to $15.3M (based on medium or high-density scenarios with 30 per cent affordable units and a two per cent average annual tax increase).

The use of the city's contingency reserve is recommended as the prudent path for the investment.

The city set aside surplus funds from the 2023 operating year into a contingency reserve.

The surplus amount put into the contingency reserve was $6,291,333.

To date, the city has allocated $505,000 of those funds to the YMCA leaving $5,786,333.

Therefore, the city has sufficient funds in the contingency reserve to cover the costs of the property acquisition.