City Council endorses phased approach to Edmonton Galleria project, but many questions remain

The long-discussed Galleria project received a fresh injection of life today after Council threw its support behind a phased approach that would see the $1 billion project constructed through 2020. The item was up at Executive Committee again after last year’s request by Council to find a way to lower the risk to the City.

Galleria

The Galleria project consists of the same components today as it did then: four performing arts theatres (1600 seat theatre, 650 seat theatre/concert hall, 200 seat theatre, 200 seat recital hall); the relocation of the University of Alberta’s School of Music, Department of Art & Design, and one other department; construction of an office tower; development of a covered public galleria; and commercial and retail opportunities. The difference is that now it’s not an all or nothing proposition.

Today’s decision by Council to endorse a phased approach means the project backers can seek funding from the other orders of government. It also means in theory that certain triggers must be met before the City needs to spend any money, the first of which is agreeing to a memorandum of understanding in September and giving final approval to the City’s financial contribution.

So how much would the City be on the hook for?

“The total project costs outlined in this report that would be the responsibility of the City total $58.3 million. When factoring in interest charges on the amounts that are eligible to be borrowed for, the total expected cash expenditure for the City is estimated at $75.2 million.”

It sounds like any City money would come with strings attached too: “The release of city funds would be dependent on EDAC achieving certain milestones including the securing of a tenant in commercial/residential development with income sufficient to cover the capital and operating commitments of the Foundation.” That’s a much better approach than they took with the arena. For now they’ve approved $7.5 million for the pedway between Churchill LRT Station and the Royal Alberta Museum.

As I mentioned last year, I’m fine with the land acquisitions the City would be making. That’s probably a wise investment whether the Galleria project goes ahead or not. But there are still too many questions outstanding for me to support this project.

Provincial or Federal funding

The Galleria project is only going to move forward if funding from the other orders of government can be secured, and that’s far from guaranteed.

We saw absolutely zero interest from the PCs in supporting the project, even with Irv & Dianne Kipnes as donors, so I don’t see why the NDP would be any more likely to support it. The Provincial government has stuck to its hard line against funding the downtown arena, and I’d be surprised to see them all of a sudden come to the table on the Galleria.

On the federal side, Mayor Iveson has said that Council has received “mixed signals” and that he’d be surprised if the project could secure any federal funding at all. It has not been easy to get money out of Ottawa. Council had to agree to a P3 in order to get federal funding for the LRT, for instance.

Furthermore, the reality is that the City and specifically Council is going to have to go to bat for the project if the Province or the Feds are going to pony up anything at all. And that begs the question, is this really the project you want to burn important political capital on? Is this more important than the City Charter, LRT, poverty elimination, or any of the other significant priorities Edmonton has?

Lack of support from the Arts Community

Crickets. That’s what we’ve heard from most arts organizations about the Galleria project, at least publicly. Privately many have argued against the project, but the Kipnes are powerful enemies to attract.

A purpose-built opera house would undoubtedly be a good thing for the Edmonton Opera. It’s probably the most expensive art form in the world. For example, the Jubilee is effectively dark for about 90 nights a year to stage just 3 or 4 opera performances because of the construction and rehearsal time that each one takes. That’s a lot of lost revenue when you consider that events like “The Book of Mormon” can arrive and be setup in a day and will nearly always sell out.

Without hearing from other organizations, how can we be sure the proposed four theatres would meet the need that exists in the arts community? How much of the new Galleria space would be open and available to other arts organizations? How often would it be unavailable thanks to either opera or University of Alberta use? What costs or other requirements would go along with use?

Perhaps those details are yet to be finalized and that’s why it is difficult for arts organizations to decide whether or not to support the project. But it’s not a good sign that the arts community at large has been so quiet on the project.

Breaking up the University of Alberta

With MacEwan and NorQuest consolidating their campuses downtown, I can understand that perhaps the University of Alberta feels a little left out, but breaking up its own campus doesn’t seem like a wise move. For years it was pretty clear in all U of A long range plans that a downtown campus was not in the best interests of the university or its students. The South Campus vision was the preferred approach, allowing for a more connected campus.

There has been some vague lip service paid to the fact that being connected via the LRT to all other post secondary institutions would be a beneficial thing, but as soon as the Metro Line opens we’ll already have that. No need for a new campus.

Innovation doesn’t seem to be happening by segregation. The most interesting and powerful ideas that are changing the world are coming from interdisciplinary efforts. Why separate the arts from the science and engineering part of the university?

Furthermore, what impact would a downtown arts campus for the U of A have on MacEwan’s new Centre for Arts and Culture? Does it make sense to have two arts campuses so close to one another?

More empty space left behind

Look up and you see cranes. Look around on ground level and you’ll see a bunch of empty space.

We’re coming up on four years since the EPCOR Tower opened, the first new office tower built downtown since 1990. Originally known as “Station Lands Tower A”, the building still to this day has empty, unused space (such as the entire 16th floor where the recent downtown event was held). The other buildings that were slated to be part of the Station Lands development have never materialized.

The old EPCOR tower, rebranded First & Jasper, still has plenty of empty space, such as most of the ground level commercial. Even Edmonton’s premier downtown street, 104 Street, is home to its share of vacancies. The old Carbon space near 102 Avenue remains empty as does the old Sobey’s on the corner of Jasper Avenue, one of the most visible – and in theory attractive – locations in all of Edmonton.

All of this space is empty today, before development has really gotten underway. What will happen when the City of Edmonton offices consolidate into the new tower? Scotia Place, HSBC, Century Place, and other buildings are going to have a lot of vacancies. What about when Stantec consolidates into its new tower? All of its existing offices will need new tenants. What happens to City Centre when the new hotel and theatre open in the arena district? It’s already struggling to keep retailers.

In fact, a Cushman and Wakefield report suggests that by the end of 2017, Edmonton’s office vacancy rate could reach 17%, the highest in the country.

I’m all for getting rid of additional parking lots, but where’s the demand for yet another office tower? Especially one that needs to generate revenue to help fund the project.

Competition with the Edmonton Arena District

So far the Katz Group has been publicly supportive of the Galleria but I have no doubt that would change if their significant real estate investments came under threat. There’s simply too much money at stake.

The arena deal is done and for better or worse the Downtown CRL depends on it. So as taxpayers, we need that project to be successful. Does it really make sense to build a competitive project right next door? Another office tower to fill, with additional retail spaces that need to attract patrons? Proponents of the Galleria would argue that the project will drive significant additional traffic to the area but I find their estimates unrealistic and I’ve not see any new data that would change my mind.

Plus we’d have yet another big, open public space to program or have sit empty. Is there really a need for Churchill Square, the EAD square, and a public galleria?

A holistic decision needs to be made

I completely understand that when someone comes forward with $50 million as the philanthropists behind the Galleria project have, there’s a desire on the part of Council to leverage that money. Acquiring funding for projects is hard and having private money brought to the table is a huge help and doesn’t happen every day. But just because you come to the table with money doesn’t mean that your project should go ahead.

Galleria

Council needs to decide not only if the Galleria itself is a good project, but whether it is going to bring a positive, net benefit to downtown and to Edmonton as a whole. Does Edmonton need the Galleria right now? Will it have a positive impact, without negatively impacting the other major projects we have underway?

With so many big questions still unanswered, I remain unconvinced that Edmonton should support the Galleria project.

Why does the University of Alberta want to be part of the Galleria project?

“The University has long desired to establish a significant campus in downtown Edmonton.”

That’s the first thing the Edmonton Downtown Academic and Cultural Centre (Galleria) business case from April 2013 identifies under opportunities and benefits for the University of Alberta. It sounds plausible, given the ongoing interest in revitalizing downtown and the University’s desire to play a role in the larger Edmonton community. But is it really true?

Here’s what columnist Paula Simons wrote in November 2001:

“Officially, a downtown campus isn’t an option. I’ve spoken to U of A President Rod Fraser, to University Provost Doug Owram, and to Jim Mitchell, the university’s vice-president of facilities. They all tell me it would be too expensive to build downtown, much more than developing land they already own in Garneau or southwest Edmonton. They say it would be too hard to find suitable space for labs and large lecture theatres. They say students and staff would feel isolated from campus life and facilities. They say it’s not their mandate to save downtown, but to serve the best interests of the U of A.”

That was around the time that the University of Alberta’s Long Range Development Plan (LRDP) was being developed (approved in 2002). It provides “a planning framework to accommodate and to guide physical development on University lands during the next thirty years.” Though it focuses on land and facilities that the University already owns, it does deal explicitly with the idea of a downtown campus:

ualberta lrdp

Though the plan has been amended a few times over the years, notably to incorporate Augustana Campus and most recently to incorporate updated plans for South Campus, that section has never been changed. “South Campus will accommodate much of the growth of the University of Alberta for the next thirty years” is what the most recent amendment says.

Even in 2005, when the University announced plans to buy the Hudson’s Bay building, it was not seen as a first step toward a larger campus in downtown or a change to previous plans. New President Indira Samarasekera said “the University of Alberta is a contributor to business, arts, and other sectors,” adding “we have an obligation to the community that we take seriously, and a downtown presence will build on that.” A few years later at the official opening of Enterprise Square, she said “that the University has finally crossed the river and found a place in the heart of the city is very significant” but also admitted that “it initially scared the heck out of me; we took a leap of faith.”

It was with some surprise then that Provost and Vice President Academic Dr. Carl Amrhein posted the following on the University of Alberta’s blog yesterday:

“The Galleria project is more than much-needed space for the University of Alberta—it is consistent with the university’s vision of an urban, linear campus connected by LRT where students, faculty and members of the public move freely around the city to access world-class teaching and research experiences offered at Edmonton’s post-secondary institutions. Imagine the vibrancy that 5,000 art, design and music students, faculty and staff will bring to the downtown core. Imagine the potential when students and professional artists interact through linkages with the Winspear, Citadel and Art Gallery of Alberta. The creative energy will be palpable!”

That seems to contradict not only statements by earlier University officials, but also the LRDP. Had the need for “an integrated campus environment” changed? Had the disadvantages about paying rent changed? Did student leaders now find a downtown location desirable? I reached out to Dr. Amhrein for clarification.

“There’s a technical point,” he told me, “which is that the Long Range Development Plan is concerned with real estate that the university owns and controls.” Given that the U of A would be leasing space inside the new Galleria project, it wouldn’t necessarily contradict the plan. He recognized the larger point however, and said “the argument for integrated locations is ease of mobility and the ability to move people around in a certain amount of time.” That’s where the LRT comes in.

Bay/Enterprise Square
Bay/Enterprise Square LRT Station, photo by Christopher Cotrell

“The feature that made Enterprise Square imaginable was the LRT,” Dr. Amrhein told me. “It meant that it was no more difficult to get from HUB to Enterprise Square than it was to get from HUB to South Campus.” He said the U of A’s first question then about the Galleria project was, “is there an LRT stop?” As both Churchill LRT Station and MacEwan LRT Station are close, the goal of an “urban, linear campus connected by LRT” is achieved at the Galleria, according to Dr. Amrhein.

In his blog post, Dr. Amrhein reiterated the University of Alberta’s key requirement for the Galleria:

“Yes, the university has identified climate-controlled access to the Galleria from the LRT as critical for our students, faculty and staff, and the patrons of the performances at the Galleria theatres and concert halls. A pedway is one solution, but there are others.”

He sounded annoyed that the pedway had become such a touch point in discussions about the Galleria. “The pedway is not a deal-breaker for the University,” he told me. Only “climate-controlled access” is a requirement. When I asked him to suggest alternatives to a pedway that could meet that requirement, initially he dodged the question. But asked a second time, he suggested the position of the buildings could provide the required access, citing the Telus towers and their connection to the LRT as an example. “Clever positioning with a plus fifteen would achieve the same result,” he said, noting that the project architects would have to rethink their plans to make that happen.

Dr. Amrhein told me the University requires climate-controlled access for three reasons. The first is the need to move faculty, staff, and students around campus in short periods of time. “When it’s dark and cold, there’s a disincentive to move around the facilities,” he said. The second is safety, which Dr. Amrhein said has been “completely lost in the conversation.” He stressed the importance of safety, saying that pedways are “well-lit and heated, and very visible” and that they often include security features. “There’s a personal safety issue here.” The third is accessibility of the performance venues for the community.

AuroraCollege_jm258
Dr. Carl Amrhein, photo by James MacKenzie

Back to the central question – why does the University of Alberta want to be part of the Galleria project? To answer that, Dr. Amrhein brought up Mayor Mandel and his vision to have all of Edmonton’s post-secondary institutions integrated and connected by LRT. “Imagine a medical student at NAIT,” Dr. Amrhein said. “That student can move from the classrooms at NAIT to the labs at the Walter MacKenzie Health Sciences Centre because of the LRT.” Integration across institutions like that would “put Edmonton in a very small group” of cities, Dr. Amrhein said.

It’s clear that Dr. Amrhein views the University’s participation in the Galleria project as something that will help Edmonton as a whole. “I hope it goes ahead.”

City Council takes a step in the wrong direction by supporting the Galleria Project

Well it just wouldn’t be a high-profile project without Council doing most of its deliberations in-camera (private) now would it? That’s exactly what Council did again tonight in considering the Galleria Project (items 6.5, 6.6, and 6.7). It’s a worrying trend.

Essentially what Council decided to do was move forward with building the pedway, at an amount of up to $30 million, and that it would purchase the necessary land and relocate the EPSB Maintenance Building at a cost of about $33 million, pending written confirmation from tenants of the project. This doesn’t mean the Galleria Project is a done deal, but it is a significant step in that direction. And I think it’s a step in the wrong direction, at least at this time.

Here’s the motion as passed this evening:

  1. That the Capital Profile number 14-17-5037 in Attachment 2 of the April 15, 2014, of the Sustainable Development report CR_1065, be amended to a total cost of $30 million.
  2. That subject to an agreement to share the total cost of construction for the Pedway, approved by Council, with land owners north of 103A Avenue benefitting from the construction of the Pedway Connection to the Royal Alberta Museum:
    1. the amended Capital Profile number 14-17-5037 to fund the Pedway, be approved, and
    2. a contract with Ledcor Construction in the amount of $4.4 million for the design for the construction of the Pedway, as outlined in the April 15, 2014, Sustainable Development report CR_1065, be approved, and the contract be in form and content acceptable to the City Manager.
  3. That the Galleria Project – Downtown Academic and Cultural Centre be acknowledged as an innovative development opportunity in downtown Edmonton and subject to the City receiving written confirmation of financing and financial commitment for the Galleria Project from the Province of Alberta for the University of Alberta, a major office building tenant, other office building tenants, and retail tenants, that the purchase of land and relocation of the Edmonton Public School Board Maintenance Building and Capital Profile number 14-17-5031, as set out in Attachment 1 of the April 15, 2014, Sustainable Development report CR_1066, be approved.

Wasn’t this project supposed to be mostly paid for by donations? Yet here we are, with the City taking on much of the upfront risk.

Galleria Project

Council decided on all of this after receiving a report full of potential risks. Here are some excerpts from one of the reports that Council considered today on the Galleria Project (emphasis is mine):

  • “The Foundation initially requested financial support for the Galleria roof, but has withdrawn that request given the preliminary state of the project and the absence of a clear design or plan.”
  • “The University of Alberta has confirmed its intention to relocate the School of Music and Department of Art and Design to the site, bringing potentially 5,000 additional staff and students to downtown. This relocation is conditional upon direct, climate controlled connection to the LRT (i.e. an underground pedway connection to Churchill Station).”
  • “On February 18, 2014, as a result of revised cost estimates for the pedway construction and land purchase, the Foundation requested additional funding that reflected the increased cost estimates. In addition, because of the design and construction schedule for the Royal Alberta Museum, the City was asked to fund the pedway design and associated utility relocations immediately. This work cannot be deferred to a later date.”
  • “In order to purchase the School Board property, the City will be responsible for all costs to relocate the School Board Maintenance Building Operations to an alternate site.”
  • “In order to protect for the opportunity to connect both the Royal Alberta Museum, the Galleria, and other new development north of 103 A Avenue directly to Churchill LRT Station, the decision to proceed with the design of the pedway, the commencement of required utility relocations, and commitment to construct the shell under the Museum forecourt must be made now.
  • “The request to the City to contribute towards the construction of a roof over the Galleria has been removed. The Foundation may return with a request for assistance at a later date once more information is available. It is considered premature to consider any additional funding for this component until the project further evolves.”
  • “The business case as developed by the Foundation identifies that the source of funding for the Trust, and in turn for the theatres, is from the revenues generated by the office space and retail leasing on the property. In the event that the revenues are not realized, then while there is no legal obligation for the City to assume the operation of the theatres, there is a risk that the City could be asked to provide financial assistance in order for the theatres to continue to operate.”
  • “It is difficult to define and quantify risks at this time as this project is still at the concept design stage. The Foundation has provided what information it has, but there is not sufficient information available to fully address many of the issues identified for clarification.”
  • “Critical assumptions have been made relative to office and retail lease rates, rate of office space absorption, retail market demand, financing costs, construction costs, fundraising commitments and availability of government grants. Should any of the assumptions made in the business case not be realized, there is a risk that the funding to build, operate and maintain the theatres will not be sufficient to achieve the goal of providing affordable space to the arts community.”
  • “While the Foundation is confident in their ability to secure an anchor tenant for the office tower as well as several additional tenants, no proposed tenants are under contract.”
  • “With several new office towers having recently been announced or underway in the downtown, vacancy rates are expected to rise, and given the existing vacancy within the EPCOR Tower, the ability to secure tenants in a short time frame is considered to be a significant risk.”
  • “Costs for the theatres are difficult to estimate as they are subject to considerable range depending upon the design; however the costs are at the low end of the range of recent theatre construction in Calgary and Toronto.”
  • “The Foundation or Cultural Trust will offset the anticipated net operating loss of the theatres with diverse and dedicated revenue streams from office and retail rental rates from the larger Galleria project. There is no contingent plan contemplated to continue the operations of the theatres if the projected revenues are not realized.”

Nevermind that the original business case called the four new theatres “financially self-sustaining”. Guess not. Or that it declared the project was “feasible” and “sustainable” or that it would “generate significant revenue.” Unless of course the assumptions are wrong. Or worst of all, that the City wouldn’t have to put in much money, because it was a unique “P4” model. Right.

Somehow, after discussing the project behind closed doors, Council was able to look past all of that risk and concern (not to mention the ultimatum about needing to decide today) to support the project. Furthermore, many of them made a point of expressing their support verbally, as if the proponents might see the motion not as a victory but as a loss.

Councillor Henderson called it “a remarkable opportunity for the city.” Councillor Esslinger called it “an exciting project.” Councillor Sohi said it was “a very innovative development opportunity.” Only Councillor Knack spoke partially against the motion, suggesting that it should be compared against other projects up for consideration as part of the next Capital Budget. Mayor Iveson too pointed out that more assurances are needed, but said “it’s entirely appropriate to further explore” the project. He said it’s a “very exciting concept.”

Councillor McKeen made the motion, and used his remarks in part to justify the use of an in-camera session. He essentially asked us to trust Council, to take their word for it that the proponents did their homework. I fully appreciate the sensitivity around confidential information that doesn’t belong to the City, but I fail to see why that means the entire discussion needs to be had in private.

Furthermore, Councillor McKeen said “I think we’re asking a lot of the proponent” and added “we have spent a lot of time on this.” Really? Given the glaring holes in the proposal and self-admission that it is still extremely preliminary, I don’t think Council is asking much of the folks behind the Gallera Project at all. And I certainly don’t think Council has spent “a lot” of time on this project, unless it all happened behind the scenes.

In general I think the land investment by the City is a good thing – I’d rather have the City own it than some speculator or foreign investor who will just leave an ugly and unsafe surface parking lot on it. I think it also makes sense for the City to be a key player in land assembly for big projects. But aside from that, I’m really at a loss for why this should proceed with City funding.

The word most commonly used by Council tonight to describe the project was “innovative”. They all seemed to find the proposed Cultural Trust especially appealing, despite the risk that it may never come to fruition if the anticipated revenues from the office space and retail leasing don’t pan out. Unfortunately no questions were asked about the success of such initiatives in other cities throughout North America. No questions were asked about the likelihood that such a scheme would work here in Edmonton.

Only one question came up about whether the project as proposed would actually meet the needs of the arts community. No one asked why other arts organizations aren’t lining up to support the project, however.

At no point in the brief public discussion tonight did any question come up about the potential impact this project could have on the arena, located directly across 101 Street. This despite the fact that both projects need significant retail leasing to happen in order to succeed, which means they’ll be competing against one another.

Galleria Project

And most importantly, no consideration appeared to be given as to whether or not this is the way we want to build our city. Is moving billion dollar projects around like lego pieces really the way to do it? Shouldn’t there be some concern about how they’ll all work together? Or maybe some sort of bigger vision or plan? At the very least, shouldn’t we understand whether or not we can afford the worst case scenario?

I’m all for building downtown and the positive vision that Council has for Edmonton. I fully appreciate the incredible work that Dianne and Irving Kipnes have done and will continue to do in Edmonton. But I’m finding it incredibly difficult to support the Galleria Project as it has currently been proposed.

Want to solve the space problem for the arts in Edmonton? Stop shaving that yak!

In software development there’s an expression we use to avoid scope creep. “Don’t shave that yak!” we’ll say. It’s shorthand for staying focused and working on solving the problem at hand, not other problems that we might notice along the way. As far as I know the phrase comes from a Ren & Stimpy episode and was coined by Carlin Vieri, a Ph.D. at MIT back in the 90s.

“Yak shaving is what you are doing when you’re doing some stupid, fiddly little task that bears no obvious relationship to what you’re supposed to be working on, but yet a chain of twelve causal relations links what you’re doing to the original meta-task.”

I quite like Seth Godin’s example of yak shaving. This GIF illustrates it well too:

yak shaving

I was chatting with someone in the arts community recently about the Edmonton Downtown Academic & Cultural Centre project, and I remarked, “I just don’t know how we got from ‘arts organizations need space’ to ‘a $1 billion project is the answer’.” But thinking about it later, I realized that I know exactly how we got there. We’re shaving the yak.

It was back in November 2011 that the Mayor’s Arts Visioning Committee released its recommendations for how we could “lift Edmonton to international recognition as a city of the arts by the year 2040.” They followed a public engagement process, learned about the challenges facing the arts in Edmonton, and developed recommendations to try to address them.

One of the challenges identified was space:

“Edmonton artists and arts advocates described a critical need for additional creation, rehearsal, exhibit and performance space. Developing or designating new arts space is paramount to the vision in this report.”

It’s worth noting that this wasn’t a new challenge – The Art of Living identified it in 2008 too. As a result, many of the recommendations dealt with space. The third recommendation was titled “Downtown Arts District and Performance Centre” and was relatively simple:

“The City of Edmonton endorse, in principle, a landmark performing arts centre (PAC) downtown, and designate land for such a development in the city core.”

The report goes on to detail the need and provides background and context. I understand from my conversations with those in the arts community that there is a real need for more space, especially smaller, black-box space that is multi-purpose.

So that’s the problem we’re meant to be solving: a lack of performance and rehearsal space. How did we start shaving the yak? I think it went something like this:

City Council put up $100,000 for the newly created Edmonton Performing Arts Centre Foundation to develop a business case. In developing the business case, the foundation connected with the University of Alberta which expressed a desire to link its music and art & design programs with the downtown arts community. There’s not enough money for all of that, so the vision needed to be made broader. The “revitalize downtown!” mantra evidently worked for others, so the group decides to go after that as part of the vision. To compete with the other big, fancy space known as the arena, a big, fancy space known as the Galleria was designed. In order to pay for that, a commercial office tower was added to the plan, along with a new campus for the University of Alberta. But those projects were deemed unrealistic unless there was a connection to the new Royal Alberta Museum and the LRT.

Before you know it, the group has taken arts out of its name completely, and we’re talking about a $40 million dollar pedway.

Weren’t we supposed to be finding new space for the arts? Stop shaving that yak!