Open Letter Re: Eckhardt Properties

Open Letter to the Residents of Penticton:

Over the past several weeks there has been significant discussion in the public and media about the circumstances surrounding the proposed sale of the City owned properties at 903 and 969 Eckhardt Avenue West. We would like to set the record straight and clarify a number of facts surrounding this issue.

The City of Penticton has long recognized the opportunity that housing would provide for the participants in the Penticton Hockey School programs. These programs are recognized worldwide for excellence, and are a significant economic generator and source of pride for our community. Hockey is more than a proud legacy of our community history, it is also a local industry that creates employment, supports our local tax base and injects millions into our regional economy. However, we are in an economic environment where we can no longer afford to take any industry for granted. The opportunity to see this dormitory project succeed would secure the future of the hockey industry in our City.

The Eckhardt Avenue properties were initially purchased by the City for road widening to facilitate construction of a turning lane at the Alberni Street intersection as part of improvements required to support the SOEC project. At the time of the purchase, these lots contained improvements and real estate values were considerably higher than at the present time. The road widening extended well into the subject properties such that the existing houses needed to be demolished leaving the remnants of the original properties as a single cleared property available for other uses. Given the strategic proximity to the SOEC, Council felt that these lots would be well suited for a dormitory project.

To facilitate the opportunity, the City initially granted the Okanagan Hockey School with an option on the lands for almost a year but that option expired. So when, in October of 2011, we were approached by a reputable local real estate agent representing a local citizen interested in building such a facility, staff and council were supportive of the concept.

Following this initial meeting with the realtor, staff and myself had met on several occasions with the proponent. The City, in contemplating the sale of the City property sought and obtained two internal and one external evaluation of the property. Due to the decline in the local real estate market and the fact that this was now bare land without improvements (houses), and a reduced land area, the values were less than what was previously paid. In the sale process, searches were conducted on both the purchasers and lender with no negative results. An offer was made through standard real estate procedures and sent to Council for consideration. Council voted in favour of the sale, in large part recognizing the benefits of this project to the long term future of an important industry and passion in our community. It should also be noted that the value of the offer was within the range of values the City had obtained. As is a standard practice in real estate transactions the City obtained a deposit in trust. To further safeguard the public interest, it was requested that this deposit become a non-refundable cash deposit in excess of 5% of the total sale price.

In an effort to ensure that the development could be completed in time for the fall hockey season and in advance of winter and associated frost setting in, the City agreed to a request from the proponent to begin land works in advance of the closing of the sale, but only after the purchaser had applied for and obtained a proper earthworks permit from Development Services.

Throughout the process, the City followed standard real estate transaction procedures, including the taking of a significant deposit on the signing of the contract, as well as meeting the obligations under the Community Charter for the disposition of municipal land. The intent of this transaction was to support an important local industry to our community and at no time did any issue arise to suggest this would not occur. It is both unfortunate and disappointing when an individual or corporation fails on an undertaking such as this. It is even more regretful when a project failure adversely impacts others, in this case individuals or businesses who had contracts with the proponent and are not paid. That said the responsibility of due diligence on the various contractor's behalf does not reside with City of Penticton taxpayers.

On a more positive note we are fortunate to have received strong interest from other parties who share a vision for continuing with this project and supporting our local hockey industry.

March 1, 2012