Calgary Board of Education pays 'absurd' rent for admin building under secretive contract

Trina Hurdman had nothing to do with a board of trustees decision to sign a 20-year lease back when office rents were skyrocketing in Calgary.

She was first elected in 2013 — six years after the board decided to lock-in a lease, which now costs the public board more than $13 million a year.

Hurdman wasn't at the table when former trustees Gordon Dirks, Pat Cochrane, Carol Bazinet, Nancy Close, Kyle Fawcett, Lynn Ferguson and George Lane unanimously approved the decision to move ahead with the lease and redevelop the Dr. Carl Safran site on 12th Avenue S.W. in 2007.

But Hurdman can't seem to shake her feelings of guilt and shame.

"It's something that is always going to hang over the CBE," said Hurdman, who is seeking re-election, this time in Wards 1 and 2. 

"It's a lot of money that's not being spent in the classrooms," she added.

One of the worst real estate deals in city history

Frank Bannon, a senior commercial real estate expert who reviewed some details of the lease obtained under access to information, described the deal as one of the worst in Calgary history. 

In an email to CBC, Bannon said many aspects of the deal made no sense when it was negotiated. He says in today's environment of falling lease rates and half-empty office towers "the rent and other components of the deal are absurd."

The building, which is approximately 210,000 square feet, cost an estimated $130 million to build between 2008 and 2010.

The CBE moved into its new headquarters in February 2011 — leasing 200,000 sq. ft. from the building's owner, Toronto-based Bentall Investment Management. 

The rent, which increases by 2.5 per cent each year, now costs the CBE $13 million per year.

That works out to an eye-popping $65 per square foot. Similar office space in the Beltline is being advertised for $14-$16 per square foot.

Sub-leases

The CBE agreed to lease most of the building but it doesn't use all of the space.  

It sub-leases the 9th and 10th floors, which are only two-thirds occupied. A recent ad indicates 8,000 square-feet are available for $23 per square foot.

In 2007, the board said it would use revenue from the sale of surplus school buildings and sites to pay for the cost of the lease.  

The former CBE administration building on Macleod Trail was sold for $36.5 million in 2012. Parkdale, Riverside Bungalow and Erlton schools were targeted for disposition to cover the lease but are still owned by the CBE. 

The former CBE administration building is owned by Vancouver-based Quadreal Property Group. Executive vice-president Scott Taylor says the company has no immediate plans to redevelop the 2.7-acre site. 

Documents shows plans changed

Hurdman says while $13 million represents only one per cent of the CBE's $1.3-billion budget, it's still a lot of money. 

"A lot of people like to think, 'what if?' What could we do with that money if we still had that $13 million at our disposal? Maybe we could lower some class sizes or put more supports for certain students in the classrooms.'"

The Calgary Board of Education is the only metro board in Alberta that leases its office space. The Calgary Catholic and the Edmonton Catholic and public school boards all own their administration buildings.

A confidential report to trustees in April 2007 obtained by CBC News shows two recommendations to trustees to give public notice regarding a public-private partnership with Bentall. The leasehold costs were estimated to be $88 million and the costs to renovate the Dr. Carl Safran School were pegged at $23 million.

In Feburary 2008, the board approved a new plan that added renovations to Connaught school for a total of $50 million. The building cost for new education centre increased to $129 million.

The documents outline a new lease agreement with an average annual cost of $8.7 million for the first five years. 

Interview requests declined

Former board chairs Gordon Dirks and Pat Cochrane would not respond to interview requests and neither would former trustees who were on the board at the time. 

The CBE still refuses to make the lease public.

Larry Leach is the chair of ARTICS, the Association for Responsive Trusteeship in Calgary Schools. He says the deal snuck up on people, and by the time they found out it, was too late.

"When we were first starting to hear about it, the deal was already signed, done and ready to go," said Leach.

"It was all done behind closed doors," he said. "There's only two mentions of the lease in any of the board minutes," added Leach.

Leach says the building lease was one of the reasons his group was formed.

"We want them [the CBE] to be more accountable, we want them to be more transparent. This is public education, these are public dollars," he said.

He wants the new board, which will include four new trustees, to call for a review of the lease arrangement that would have to include the provincial government.

"You're gonna need both of those parties to have the political will to say 'yes, we want to look at this,'" said Leach.

"Ask your trustee candidates: 'Are you willing to dive into this, are you willing to make this a priority?'" said Leach. 

Candidates want new lease

Lisa Davis, who is running for public school trustee in Wards 6 and 7, says the lease needs to be re-negotiated, and she will push for a meeting with Bentall if elected. 

"We would jump right into that topic with the landlord. We have to be very honest with the fact that this lease has become a burden for our students, and we're going to be looking for some rent relief," said Davis.

She's part of a slate of like-minded candidates running in five wards. 

The group is also calling for greater transparency around the CBE's administration costs. They say too many employees based at the administration building are classified as school support staff, when they should be considered administration.  

Davis says it's a move by the CBE to keep administration costs under the government mandated limit of 3.6 per cent.

"That's not true when you properly allocate those admin head office costs," said Davis.

Government says further analysis needed

The government seems to agree. In its operational review of the CBE released last month, the preliminary findings indicated "over half of the Central Administration Building's costs are allocated to instructional programming costs instead of being charged to administration overhead," the report read.

"Provincial policy would suggest that such an allocation might be high and requires further analysis," the report added. 

Outgoing board chair Joy Bowen-Eyre, who is not seeking re-election, disputes those findings. She says many people who are based at CBE headquarters are school support staff and not administrators. 

She does acknowledge headoffice costs are taking resources away from the classroom.

"What I would say is that, whenever possible, as much resources we can put towards the classroom, we would like to do that. If we could get a cheaper lease rate, then that money would be put towards the classroom, absolutely," said Bowen-Eyre.

She also defended the CBE's decision to not release the full lease agreement for the public to see.

"I don't think the average person would be able to understand the document," she said.

Calls for review 

The Association for Responsive Trusteeship in Calgary Schools wants the new board formed after the Oct. 16 election to call for a review of the headquarters lease. 

Leach wants Calgarians to ask trustee candidates to lay out their position on a possible review. 

"You have to ask those tough difficult questions to your candidates now because they're going to be your eyes and ears for the next four years. They're going to be the people who are looking at this lease and they're going to be the people deciding on what the next course of action is," said Leach. 

Hurdman tried that during her first term, and after two independent legal reviews, the board was told it would be more expensive to break the lease than honour its terms. But she's open to any suggestions from anyone who could help ease the financial pain from the decade-old decision.

"We welcome anyone, including the province, to aid us in trying to come up with other options. But all the options we have explored so far have not been successful," said Hurdman.