In the case of the city and the coffee shop, a whole bunch of questions need to be asked about council’s thought process, the quality of administration’s advice, the plausibility of the city’s explanations, the mandate of Servus Credit Union Place and the principle of the city running a business.
Last week council agreed to invest $280,000 of city money into a Starbucks location for Servus Place. The kiosk will be city-owned and operated under a 10-year licensing agreement with Starbucks.
Council twice discussed the potential business venture in private before debating it publicly for the first time on Monday, July 4. By the time the next council meeting rolled around, Mayor Nolan Crouse was second-guessing his decision amid growing backlash and Couns. Cam MacKay and Malcolm Parker were angling for a way to reverse the decision. However, council heard the contracts were already signed and it could cost in the neighbourhood of $1 million to back out.
Let’s start the questioning here: how can an organization with the resources that the city has at its disposal get itself into a situation where a $280,000 decision costs $1 million to reverse? While it’s standard practice for business deals to include cancellation penalties, $1 million for a project of this scope is harder to swallow than a scalding hot cup of cowboy sludge.
Furthermore, why was this done so secretively? Crouse admitted the city erred in keeping the issue private for so long but we haven’t heard an explanation why it did so. It’s standard procedure for city administration to try and keep as much information private as it can, for as long as it can, but our elected council is there to ensure the public interest is served. Crouse usually has his radar up to detect issues that should be made public sooner rather than later. Where was his radar this time?
A bigger question is this: once the Starbucks idea became public, why didn’t council and administration take some time to consult with citizens and the business community? Two councillors, MacKay and Parker, voted against the Starbucks scheme and spoke strongly against it. But why didn’t one of them ask for a delay, as they’ve often done in similar situations? It’s very strange that in an environment where nearly every issue is deliberated, studied and methodically inched towards a final decision, this one was signed and sealed faster than it takes to grind a batch of dark roast.
Could the problem be the mayor and some on council still hold out hope Servus Place will break even some day, per its original vision? The facility’s membership growth has flattened, according to last year’s third quarter report and its deficit has leveled off at about $750,000 a year. The $90,000 in projected net revenue from Starbucks won’t make much of a dent in that deficit.
Crouse has admitted the appeal of added revenue motivated him to vote against his principle of keeping the city out of private business. If he would just admit that Servus Place will never make money, then the perceived need to boost revenue at all costs would be less urgent and the prospects of a more rational decision would increase proportionally.
Are the mayor and council prepared to accept that Servus Place is a subsidized facility with a mandate to provide recreational opportunities to all citizens regardless of economic status and particularly those who would be unable to participate at the rates necessary if city-owned facilities were expected to make a profit?
With this decision to open a Starbucks, this city-owned outlet will be selling products that compete with another Servus Place tenant — Booster Juice. Owner Ray Davidson estimates the Starbucks could cost him 20 per cent of his revenue, which would devalue his business by $300,000. Davidson said he has no problem competing head-on with another entrepreneur, but he calls foul at going up against the deep pockets of city hall. Which leads to the biggest question of all: what business does the city have being in business and competing with the private sector?
The city has no policy to guide whether it uses its own staff or private contractors to deliver its many services. This has resulted in a mix of private and public delivery for services ranging from facility concessions to waste pickup. Does council need to sit down and have a policy discussion? Can it do that in public and not in private over a cup of coffee?
