Starbucks and Servus Place: Both high on the hit list of St. Albert’s CAVE (Citizens Against Virtually Everything) people. Below: St. Albert Mayor Nolan Crouse.What’s wrong with the City of St. Albert opening a Starbucks franchise inside the Servus Place community recreation facility? After all, it’s a good idea likely to help the still-controversial recreation centre become a financial success.
So City Council should stick to its guns and not back away from this particular deal. Indeed, to do so would be fiscally irresponsible. The suggestion Mayor Nolan Crouse and another member of council should resign over it is risible.
What’s more, a Starbucks franchise at Servus Place would not amount to unfair taxpayer-supported competition for the operator of the Booster Juice franchise in the same facility, or indeed offer any kind of meaningful competition to that business.
Finally, whether you hate the Starbucks plan or not, the campaign of vilification against St. Albert’s city manager is odious. If you don’t like decisions made by the city, take it up with the responsible body – and that would be our city council, which we put there with our votes. If you don’t like what council is doing, there’s a mechanism for dealing with them.
Now, for some reason, opposition to this particular Starbucks deal seems to have really struck a nerve with a group of people in our community who basically disagree with anything council does short of slashing services to reduce taxes. Some folks call them the CAVE People – “Citizens Against Virtually Everything.”
An on-line petition claims council and the administration have lost the trust of St. Albert voters, and therefore that Councillor Cathy Heron and Mayor Crouse, whom the petition author identifies as key supporters, should resign. Worded and distributed as it is, this petition has no legal validity and little political value. Still, if you disagree with me and think it will put some pressure on them, be my guest and sign it. It’s found here. Just remember that what you’re asking them to do is to take $30,000 or more of our tax dollars and throw them out with the coffee grounds because you believe in an ideology that says there’s no place for government in commercial enterprise.
Some of the people associated with this campaign – whom I would guess have some overlap with the members of the St. Albert Taxpayers Association – are folks who post on-line pictures of our new squarish garbage cans not lined up perpendicular to the curb and argue that this means municipal garbage collection system is a failure. Well, I have some issues with the garbage collection plan too, which I’ll save for another day, but I’m not persuaded the tidiness the cans post-pickup is evidence on which any decisions about the efficacy of the system should be based.
Now, some opponents will argue government has no business in business. This in my opinion is a load of hooey, but then – as someone is bound to point out – I make my living working for a public-sector trade union. Here in North America, we’ve let the so-called business community run everything in the name of market fundamentalist purity since Ronald Reagan was elected president of the United States 30 years ago. Ask yourself, is our corner of the world a better place as a result of this emphasis on the ideology of privatization? Not likely!
Back in the day, the city might have run a cafeteria in a place like Servus on a break-even basis and we’d all have been fine with it. Nowadays, the right having won that fight, there’s lots of pressure on governments to get involved in “public-private partnerships,” which usually don’t amount to more than a creative way for taxpayers to subsidize private businesses to do work the public sector does better for less.
We have a couple of city councilors who are frequent proponents of P3s – the same councillors, oddly enough, who oppose the deal with Starbucks.
But what is the Starbucks deal but another kind of P3? And if P3s are such a great idea, what’s wrong with this P3?
The private sector provides the marketable product and the city provides some of the start-up cash. Indeed, it’s a much better deal than the usual P3, because it actually has the potential to turn a profit for the city instead of being just an outright taxpayer subsidy like the Anthony Henday highway that will run right past Servus.
One could argue, I suppose, that in a true P3, the business and not taxpayers bears the risk, but everyone knows this is baloney. If the business fails or walks away, the taxpayer is always left holding the bag. Plus, there’s almost no risk in operating a Starbucks at this location, which is no doubt why city council liked the deal in the first place.
You don’t think the city should run a business? Fine, that’s an ideological position, which all of us don’t accept. If that’s the way you feel, deal with it at the next election.
Then there’s the matter of competition with Booster Juice. Please! If Starbucks and Booster juice have anything in common, it’s only that they both sell drinkable liquids. What’s the difference between competition from a private coffee shop operator (with which the petitioners would presumably have no problem) and a P3 coffee shop (which outrages them)? None from our perspective as taxpayers.
Was the Booster Juice franchise operator promised there would be no other competition in the facility? If he was, then he has cause for complaint.
But, you may argue, his taxes are supporting his competition. True, I suppose, but his taxes are also supporting a favourable place for him to do business, and council is doing everything it can to drive business his way. Sorry, but the Booster Juice complaint is a red herring.
Finally, there are the attacks on the city manager, who nowadays is not only being vilified for decisions made by several past councils, but for the recession and the downloading of provincial services on municipalities by Alberta’s Progressive Conservative government – which I’ll bet every person screaming for his head voted for.
This is way out of line, and the people responsible should take their complaints to the actual decision makers.
Yes, taxes are too high in this community. Reasons include decisions made by past city councils, but also the lack of industry here, which also has obvious benefits, and the ridiculous tax structure of the Capital Region, blame for which belongs squarely with our Conservative provincial government.
Solutions include being thoughtful about what services the municipality offers, not wholesale privatization, which will cost us more, not less. They sure as heck don’t include cutting municipal services right and left. Maybe we should also think about replacing the provincial government with a party closer to the centre of the political spectrum.
These are not grounds, as it were, for killing the Starbucks deal.
I would like to respond to your article (in three comment parts since I am limited by your blog).
I am the individual who created the online petition and I would like to correct a few items in your article since some of your information is not exactly correct.
I have no personal affiliation with the St Albert Tax Payers Association. Since the petition was posted several of them have reached out to me but I need to set the record straight. This petition is not part of a broader plan related to the Tax Payers Association’s agenda but rather it is even worse.
I am a citizen who is fed up with our poor Council leadership and weak Administrative management. As a result I feel compelled to stand up and make a stance against poor leadership decisions.
This is something that Council and Administration should take note of because I am not formally organized, I do not hold regular membership meetings but I have received numerous emails from individuals who feel like me.
In my personal opinion the Starbucks decision lacked numerous checks and balances that your article seems to gloss over.
The missing checks and balances would be a free and open public debate about an issue to spend public money and to change the business objectives of this City.
You neglected to make this point in your article.
Public money is not a venture capital fund for City Council and Administration. Rather the Public money entrusted to our City Officials is to deliver essential services.
part 2
The entire Starbucks discussion happened behind closed doors without any public awareness. The issue then came before Council and was quickly voted on and case closed and Council saw no problem with their actions at the time.
Both the Mayor and the City’s CAO have both public stated this was a mistake in hindsight.
Why is this an issue you may ask?
For several reasons, we elect public officials to represent our views and effectively manage our governmental affairs. This Council did not represent the views of its constituents in this situation. Council does not even know what are views are on this issue because we had no public debate. Instead we are now having the debate on the Internet.
Secondly if this is such a good deal as you call it for our City why is it so hard to find other examples of local governments running successful private sector businesses franchises?
Largely because it is not core to their business objectives and why local governments exist.
The business objectives of a local government are to deliver essential services such as core infrastructure (roads, water, sanitation, waste management) and to provide the critical services that we need at a local level.
Serving coffee at a recreational facility is not an essential service (yes I know the folks addicted to coffee who beg to differ).
part 3
Running a business even a franchise requires an entrepreneurial sprit and most people who work for local governments do not have this expertise nor the drive to make a business work when things go wrong.
I will use Servus Place to make this point. Servus Place was sold to this community as a venture that would pay for itself, would be financially neutral and it would be run like a private sector business. Within the first year the facility lost millions, the Director resigned (sacrificial lamb) and the City ultimately turned to run the facility like any other public building. Why? Because local governments are not good a running businesses.
If Servus Place was a true business venture (the business case would have been more sound first of all) and the entrepreneurial spirit would have kicked in to increase memberships, develop new programs to draw people to the facility, the stadium would have hosted more events other than just hockey (concerts as an example). More would have been done to get the facility out of the hole. But instead we created a task force to look at the problem and implemented some of the solutions and turned the facility into a true publicly run facility because Administration does not have the expertise in running a business when things go wrong.
Sure I will agree with you that the Starbucks arrangement does have a creative aspect to it (especially in light of how municipalities are funded) but I can think of numerous scenarios where this may fail.
One persistent question I have is where is the short and long term business plans?
A bank would have required the business owner to have a plan for financing but our City of St Albert Venture Capital fund only requires a closed door meeting and a quick Council meet and bingo into the reserve fund we go…
This City holds a very high debt level and we are gambling with City money into an unproven space for this administration.
What happens if this coffee shop does not make money or what happens when Starbuck’s comes to the City and tells us that it is not profitable enough and wants to close it (in 2008 they closed 600 stores in the USA due to poor performance).
Who is left holding the debt? This shows that this is not a sure bet as you seem to allude to in your article.
If I understand the limited financials that have been provided to us, this venture is not profitable for three years – a $280,000 up front investment, with a $90,000 profit each year equals a 3 year payback cycle.
What happens if Starbuck’s changes logo designs and store layouts during the first three years? This dips into our profits. McDonald’s is currently rebranding every store in their inventory to have a new look and feel (everything from tables to colours).
If the deal is so good for this community why do we have Councillor Parker stating publicly in a GlobalTV article that he is reviewing the contract to see if the City can get out of it…
And yes I think we should spend the $30,000 to get out of this venture early before it costs us any more than $31,000. I do know what I am asking for… Thank you for allowing me to comment on your story.
Although I agree that this issue in itself should not be case for resignation, I find your article flawed and twisted. I also believe you totally missed the point to why there is an uproar over this.
Is this truly a private business? Just buying a franchise does not make it private run. I believe it is city run since the city is hiring the employees. And we really should have explored this avenue when we reviewed operations back in 2007, why not change everything in the facility to this model? Reduce the tax load!
It seems public officials are always ready to tout P3 arrangements, using the public taxpayer's funds as a slushfund.
The financial culture in this province has to change, there are no checks and balances against financial corruption. There need to be plebescites and hearings. People need to wakeup and quit wasting so much time drinking beer and watching sports or golfing all their weekends away.
Lastly, Albertans have to get off their gluteus's and get politically aware and involved.
New laws must be legislated, outlining the the details to which P3 partnerships must adhere. The final financial risk, must be on the business and court enforced.