The Road to Paragon

Paragon's first 'Indian Casino' in Coachella, California

This story was written for the Vancouver Observer.
A version of the story is up on the VO site.

“Stop the expansion of gambling that has increased gambling addiction and put new strains on families,” promised the BC Liberals during the 2001 elections.  A decade after the BC Liberals took power their 2001 campaign promise to “stop the expansion of gaming” lies bloodied and broken in the ditch along with promises like providing “open and honest government” and “making children the number one priority.”

There’s no better example than Vancouver’s newest Casino project on the BC Place lands, announced by the Premier himself one year ago.  The $450 million deal is a partnership between BC Place and Paragon Gaming, a privately held Las Vegas gaming company that owns the Edgewater Casino at the Plaza of Nations, just south of BC Place Stadium.

It’s a deal that involves Liberal insiders, significantly expands gaming in the City of Vancouver and robs citizens of the development levies that pay for civic services.  And it was done with all the hallmarks of a political deal a la BC Rail.

Unseemly Haste

The Liberal government announced the deal with Paragon Gaming in the spring of 2010 but the actual decision was made months earlier on May 22nd, just days after the May 2009 election. That’s when the BC Pavilion Corporation (PavCo), the crown corporation responsible for BC Place, picked Paragon as the winner of one of the shortest proposal calls in BC history.

The quickstep timing of PavCo’s proposal call alone raises significant questions about the deal. The process began March 6, 2009 with a call for expressions of interest in developing the lands adjacent to BC Place. On April 20th the two lone proponents were invited to respond to a request for proposals.  The whole process took less than 11 weeks.

Eleven weeks to put proposals together, find financing, review city planning documents, determine allowable uses, conduct market studies, configure the site, set up partnerships, determine financial viability.  And that’s just on the proponent side.

Then PavCo had to review all the proposals for viability, value for money, compatibility with the rest of the stadium redevelopment – the list goes on and on.  Months and months of work.

An RFQ (request for quotation) for the Evergreen Line asks for significant information in 13 different areas.  It describes a process very similar to the BC Place redevelopment process – RFQ, invitation to bid in a RFP, selection – with one very big exception; the BC government expects to take over a year to receive and evaluate the proposals to build the Evergreen Line.

The Evergreen Line is the rule, not the exception. According to Partnerships BC, most big government projects take 12 to 16 months to determine the best proponent for the project.  The exception is the 11 week decision-making process that ended up awarding a $450 million redevelopment of BC Place lands to a Las Vegas based gaming company with ties to a prominent BC Liberal.

The question is why did Pavco rush the process?

PavCo refused to provide the RFQ and RFP documents to the Opposition critic Spencer Chandra Herbert, citing business privacy concerns.  But PavCo has admitted that the process only generated two applicants, and of the two only Paragon provided a serious proposal.

In other words, in a rushed process that prevented the due diligence normally required in deals this big, PavCo ended up awarding on the basis of one serious bid.  That conflicts with government policy as expressed in the procurement manual as well as Partnerships BC policy.  Both place competitive processes at the centre of the procurement process.  As the BC Liberals directed Partnerships BC – the government agency responsible for most large projects – bids must “demonstrate transparent and competitive processes.”

The question is why did PavCo abandon government processes that were designed to maximize taxpayer benefit and minimize taxpayer risk?  Why did PavCo construct a process that made it impossible for a different kind of project – a project that wasn’t based around a casino?

Tipping the scales

PavCo chose Paragon’s lone proposal within weeks of the 2009 election.  But the plan was set in motion at least a year and a half earlier.  That’s the story told by a series of 2008 City Council reports on the BC Place Lands.

In the fall of 2007 senior officials with the Pavilion Corporation approached Vancouver City Manager Judy Rogers with a request to amend the North False Creek Official Development Plan to accommodate the redevelopment of the BC Place lands.  And PavCo offered to pay $145,000 to the city to cover 50% of the cost of the city-run planning process they wanted.  The planning process would address PavCo’s land use and floor space needs on the redeveloped BC Place lands.

According to the Council Report of January 31st, 2008 “The stadium site is the only one in NEFC [North East False Creek] that has no potential stated in the ODP, and PavCo feel it is critical to understand the development potential in order to provide the financial foundation to support the cost of rehabilitation.”

In other words, Pavco wanted the necessary zoning changes in place before they began pursuing development proposals.  The zoning changes would determine the kind of project they would seek.

And that’s what happened.  Paragon’s winning bid emerged directly out of the zoning and land use changes made by PavCo and the City in 2008.

The NPA Council agreed with PavCo’s request, and work began in the spring of 2008.  The city planners were put on a fast track because PavCo wanted the deal done before the civic election scheduled for November 2008.  After all, there’s nothing like a new council to throw a wrench in your plan for favourable zoning and other incentives.

Planners and city staff met with PavCo and other commercial enterprises in the area.  They met with residents affected by the redevelopment.  They commissioned a study of job potential and commercial space needs.

And in September 2008 Vancouver’s Director of Planning was ready to report back to the NPA Council.   The report gave PavCo a bundle of changes that set the stage for the Paragon deal.

First, the planners increased commercial and reduced residential floor space for the area making a residential based development less profitable and a commercially based development more profitable.  The new ratios better accommodated hotels and commercial enterprises.  That recommendation was supported by a Colliers’ study of jobs and land use in the Downtown core.

Secondly, Pavco got a mysterious gift – land use amendments to permit a “major casino”. “Council,” the report recommended “may allow sub-area zonings to include other cultural and recreational facilities, including a major art gallery and a major casino, that will also serve the city and region.”

We know where the idea for a “major art gallery” came from – Ken Dobell was working for both the Office of the Premier and City of Vancouver on a new site for the Vancouver Art Gallery.  And the Premier was supportive of a Bilbao-like site on the edge of False Creek.  That was enough to make the art gallery land use amendment a fait accompli.

The “major casino” recommendation is another matter.  It appeared out of nowhere.  In fact it went against recent City policy.  In January 2004, City Council explicitly approved a time-limited zoning for the Edgewater Casino at the Plaza of Nations.  According to that zoning by-law, Edgewater would have to relocate away from False Creek by 2008.

In May 2006 the new NPA Council granted a five-year extension to Paragon Gaming, the new Edgewater owners, so they could begin the search for a new site.

And then out of nowhere, in a planning process initiated by PavCo to meet their BC Place re-development zoning needs, a “major casino” is added to the list of appropriate zonings for the BC Place lands.

The Council report admits that the casino zoning change was not supported by any studies.  Nor was it part of the public information sessions set up with residents.

The implication for the final shape of the BC Place redevelopment is obvious.  The increase of commercial space gave a leg up to a commercially based development.  The addition of a “major casino” as a permitted use gave a leg up to a commercial development that included a casino.  With the zoning changes a proposal for Casino based commercial development on the BC Place lands was a slam-dunk.

And only one company was in a position to make that bid. Only one company held an operating license to operate a casino in the area:  Paragon Gaming, the owners of the Edgewater Casino.

Is it any wonder that PavCo’s subsequent Request for Expressions of Interest produced only two proposals and only Paragon’s was serious?  The Paragon deal six months before PavCo issued officially received Paragon’s Proposal.  It was inevitable when the PavCo requested amendments to the False Creek North East Official Development Plan were passed at the final meeting of the NPA Council in October 2008.

Disclosure: I was employed by the original owners of the Edgewater Casino to help secure the 2004 temporary zoning that permitted slot machines and worked on the employment partnership with the DTES, the agreement with the Starship Bingo community partners, the community fund and the trade union certification.

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6 Responses to The Road to Paragon

  1. Norm Farrell says:

    Donald Gutstein has been a thorn in the side of the Fraser Institute before. He provides detail about the corrupt school report.

    http://donaldgutstein.com/eight-distortions-and-other-problems-in-the-fraser-institutes-report-card/

  2. Norm Farrell says:

    The comment about Gutstein makes more sense in previousr article. Ian you can delete this one.

  3. RossK says:

    May 2006.

    Hmmmmm…..

    Was that not approximately one month before the good Mr. T. Richard Turner, he the former Chairman of the BC Lotteries Corporation and future cell phone correspondent with the BC Liberal Minister-in-Charge-Of-The-Marshmallow, became a principal in Paragon (Canada)?

    Why, yes, I believe it was.

    .

  4. Ron Sward says:

    Hi, I am a regular reader of your blog and I have also noted your comments on several other websites and blogs. I must say always informative and spirited at the least. We here in Maple Ridge are starting our recall of Marc Dalton and we would like to link our website http://www.downwithdalton.com with yours and others as well. If you would be so kind enough you can send your link to our site and we of course will appreciate it if you would include our link to your site.

    Thanks in advance.

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