GNWT defends Stanton Renewal decisions

Officials from the NWT government are defending a project at the centre of a recent damning audit.

In the report, which was released in October 2024, the Office of the Auditor General of Canada detailed several concerns with planning and decisions made as part of the Stanton Territorial Hospital Renewal Project.

That project involved construction of a new hospital in Yellowknife as well as renovation of the city’s old hospital building.

The audit concluded Stanton Renewal will cost hundreds of millions of dollars more than originally planned and the territorial government could not show that it provided good value for money.

A committee of MLAs on Wednesday asked territorial officials and the deputy auditor general questions about the project during a public review of the audit’s findings.

Several MLAs called for greater transparency and for the territorial government to provide evidence supporting its claims that the project is financially beneficial.

Sublease decision questioned

Many questions were related to the NWT government’s decision to become a rent-paying tenant – in a building that it owns – under a 30-year lease.

The territory leased the old hospital building to third-party developer Ventura in 2016. It planned for Ventura to renovate the site and then sublease space to commercial tenants to pay off the cost of those renovations.

Just one year later, however, the NWT government subleased the building back. The auditor general’s office estimated that decision cost the territory at least $78.6 million more than planned.

The renovated building, now known as the Łıwegǫ̀atì building, opened last year. The facility houses extended care and long-term care beds alongside primary care and outpatient rehabilitation services.

Steve Loutitt, deputy minister of infrastructure, and Perry Heath, assistant deputy minister of health, praised the facility and its proximity to the new hospital, creating what the government has dubbed “a campus of care.”

Heath said it is hard to quantify the value that has brought to residents.

“It’s a fantastic facility. It’s nearby for … being able to access doctors, being able to able to access the hospital, and the hospital itself having private rooms and everything, there’s a huge benefit to the residents of the Northwest Territories,” Loutitt said.

Is it costing more than it should?

Deputy auditor general Andrew Hayes pointed out, however, that the NWT government knew it needed additional space for healthcare services as early as 2014. He said the GNWT failed to properly consider whether to use the old hospital building for those services before deciding to lease it.

Hayes said he was also concerned about the NWT government’s decision to “pull back some of the expectations on Ventura” by taking over renovation of the building.

“Ultimately we did not see the analysis necessary to show value for money here,” he said.

“I accept and will obviously acknowledge the fact that there is a hospital premises that’s new, that’s providing value to the residents of the Northwest Territories. Likewise the existing hospital building is being used. But is it costing the residents of the Northwest Territories more than it should? In our view, it is.”

Heath said while he was “not privy” to all discussions on the matter, he understands the decision to lease the building was based on minimizing the government’s liability in decommissioning the former hospital and the potential revenue from commercial tenants.

Loutitt said Ventura completed specialized work required to decommission the old hospital, including removing hazardous materials. Under the lease agreement, tenants – initially expected to be commercial tenants – were then required to pay for leaseholder improvements.

In this case, he said, when the NWT government became the building’s tenant, it was responsible for the renovations required to prepare the space for long-term and primary care.

It remains unclear why the NWT government did not plan to use the old hospital building to house those services prior to leasing the building to Ventura.

Heath asserted the sublease agreement is beneficial as the NWT government is paying a rental sum 30 percent lower than the market rate.

He said the cost of rent and renovations is “pennies on the dollar” compared to what it would have cost the territory to construct an entirely new healthcare facility.

Exactly how much it is costing, however, is not public.

GNWT won’t report lease costs

The NWT government has disagreed with the auditor general’s recommendation to publicly report all costs related to Stanton Renewal. It argues the lease agreement was not part of the public-private partnership (also known as a P3).

Bill MacKay, deputy minister of finance, added that some of those costs cannot be made public due to “various reasons in terms of keeping commercial relationships confidential.”

Several MLAs advocated for more information to be released.

“It’s really not clear at this point what is the benefit of us leasing our own building to a company to then lease it right back and be losing to the tune of $78 million,” Yellowknife North MLA Shauna Morgan said.

“If there are other benefits we’re not seeing, I’m sure we would all love to have a detailed cost breakdown to see where is the value added and where are those benefits.”

“I think the difficulty that I’m in is simply that we’re effectively being told to kind-of just take your word for it that this whole thing, the lease and the sublease agreement, is for the best,” Frame Lake MLA Julian Morse added.

“How can we be certain that what you’re telling us is true without being given the evidence to back it up?”

Loutitt said the government would consider confidentially providing its analysis of the subleasing agreement to MLAs.

When Dehcho MLA Sheryl Yakeleya questioned whether the government could cancel the lease agreement, Loutitt said he was unaware of any mechanism to do so. He said if negotiations did occur, Ventura would likely want to recoup the “tremendous expenses” of its remediation work.

“That would not be a cost savings at this point,” he said.

Improvements under way

MacKay said since the Stanton Renewal project was completed, the NWT government has made improvements to its procurement process and record-keeping procedures that are consistent with the audit’s recommendations.

He highlighted the centralization of procurement services under the finance department and the creation of a procurement procedures committee as examples.

He said further work has also been planned, such as a review of the territory’s P3 management framework, which is expected to be complete by December 2027.

“We do take the recommendations in the report very seriously and intend on adopting them mostly, except for one,” McKay said. “We feel there’s a lot that we can learn from the project.”

Hayes stressed that the audit should not be interpreted as suggesting that P3s should not be used, but the recommendations can be used to strengthen the territory’s analysis and controls for such projects.

“We are not, in any way, shape or form, commenting on P3s in a negative light,” he said.