Abbotsford Council needs to get this right

The Abbotsford City Council is expected to be voting on whether or not to continue working with NAI Pfefferle, a Wisconsin-based commercial real estate firm, to market the city’s industrial park lots to prospective buyers.

Let’s preface this by stating that NAI Pfefferle has done their job in marketing available lots in the company’s most recent contract with the city as evidenced by emails and correspondence shared by a representative of the company at last week’s Abbotsford City Council meeting.

However, the devil’s in the details. An original contract between NAI Pfefferle and the city of Abbotsford had NAI Pfefferle earning $2,000 per acre sold in commission. The price seems like a miniscule amount for a firm that might be bringing in millions of dollars worth of development. After a bad experience with an investor which saw the city pay $22,000 in commission for a development that will not be built by the three-year deadline, the city decided to arrange its contract with NAI Pfefferle in a different way when it comes to commission.

The council passed a contract that would pay NAI Pfefferle five percent commission on the tax assessed value of impending developments. This version of the contract would prevent the city from paying NAI Pfefferle any money unless a development was actually built but it also steeply increases the amount the city is paying its real estate firm.

As an example, if we go back to the same investor that garnered NAI Pfefferle a $22,000 commission and place the new commission model in its stead, we get very different results. The contract says that the investor would need to develop 11 parcels with a minimum of $600,000 of value for each building. Say that minimum was achieved for all 11 buildings, we get a total of $6.6 million in value for the development. NAI Pfefferle, having sold the lots to the developer, would earn five percent commission on that $6.6 million. This comes out to a huge payday of $330,000. The city would be paying $330,000 instead of $22,000, or 15 times the amount, for the same services from NAI Pfefferle.

City Administrator Josh Soyk said part of the thinking behind moving to a percentage-based deal was the idea that the city would be able to sell the lots for $60,000 per acre. If that were the case, the five percent commission on tax-assessed value would make much more sense. However, the city has been offering incentives to developers in order to get their business. These incentives often include vastly reduced rates for the land which include the sale of parcels for $1 per acre in most cases.

The sale of land at the cost of $1 per acre doesn’t make sense for the city when having to pay five percent commission to a realtor on the tax-assessed value. Luckily, Soyk said the city hasn’t been assisted by NAI Pfefferle on any sales since the five percent commission went into effect in May of 2022. The council has the opportunity to get out from under this one-sided contract on Wednesdday, January 17.

We would like to see the council vote to go a different route to do right by the taxpayers, whether that be with a different commission setup, or marketing the lots for sale without the assistance of NAI Pfefferle.

The Tribune-Phonograph editorial board consists of publisher Kris O’Leary, editor Neal Hogden and reporter Nathaniel Underwood.