Monday, 22 September 2014

ICECAPS SUBSIDY: NO BRAINER OR JUST PLAIN DUMB?

When news broke of City Council’s decision to award the IceCaps a subsidy of $700,000 over two years, in a private meeting no less, I waited for the key words which might help explain what gave rise to the decision. 

Councillor Galgay supported the measure, spoke at length, but said little. Next day, as social media went viral, in a local context, Councillor Art Puddester acknowledged he was the one who leaked the information and that he had voted in favour.  He explained why he had broken the protocol of ‘private’ Council Meetings but did not address the merits of Danny Williams’ demand. 

Finally, Deputy Mayor Ron Ellsworth, noting the need to respond to widespread public rebuke, acknowledged he had voted against the subsidy and stated:

I just felt we never had enough financial information from the IceCaps, with regards to looking at their financial statements…looking at what the impact of the million and half dollars would have on them and their bottom line. Those are the things I would like to have at the table to make a decision.
Ron Ellsworth confirmed what I had suspected.  The IceCaps did not open its books to Council in order to justify an award of $700,000!
A businessperson, like Ellsworth, understands the importance of reviewing the IceCaps’ financial statements; he would know Council has an obligation to do its homework and confirm the generous ’subsidy’ is justified. Puddester and other Councillors ought to grasp that requirement, too.

The City of St. John’s, or any other City, does not go around doling out hundreds of thousands of dollars to companies without the assurance the donations meet some basic criteria. Were City policies adhered to? Would the Company experience financial jeopardy in the absence of receiving the benefit? Is the public interest served thereby? 

Williams’ “no-brainer” rationale wouldn’t impress a Bank, to which money must be repaid; neither should it pass muster as a “free-bee” on the taxpayers’ dime.

The Ice Caps want to extend its lease with Mile One.  That request, alone, should afford either Mile One or the City the right, as a condition of such renewal, to check if the Company’s financial circumstances have changed, as they may have. Such an inquiry does not speak to leniency or the question of whether public largesse is warranted.  It is intended only to permit the Ice Caps’ Landlord to confirm the Company’s higher costs have not jeopardized the Company’s viability.  It is to confirm that the Company is capable of extending its tenancy and is not likely to breach its covenants to Mile One. That is a quite normal business practice.

IceCaps’ management announced confirmation, weeks ago, of an additional season for the Team.  Team owner, Danny Williams, did not say that the decision was conditional; there was no suggestion or warning that if taxpayers failed to offer him $700,000 there would be no games, this year or next.  

This last point needs further discussion. I will make four points: 

First, on any rational level, City Council ought to have assumed that that an agreement had been entered into by the IceCaps and its franchisor, in the ordinary course of business.  Why would it draw any conclusion other than that Williams needs Mile One as much as Mile One wants the IceCaps’ continued tenancy?

Second, in awarding the subsidy without scrutinizing the IceCaps’ accounts, Council has awarded monies to a Company it knows not whether it earns $5 or $5,000,000.  It does not know whether Williams’ return on investment in the IceCaps is 1% or 50%. It does not know if it is giving public money to a wealthy Company or to one whose continued viability rests on the receipt of free money. It simply does not know. 

Councillors will naturally want to do their best, if the price is not excessive, to ensure bums are in the seats at Mile One.  If there is any public interest, that is it.  In this case, it did not demand reasonable proof, from the IceCaps, as to why users should not pay an extra $1.50 per game; the kind of decision that preoccupies private businesses constantly.  The IceCaps is not a charitable organization. Council receives no upside if the Team makes more money. Why should the City bear the downside if the organization makes less? 

Third, the IceCaps have confirmed play at Mile One this Season.  It is old news.   The tickets are already on sale.  In short, this is not so much a subsidy to the IceCaps as it is a $700,000 gift!

Fourth, Council quite rightly has the authority to review the rent structure charged promoters, like Danny Williams.  It may even conclude the Facility must be more cost competitive. But given the Ice Caps public acknowledgement of the one season extension, Council’s new rental subsidy ought to have applied to the period beyond that commitment.  Mr. Williams and any other promoter would then have known, well in advance and on a fair and equal basis, the rules of the game.   

_______________________________________________________
For an alternative view, David Lane, Councillor-at-Large has posted on his Blog:
                        
                          My Thought on Council and the IceCaps $700K

_______________________________________________________________________

For all these reasons, on any public policy level, this decision stinks. That the vote was conducted in secret just strengthens the smell.

Mr. Ellsworth, having made the right decision, should now work to ensure it is not approved when the Budget comes to a vote. Otherwise, the decision threatens any notion of transparent public policy at City Hall; it confirms that for a majority on this Council, public money is up for grabs if the applicant has the right political connections.  It taints Council for the rest of the Term.

If older politicians like Dennis O’Keefe and Art Puddester, or younger ones like Danny Breen, Jonathan Galgay and David Lane are cowed by the attraction of political influence and are incapable of making a small city’s institutional framework stronger, what chance is there for us to shed a large and well-funded outfit like Nalcor of its secrecy and its distain for public accountability?

Danny Williams may not give a hoot about such notions as long as his corporate interests are served; for him all of this may be a “no brainer”. 

As for the general public, how can they not see the decision is worse than unwise; it is just plain dumb.

6 comments:

  1. Despite crying poor, the IceCaps are able to continue to contribute to political causes; without the subsidy, this is not an issue, but with it, well one has to ask...........

    ReplyDelete
  2. Uncle Gnarley: Art Puddister voted to approve the subsidy. So far, Ellsworth and Hann have announced they voted against the subsidy because they "wanted more detail". The question I have is for SJSE. Why would a business offer a deal to a client knowing that it was going to negatively affect its bottom line by $700,000? SJSE and some councillors are using taxpayers as a bank.

    ReplyDelete
  3. William's bafflegab is a good example of "Broken Window Fallacy" If the Caps don't play hockey, 25 mil will disappear off the face of the earth. His team can conjure up 25 mil in new money if we give him 700K. Are we to believe then that hockey fans will burn their disposable incomes if there is no hockey, not bloody likely, they will just go to a show or order a pizza. Citizens of SJ will still spend their money in the city, just not give it to Danny. As for the secret meeting... Gandhi said it best "Truth never damages a cause that is just!"

    ReplyDelete
  4. they would not reduce the rent for the Fog Devils. If so, they would still be in business.

    ReplyDelete
  5. Excellent comments, and O'Keefe, Galgay et al should respond. And the Fog Devils were very badly treated.

    ReplyDelete
  6. Yes Sir, and its only too bad Councilor Jon Galway thinks the leak is bad because their communications staff never had a chance to get a hold of it first, so it seems. I figure he wanted to do what Premier Dunderdale did when they put aside $90 million dollars in the budget and didn't want to tell anybody in the province what it was for. It ended up being $120 million after and it was for Kruger's CBPP, our back electricity provider. What's been running down our provincial Tories legs all these years must be now dripping onto all the Tories on our City Council. It seems we now have a price put on to something that use to be a perk for our city. The Ice cap management now think it should be $700,000. The only no brainer is for the person who's pocket its going into, I think! This is nothing more than a made up money grab form the ice caps. And the optics is making it appear, rightly or wrongly, that Williams owns/controls more than just the Project Galaway. Maybe he's moved on to one of those other kind of get rich quick scheme called Project Galgay.

    ReplyDelete