• TCL’s theft of the Metro Centre box office goes down the memory hole
• The city paid half the costs of Fred MacGillivray’s super pension
Management for the new convention centre wants a tunnel blasted through the bedrock below Grafton Street. The block-long tunnel would link the new convention centre to the existing tunnel and pedway system connected to the existing convention centre, and would allow people staying in four downtown hotels — Prince George, Barrington Halifax, Delta Barrington, Halifax Marriott Harbourfront — to attend conventions without stepping foot outside.
The tunnel is mentioned in a report written by city finance director Greg Keefe, updating city council on the state of management and financial issues related to the new convention centre:
TCL [Trade Centre Limited, the operator of the existing centre] has expressed that a tunnel is needed between the existing World Trade and Convention Centre (WTCC) building and the Halifax Convention Centre. This will link the complex to four hotels (Prince George, Barrington Halifax, Delta Barrington, Halifax Marriott Harbourfront) without requiring guests to go outside. TCL maintains that ease of connectivity is important to clients and integral to sales activity for the new centre. One of the requirements of the RFP for the convention centre was that the developer accommodate an entrance to a tunnel for connectivity to the hotel network downtown.
Concept design for the tunnel connection along Grafton Street between the existing enclosed pedestrian system and the new convention center is expensive ($7-10 million). While HRM staff do not agree that a tunnel is a necessary feature, we do acknowledge that the concept of a convenient, weather protected pedestrian connection at street level is a desirable outcome. This issue has a direct connection to the overall issue of streetscaping and the ultimate dispensation of the Nova Centre events plaza. Staff are working on practical and effective alternatives to create weather protected access without the expense and disruption of tunnel.
Such a tunnel was never mentioned when the convention centre was proposed or when the city and province worked out financial arrangements for the facility. The idea for a tunnel was expressed only recently to the city, via Trade Centre Limited managers, who of course work under president Scott Ferguson. Trade Centre Limited will morph into a new organization called Halifax Convention Centre that will run the new convention centre, and Ferguson has already been named its president.
Keefe told me Tuesday that the contract with developer Joe Ramia required merely that the Nova Centre include a portal to a tunnel, but not the tunnel itself, which would not be on Ramia’s property in any event.
Should a tunnel ultimately be built, the cost of it would likely be split evenly between the city and province.
The design guidelines in HRM By Design speak to encouraging foot traffic outdoors, at the street level:
The intent of these guidelines is to focus pedestrian activity and at the sidewalk level in support of sidewalk level retail establishements, and overall public realm vibrancy. Canopies and awnings are encouraged throughout the donwotwn for this reason. While weather-protected sidewalk-level connections are generally preferred, pedways may be appropriate or necessary in some cases, such as interconnecting convention and hotel spaces. When deemed necessary pedways shall:
- Not be constructed in a north-south direction such that they block views up and down the east- west streets in the downtown.
- Not be more than a single storey in height.
- Strive to have as low a profile as possible.
- Be constructed of highly transparent materials.
- Be of exceptionally high design and material quality.
The prohibition against north-south pedways makes it impossible to connect the old and new convention centres with a pedway —such a pedway would block the view down Prince Street to the harbour — which explains why a tunnel is wanted.
Keefe said the city is “working with” Trade Centre Limited to find an alternate solution, but had no further details.
It’s neither here nor there, but perhaps pedways and tunnels wouldn’t be so needed if the city did a better job clearing ice off sidewalks.
And encouraging awnings is a wonderful goal, so why are we charging encroachment fees [4(a)(ii)] for them? The encroachment fee is $125 (I presume annually) for an awning over 2.5 square metres.
Theft of Metro Centre box office
Keefe is an upstanding civil servant. I’ve followed him since he began working for the city and I’ve found him to be a straight-shooting, no-bullshit kind of guy. So it surprised me to find a paragraph in his report that seemed designed to obscure, rather than illuminate. That’s this paragraph:
Ticket Atlantic
TCL operates Ticket Atlantic, which in addition to offering ticket sales for a number of venues, is the box office for Scotiabank Centre. In July 2012, the Auditor General recommended, as a result of an audit, a change to the billing model between Ticket Atlantic and Scotiabank Centre. A subsequent review by Grant Thornton showed that the issue the Auditor General brought to light occurred when there was a year with very high attendance numbers. It is planned that Ticket Atlantic become a part of HCC [Halifax Convention Centre, i.e., the new convention centre], and that any change in the billing model be considered in that context. As a part of HCC, any Ticket Atlantic surpluses will contribute to the operations of HCC.
Let me translate that for you:
Yea, sure, TCL stole the Metro Centre box office from us, but the ongoing theft isn’t as big as it was back in 2008, and from now on the amount of the theft will be cut in half.
In 2013 I gave the context for this issue:
Since the 1980s, the city has contracted with provincial crown corporation Trade Centre Limited to manage the Metro Centre, which is a city-owned venue. Up until 2007, the Metro Centre had its own ticketing facility called Box Office, but in that year TCL took over the operation, folding it into a bigger operation called Ticket Atlantic. The takeover was not authorized by city council or the TCL board of directors, and was apparently OKed only by then-TCL president Fred MacGillivray.
While Box Office no longer existed, its old bank account, owned by the city but managed by TCL, continued on. It was this account that became the conduit for $7.4 million in secret loans to concert promoter Harold MacKay, meant to finance concerts on the Halifax Common. The last $400,000 of those loans was not repaid; minus a deposit, the city ate $359,550. [Click here to read my investigation of the concert scandal.]
In the wake of the concert scandal, city auditor general Larry Munroe discovered the takeover of Box Office, and the lack of documentation for the reimbursement of ticket sales. Specifically, the city would be paid just 40 cents for each individual Metro Centre event ticket sold at Ticket Atlantic, but nothing at all for group ticket sales or for Skyboxes. Munroe requested an audit of the entire Metro Centre/TCL arrangement, and in August, 2012, council directed staff to hire a firm to conduct the audit, at an estimated cost of $50,000.
That audit, performed by the accounting firm Grant Thorton, discovered that the city had lost about half a million dollars because of the theft of the box office — $503,644 to be exact.
Grant Thorton made three recommendations (pages 36 and 37):
1. A regular and transparent process should be implemented to enable HRM to monitor the operation of the HMC by TCL. This should include regular financial reporting, discussions on annual budgets, and approval for major investments or abnormal expenditures. Regular meetings should be scheduled with an appropriate representation of TCL and HMC officials. Minutes should be documented and all important decisions should be approved or rejected by the designated representatives. Significant decisions should be further approved by the appropriate level of HRM and TCL (e.g., Council or Board or management as agreed).
2. In designing a compensation structure for ticket sales there are three options that could be used by Ticket Atlantic and HMC:
1) Use of the current system where the majority of the risk and upside return has been transferred to Ticket Atlantic with HMC being guaranteed a minimum return on single tickets sales.
2) A cost matching approach where service charges are set at a minimum level to cover the cost of box office operations. Under this approach the box office is not viewed as a profit centre rather the cost of tickets are lowered by reducing the service charge. The goal of this approach is to stimulate demand for tickets and increase attendance to drive other revenue and ultimately increase the number of events hosted each year. If events are viewed as being more successful due to greater attendance then it should follow that the demand from promoters to stage events at HMC should increase. This approach requires that the box office management have the ability to adjust service charges to match the cost of operations in the aggregate. It will also only be of benefit if the HMC has capacity to increase the number of events that are held during the year.
3) A partnership approach where Ticket Atlantic and HMC share in the upside return from successful events. A formula could be developed to support this approach that would likely require the HMC to forgo its currently guaranteed minimum commission level in years such as 2011 where Ticket Atlantic operates at a loss.
3. Currently group and package ticket sales are not subject to a service charge, however there are costs associated with the issuance of all tickets sold. Ticket Atlantic’s cost structure is being solely support[ed] by the service charges on single ticket sales. Ticket Atlantic and HMC could consider if there is the ability and scope to institute a service charge or cost recovery fee on group and package ticket sales.
So far as I can determine, none of those recommendations were implemented.
Let’s be clear about this. In his capacity as TCL president, Fred MacGillivray stole the Metro Centre box office from the city. The theft resulted in the city losing a half million dollars in ticket sale revenue between April 1, 2006 and March 30, 2012 (the ending period of the audit).
The loss was particularly high —$620,351 — in the 2008-09 fiscal year, when the world hockey championships were hosted in Halifax. The total is less than that because in 2007/08 and 2010/11 the city actually got paid more than it would have under the old system.
But the loss continues. How much? We don’t know — no one’s checking — but if we exclude the hockey year, the city was losing on average $23,341 annually, and it’s probably safe to say that the city is still losing that money.
“Whether or not it [Ticket Atlantic] keeps a little extra profit or not is not that big a deal,” Keefe told me.
In any event, said Keefe, since Ticket Atlantic will shift over to the new organization, the Halifax Convention Centre, which will be half-owned by the city, the loss will only be half as much, or $10- or $15,000 a year (unless there’s another big event like the hockey championship), so it’s not worth bothering about.
Even if so, I said to Keefe, there’s still the matter of the missing half million dollars, the money flatly stolen from the city by TCL. Keefe’s report provides no resolution to that missing money.
There was a report to council, replied Keefe, that addressed the Grant Thorton audit. He summarized it as follows:
The recommendation going forward is let’s forget the past, there’s lots of fuzzy stuff there to make a solid case one way or the other. There’s probably enough blame on both sides. Let’s go forward with reslolving this formula issue with Ticket Atlantic.
Keefe said his staff meets with TCL staff monthly, and “this would not [now] slip through the cracks like it did then.”
While the city can be faulted for not paying enough attention to the box office issue, it was MacGillivray and TCL that made the unilateral decision to steal the box office. And the city is out half a million dollars, and counting.
Fred MacGillivray’s pension
Here’s one thing that’s not in Keefe’s report: Fred MacGillivray’s pension.
Back in 2002, MacGillivray convinced the TCL board to him a “super pension,” over and beyond the pension that all public employees receive. This pension wasn’t discovered by the outside world until 2008, when it suddenly was approved by then-Premier Rodney MacDonald’s cabinet. Reported the Canadian Press:
A special pension for the boss of Trade Centre Ltd. was put in place more than five years ago but didn’t get cabinet approval until November.
New Democrat MLA Graham Steele says that the supplemental pension arrangement for president and CEO Fred MacGillivray, worth about $800,000, requires cabinet approval under the Provincial Finance Act.
“The first year in which the supplemental pension is recorded in the financial statements is ’02-03 and so if it’s being approved by cabinet five years later, the law was on the books the whole time,” the Halifax Fairview member of the legislature said Thursday.
“Somebody messed up, they realized they messed up and now they are trying to paper it over. I think somebody’s got some explaining to do.”
Economic Development Minister Angus MacIsaac said the issue was brought to his attention and the pension agreement was brought to cabinet for approval.
“Once we became aware of that, then I took it forward,” MacIsaac said Thursday at the legislature.
“I was advised that this was approved by the (Trade Centre) board some time ago, but it also requires — in order to come into effect and be appropriately approved — approval of cabinet, so we prepared the documents and took it forward.” Tom Peck, a spokesman for the Office of Economic Development, said the approval was made on Nov. 15, 2007.
The Grant Thorton audit in 2013 revealed something else: Between 2004 and 2013, TCL charged the city-owned Metro Centre box office $486,118 to fund MacGillivray’s pension (see page 41). Undoubtedly there were similar charges in 2002 and 2003, but the audit didn’t cover those years.
Understand that while the city appoints three city councillors to its board, TCL is a provincial crown corporation, owned by the province. Moreover, TCL had no authority to issue the super pension in the first place, and it was only retroactively approved by cabinet.
There is no reason — none at all — why the city should have paid half the pension.
MacGilivray’s pension was recently valued at $1 million. The latest TCL annual report notes that:
During 2013, the province of nova Scotia made a decision to cover the costs of the pSSA SeRp on behalf of Crown corporations. this change resulted in a one-time recovery of costs related to the pension arrangements with the former president and Chief executive officer of trade Centre limited. As a result the Company recovered $76,710 in 2013 in accrued benefits previously expensed in the Company’s financial statements. [capitalization problems in the original]
The city has not been reimbursed any portion of the money it paid into MacGillivray’s pension.
Incidentally, TCL had a deficit of $772,303 last year before amortization of assets. The figure rises to $3.3 million after amortization.
Other issues
The rest of Keefe’s report is old news, but I’ll just quickly go through the list:
First, the city and the province will each own half of the convention centre, meaning that each has to pay for half the operation, and more importantly, each will have to pay half the losses. And everyone admits convention centres lose money. How much? We don’t know. Reports from a few years ago peg the annual loss at about $3 million every year…I think that’s optimistic, to put it mildly. Time will tell.
Second, there are big transition costs to to move into the new convention centre, to get all the computer equipment needed for it, and to advertise it. That will cost $640,000 this year, and just over a million dollars each of the next two years.
Third, the city will have to buy the existing convention centre and the office tower above it from the province. That building was built in 1982, so it’ll be 35 years old when the city gets it. It’s old, tired, and falling apart. The report says that the city will probably only have to pay about a million for it, but then a bunch of money will have to be spent to fix it up and make it useful, probably for city offices. I’ve seen figures as high as $12 million for that.
Very thorough and illuminating article.
The status quo around here seems to be: screw everyone over by doing whatever you want and, as long as you are a big developer or politician, everyone will wave it off as being “in the past.” As if to say “that already happened, so it wasn’t wrong.” Or, “they already did it, so it must not have been wrong to do it.”
Or, even more worrying “we didn’t catch them doing it, so now WE are responsible for paying for what they did.”
Great article.