No tax hike for residents to save Lethbridge & District Exhibition
By Lethbridge Herald on December 12, 2024.
Council voted by a 6-2 margin to keep the Exhibition operational during a marathon session on Tuesday night.
Herald photo by Ian MartensAl Beeber – LETHBRIDGE HERALD – abeeber@lethbridgeherald.com
City residents will not be facing another tax increase to pay for the costs of operating the Lethbridge & District Exhibition which will remain open after a city council vote late Tuesday night.
Residents could have been facing another 2.24 per cent property tax increase on top of the already scheduled 5.1 per cent hike scheduled for 2025.
Council voted by a 6-2 margin Tuesday night to keep the Exhibition operational during a marathon session that started at 9:30 a.m. and ended around 11:30 p.m.
Acting mayor Jeff Carlson and councillor Rajko Dodic voted against that plan.
Any additional tax increases will be deferred until 2027 after council voted to approve the third of five options presented to it by chief financial officer Darrell Mathews.
Mathews’ recommended option was that council approve an additional residential property tax increase of 2.24 per cent – on top of the 5.1 per cent tax increase already scheduled for 2025.
This option had the lowest impact for the City, Mathews told council.
But council instead went with an option that will delay additional tax hikes until 2027 when residents will be facing another 1.4 per cent increase.
This option requires the allocation of $2.6 million of one-time funding which limits future budgets and allocates $1.5 million of contingency funding – which reduces financial flexibility and also contravenes City fiscal practices by using one-time revenues for ongoing costs. Due to the tax deferral, there is also a lack of budget certainty and this option may also require future service level reductions for that deferral.
Council also passed a motion to refinance the debt related to the construction of the Agri-food Hub & Trade Centre to save $15 million in interest during the next 10 years. This was recommended by Mathews to council acting as Economic and Finance SPC after it heard the results of the third-party review conducted by Deloitte Canada LLP recently.
The refinancing will change the loan from a 30-year term to 10 years and move external borrowing to internal.
Mayor Blaine Hyggen early Wednesday morning told the Herald in a phone interview that “the community cannot bear another cost so I’m quite happy the way it is and I’m sure we can over the next few years find the cost savings and the efficiencies so we don’t have to increase taxes because of this.”
The LDE’s financial problems came to the attention of council in March of 2023 when the LDE’s then-CEO Mike Warkentin came to an SPC requesting more than $4.6 million to demolish the three old pavilions on site.
Warkentin told the SPC that the original cost of the new trade centre had escalated millions of dollars over its projected budget.
At that meeting, Warkentin said the LDE was forecasting a loss for 2023 and was working to mitigate it. In November of 2023, when he returned to council asking for the City to immediately take possession of the pavilions and give it emergency financial assistance, he said the Exhibition expected to lose money for three to four years.
The hub was built in part with $27.8 million from the province of Alberta and $25 million from the City of Lethbridge. The City also backstopped a loan to the Exhibition of nearly $18 million while Lethbridge County contributed $2 million to the project.
In November of 2023, Warkentin appeared before council asking the City for a capital grant in the amount of $6,742,315.72 or a capital grant in the amount of $2,081,093 to cover the unfunded capital costs of construction and a four-year debt deferral to be repaid on the back of the loan, totalling $4,671,309.72.
Council agreed to support the Exhibition contingent upon the province agreeing to pay half of a capital grant of $2,081,093 to the organization. That motion was several approved at that November meeting, all of which hinged on provincial money being provided. But in December of 2023 the province declined to provide that funding, telling the mayor in a letter read to council that because the viability of the current business plan was in doubt, the province declined to provide the requested $1,040,546.50 to the city.
As council debated in closed session on Dec. 18 of 2023, the Exhibition announced in a press release that it and Warkentin had mutually agreed to part ways.
That departure was followed hours later by an announcement that the City would a provide emergency interim financial support to the Exhibition of $250,000 and set aside up to $950,000 in contingency held under City control “for verified emergent needs.”
The council resolution also called for an independent third-party review of the Exhibition and the establishment of a new governance body consisting of administrative staff from the City and Lethbridge County.
Ground was broken on the 288,000 square foot facility in March of 2021.
Hyggen said Wednesday that this council was blind-sided by the LDE’s financial problems.
Other options that council could have explored Tuesday included a partial tax increase for 2025 which would use the full corporate budget contingency, leaving zero dollars available for unexpected costs and increase taxation only by 1.4 per cent.
Another option called for a partial tax increase in 2025 using $1 million from the corporate budget contingency, an immediate additional tax increase of one per cent above the previously approved level and allocates $1.3 million of one-time BAU and 2023-24 carryover funding, reducing capacity for one-time allocations for 2028-31 budget deliberations, an option which contravenes council’s fiscal practice.
Another option was to reduce service levels by 2027 and called for the removal of $4.1 million from the 2025 and 2026 operating budgets for departments. Services impacted would have included cuts of $1.5 million to protective services, $800,000 to community services and $1.8 million to all other services. Police would have taken a 20 per cent hit or $900,000 while fire and ambulance services would have seen a cut of $600,000 or 15 per cent.
Parks and Transit would also have seen $300,000 cuts.
Mathews’ report stated that all options are viable and none are “low-low impact” and all will require either tax increases and/or service reductions either now or in future years.
Council heard that mothballing the Agri-Food Hub and Trade Centre would also have costs, including $1.8 million needed immediately to begin winding down operations and $2.5 million in annual fixed costs. Such an approach would have still resulted in a total annual tax increase of 6.5 per cent due to an additional 1.4 per cent needed to cover such costs.
Mathews’ report to council said continuing operations at the LDE will have important economic spinoff benefits for hotels, restaurants, tourism and retail businesses while providing important community events.
For example, five upcoming conferences and trade shows that have already been booked are each expected to provide between $100,000 and $500,000 in benefits to the local community.
“Administration recommends continuing operations based on the ongoing costs associated with stopping operations, economic benefits to our community, and quality of life benefits for our residents,” says the report.
Council spent hours discussing the LDE while also dealing with other matters including lengthy public hearings and an unexpected motion by Acting Mayor Jeff Carlson early Tuesday morning to disband standing policy committees of council.
That matter was deferred until the Jan. 21 meeting of council when members of the public will get a chance to voice their opinions.
SPCs consist of four members of council who address issues and then present their recommendations to council at subsequent meetings. Those matters are part of the consent agendas and are often voted on at one time. Councillors will – and sometimes do – request items to be removed for further debate at the council level. While the public is not allowed to speak on matters at council meetings, they do have that opportunity at SPCs.
Carlson said while he enjoys “the deep dive” of committee work, he said the committees are a waste of time and feels the hours addressing matters at them should be done at the council level. He said he doesn’t want to waste people’s time in committee then deal with matters again at council.
Dodic told his colleagues that the function of SPCs could best be served by council, that their is a duplication of effort. He also pointed out that the consent agenda items can add hundreds of pages to council agenda.
A third party review by Deloitte Canada LLP of the Exhibition stated that “LDE did not proactively communicate more than $27 million in additional costs ($11.3 million for demolition and $15.7 million for parking refurbishment) that were uncovered by the City despite the significant impact these unanticipated costs would have on LDE’s financial sustainability.”
Deloitte’s review also stated that “there are indications that initial project budgets significantly underestimated the costs of pavilion demolition and parking lot refurbishment due to a lack of diligence.”
The report says there were a lack of procurement processes surrounding the architect/designer and project manager which were procured through sole-source contracts dating back to as early 2013. It notes project budgets and forecasts were inconsistent and lacking in detail and initial estimates for parking lot refurbishment and pavilion demolition costs weren’t supported by third-party quotes or appropriate diligence.
There was also a lack of documented approval of functional design changes.
The City says unused grant funding has identified to pay down the LDE loan by more than $7 million.
Council also on Tuesday approved a recommendation to refer consideration of the pavilion demolition and parking lot reconstruction to the 2027-30 Capital Improvement Program and it approved that work proceed on exploring a new operating model for LDE which includes a recommendation by Deloitte for a municipally-controlled corporation to consolidate event attraction here.
And council has also directed administration to amend policies and procedures to better protect the City of Lethbridge corporation and taxpayers from undue financial risk.
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There’s a need for a second article here. This does not mention the gross understatement by Warkentin on the funds that he said were needed versus what were actually required. This was proven through review that identified $35 million more in capital dollars, $4 million in continued operating dollars, zero maintenance for many years and no planning for future costs. Plus, no thought to staffing or money put away for the future as he stated would be happening! Instead money was wasted on garish and unnecessary expenses. The actions of Warkentin and the former board are appalling!!
I agree that Warkentin and the board were grossly incompetent and possible legal action must be investigated. However, the city administration and council bear the ultimate responsibility for the LDE financial disaster. Giving someone millions of dollars and assuming they will look after ur best interests with no direct oversight is also grossly negligent.
The LDE situation reflects a serious breakdown in oversight and financial management, as highlighted by Deloitte’s review and comments from residents. While avoiding an immediate tax increase may seem like a win, the decision to use contingency funds and one-time revenues creates future financial uncertainty and limits flexibility for emergencies. The lack of planning for maintenance, staffing, and long-term costs, combined with unnecessary expenses, shows gross mismanagement by the former leadership and board.
However, as Chmie pointed out, the City Council and administration also bear responsibility. Entrusting millions of dollars without robust oversight or clear accountability processes was negligent and has left taxpayers bearing the fallout. Moving forward, the City’s commitment to implementing better fiscal protections and exploring a municipally-controlled corporation is essential, but public trust will require transparency and measurable results.
As for the Exhibition itself, it’s vital to remember its role in supporting the local economy through tourism, events, and business attraction. While its future must be carefully managed, abandoning it entirely could mean losing these benefits and increasing financial strain through mothballing costs or missed economic opportunities. The challenge now is to balance immediate action with sustainable, forward-thinking solutions that restore confidence and ensure taxpayer dollars are well spent.
This is a wake-up call for better planning and governance—not just for the LDE but for all major city projects. Lessons learned here must guide future decisions to avoid repeating such costly mistakes.
I agree with Dodic and Carlson- put on the backburner. Likely it will be taken down in 5-10 years. It can’t perform the functions that it was agreed it needed to do in the first place. The city has lots of private facilities that need the business for conference space. You can’t have it perform as a agricultural hub, as it can’t house anything bigger than a poodle.
The rest of council are in denial and just trying to fool themselves,let’s pretend til after the next election.
I guess some councilors are realizing that being on council entails a bit more thought than running a pop stand.
So no tax increases next year but they’re taking money from other projects and this is good how? Could it be there’s a municipal election scheduled next year and members of council are concerned about their future and for good reason. I want to know who’s responsible for letting this boondoggle happen and what is being done to prevent it happening again. This city is loose with taxpayers money and slow to take responsibility for it. What happened to the city worker who ran the enmax and put into an impossible situation running the agri-hub? He’s not there anymore or even working for the city. More colateral damage? This reminds of the ABCP scandal. Bury it in the books and by the time questions are asked it’s too late.
We keep hearing about the LDE original Board’s role in this fiasco but I have yet to see the names of Board members. If they continue unnamed we may unwittingly be voting some in for Council in 2025. Does anyone know the names?
According to an article from Lethbridge News Now. Com dated Feb 24/2023 the president and directors were as follows:
President: Ryan Miller 56th president
Directors: Russ Zemp – 1st vice president
Heath Wright – 2nd vice president
Five New directors were also named:
Don Strankam and Derek Johnson to three year terms
Dan Brewin and Kelly Shigehiro to two year terms
Melissa Arseniuk to one year term.
They join Past President: Bev Lanz
Directors: Mark Sayers
Bruce Galts
Tory Campbell Lethbridge County Rep.
continuing to serve on the board.
Rick Neudorf serving as a volunteer on the board since 2011 stepped down.
https://lethbridgenewsnow.com/2023/02/24/lethbridge-and-district-exhibition-brings-in-new-president-and-five-new-directors/
Note there was no City Representative noted in the article and further investigation on Google has failed to turn up any info prior to 2023.
According to a LinkedIn profile of Mike Wuchterl from 2 months ago he has worked for the LDE for the last nine years. In his role of Business Development Manager on site for the last 3 years he indicates the 268,000 square foot building will be an economic driver for the growth in the food sector in Alberta. Expectations include the new Agri Food Hub and Trade Center is expected to contribute more than 90 million annually to the regional economy.
The past presidents can all be found at the bottom of this link. 2019 – 2023 are the key people to look at. A Landmark for Lethbridge Community | Agri-Food Hub and Trade Centre
With the cost of living up 2.7 % this year it is hard to see how the city can justify a 5.1% increase. Never mind the Exhibition centre. It has got to the point where we are seriously contemplating a move away from Lethbridge because of the municipal tax burden. This town has an out of control spending habit.