By Lethbridge Herald on November 28, 2023.
Al Beeber – LETHBRIDGE HERALD – firstname.lastname@example.org
Lethbridge city council is coming to the financial aid of the Lethbridge Exhibition but some of that support is contingent upon the Province of Alberta providing a formal commitment by Dec. 11 and on the Exhibition to agreeing to a City-led independent third party review of its operations and sustainability.
If council gets provincial support by Dec. 11 – the day before its next meeting, it will provide a capital grant of $2,081,093 – of which $1,040,545.50 is to be given to the City by the province – to the Exhibition to cover the capital shortfall “with the funding to be held in reserve and which can be assessed by the Lethbridge & District Exhibition upon their submitting claims for eligible expenditures for the Agri-Food Hub and Trade Centre project with funding being provided subject to the amendment of the Agri-Food Hub and Trade Centre Project grant agreement in a form satisfactory to the City Manager.
That motion passed by a 7-2 vote with councillors Jenn Schmidt-Rempel and Jeff Carlson opposed. Schmidt-Rempel opposed all six motions presented to council, who she told during debate the project should be supported without provincial assistance.
The second motion, which also passed by a 7-2 vote (councillor Belinda Crowson joining Schmidt-Rempel in opposition) called for providing the Exhibition with $500,000 for maintaining the old pavilions with the City’s contribution with one-time funding from the Municipal Revenue Stabilization Reserve for which the Exhibition will be required to submit eligible expenditures for the old pavilions with funding subject to the execution of a contribution agreement in a form satisfactory to the City Manager.
Council voted 5-4 in favour of a motion to defer two of the Exhibition’s semi-annual loan payments of $583,913.59 for the period of Dec. 15 of this year ending on June 15 of 2024 by adding two payments on Dec. 15, 2052 and June 15, 2053 plus accrued interest based on the City’s 10-year investment portfolio at the time of deferral, to the development loan agreement between the City and Exhibition with interim of funding of $1,167,827.18 – divided into two payments of $583,913.59 – coming from the Municipal Revenue Stabilization Reserve.
Council passed by an 8-1 vote a motion calling for the City Manager to retain and work with an independent third party to obtain the information necessary to evaluate and provide recommendations on the strategic and operational planning as well as the financial decision-making of the Exhibition to support its ongoing success.
The review is also to provide an economic feasibility assessment of the Exhibition to determine its short-term, mid-term and long-term financial sustainability. The selection of a consultant will be jointly considered by the City and Exhibition administration with a cost of $300,000 to be funded from the existing 2023-26 operating budget.
Council also voted – by an 8-1 margin – to direct administration to execute amendments to the development loan agreement to reflect the amended schedule of loan payments. It also voted to direct that a closed meeting report and discussions remain confidential
Warkentin made a presentation 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 of construction and a four-year debt deferral to be repaid on the back of the loan, totalling $4,671,309.72.
The presentation says the original approved budget for the new Agri-food Hub and Trade Centre was $70,600,000.
The forecasted budget projection at completion of the Hub is $77,342,315. That total includes $5,574,487.82 in project escalation and $1,167,827.18 in fiscal year 2023 debt servicing which the Exhibition says should have been included in the original budget.
The Exhibition says rising interest rates have impacted the organization. In August, 2020 the interest rate was 2.2358 per cent and the expected annual blended payment was $818,691.13.
By June 15 of last year, the interest rate had risen to 5.11 per cent and the actual blended payment was $1,167,827.18, an annual increase of $349,136.06 or 42.65 per cent.
In addition to the higher annual change due to interest rates, the Exhibition is dealing with a $400,000 annual change due to “building specific operational requirement” and an unbudgeted operating expense of $400,000 due to the old pavilions.
Warkentin told council the Exhibition is expecting an operating loss for the first two to four years and the organization needs to keep its contingencies intact, noting that “interest rates are the biggest killer for us.”
He said people need to look at the success of the Agri-Food Hub and Trade Centre, not from its first few years of operations, but from its success years down the road.
Warkentin told council “we are in the infancy of this project; we can’t get our feet under us.”
He noted he is feeling optimism about the future, noting the Agri-Food Hub building is going to be a game-changer for the organization, saying there is no comparison with other facilities in the country.
In response to a question from Carlson why the new building is lit up “like a Christmas tree,” with every light and television set on the CEO said that situation is being mitigated.
Deputy mayor Mark Campbell called the situation a nightmare that hopefully the City will wake up from and so the dream can live on.
Councillor Jenn Schmidt-Rempel said council should support the Exhibition without the province’s support, citing the importance of the hub to the region.
Crowson noted that other projects considered white elephants in their day such as Galbraith School and the old Exhibition grandstand stood the test of time, with the latter lasting 60 years.
During debate, councillor Ryan Parker said he is a pessimist and believes the City “is going to be hung out to dry” with the Exhibition’s costs falling on Lethbridge taxpayers to bear.
Chief Financial Officer Darrel Mathews told council the Exhibition’s request is actually far greater than what was seen in the presentation with there being unseen costs associated with it.
Those under-the-surface costs include $11.3 million for demolishing or repurposing the old pavilions. A draft report is scheduled to come before council Dec. 12 on the latter idea.
There is also a $15.71 million cost for parking lot refurbishment and the loss of $3.79 million in investment income over 30 years.
In addition, there are additional staff/consultant costs and less funding available for other City projects.
Concerns and questions were asked about the potential impact to Lethbridge taxpayers if the Exhibition had to turn over the keys to the City but no certain answers were available.
Mayor Blaine Hyggen said he supported the project in 2020 and he supports now, noting the city is invested in its success.