Monday, June 30, 2008

Sudbury Star: Analysis of external funding for arts and recreation infrastructure

The following is from the Sudbury Sun. The article looks at external (provincial and federal) funding for arts and recreation infrastructure and concludes that Sudbury has little chance of getting such facilities without significant local investment. The analysis in this story supports our view that Penticton taxpayers will be on the hook for a significant portion of any performing arts facility in this city. Both the Penticton and District Performing Arts Facility Society (PDPAFS) and City Council have been unwilling to acknowledge the burden their scheme will impose on local taxpayers.

Funding the Legacy Projects: Where will we find the money?
Sudbury Sun
7 Jun 08

For months, Greater Sudbury Mayor John Rodriguez has maintained the provincial and federal governments must be significant funding partners for the city's so-called legacy projects. It's likely safe to assume "significant" would translate into tens of millions of dollars, given total costs in the $140-million to $150-million range for the proposed projects -- a huge recreation complex and a performing arts centre. In fact, the mayor suggests senior levels of government, combined with generous support from the private sector, must cover the lion's share of the legacy projects' costs -- as much as 80 to 90 per cent.

The city has yet to quantify how much provincial and federal funding it needs for the legacy projects. It is expected to take several weeks or even a few months for those numbers to surface. But securing major financing from outside sources will be a key factor -- and possibly the defining issue -- determining the projects' fate. So what can the city expect in terms of provincial and federal support? Is it realistic to count on tens of millions from Ottawa and Queen's Park?

Recent experiences of other Ontario municipalities that have developed recreation and culture facilities suggest Greater Sudbury may get nothing at all. At the other end of the spectrum, a best-case scenario would appear to be one-third of total costs funded by senior levels of government.

For the most part, there appears to have been relatively little funding from provincial and federal coffers for major culture and sports complexes developed by municipalities recently, research suggests. In fact, in several cases, there has been no such funding at all, leaving municipalities to finance their projects entirely from the local property tax base and community fundraising.

The Sudbury Star took a look this week at 10 municipalities that have built either a major recreation complex or a performing arts centre in the last five or six years. In six of those cases, there was no provincial or federal funding, while two municipalities received what could be characterized as minimal help. Two other municipalities managed to secure what could be described as significant funding from senior government levels.

When the City of Brampton built its Rose Theatre, an 880-seat performing arts centre that opened in 2006 at a reported cost of $55 million, it was shut out in its requests for federal and provincial assistance. "There was a lobbying campaign with the province at the time ... as well as with the federal government for funding for the theatre," says Gordon Smith, Brampton's communications manager. "That was, unfortunately, unsuccessful."

The Town of Richmond Hill has fared only moderately better in seeking help to develop its $30-million performing arts centre, which is scheduled to open this fall. "We got $2 million from a federal grant," says David Dexter, Richmond Hill's director of financial services. "That's the only grant we've received so far." While more funding "opportunities" are being sought, municipal officials don't appear to be holding their collective breath for senior government partners to come to the table. "Nothing right now is on our plate," Dexter says. As a result, the municipality expects to finance more than 75 per cent of the project's cost -- about $23 million -- from its own coffers. In addition to the $2-million federal grant already provided, "another $5 million is to come from corporate and personal donations" and any additional government funding, says Dexter.

Only one of the four performing arts centres reviewed by The Star -- Toronto's Four Seasons Centre -- received funding from both senior levels of government.
A survey of six municipalities which recently developed major recreation complexes found that only one community -- Sault Ste. Marie -- received provincial or federal funding. The other five municipalities were left to their own devices to finance recreation projects ranging in cost from $16 million to $39 million.

This rather uninspiring record of senior government support for culture and recreation projects appears unlikely to change, given current fiscal and political realities at Queen's Park and in Ottawa. Both levels of government are in belt-tightening mode, particularly the provincial Liberals who face a revenue crunch due to a slumping economy bordering on recession.

None of which deters Greater Sudbury's mayor, however. Federal and provincial funding for the city's legacy projects will and must be available, Rodriguez says. "I have to take the federal government at its word, that it is interested in cultural diversification and enhancement. They've said that," the mayor says. "I'm going to hold the federal government to its word and to its commitment and I'm going to try to drag the provincial government, kicking and screaming, into the 21st century, because this is where it's at."

It cannot be lost on the senior levels of government that there are important distinctions and unique circumstances to be acknowledged in evaluating the merits of funding community projects in any municipality, the mayor suggests. Rodriguez has argued since he campaigned for office in 2006 that the city needs a greater share of the mining-generated tax wealth received almost entirely by the provincial and federal governments. It also is a fact that Northern Ontario municipalities have not enjoyed the same level of assessment and revenue growth as their southern Ontario counterparts for the last several years.

Such factors may help explain why the City of Sault Ste. Marie received $4.7 million from the province and $3.7 million in federal funds to help build the Steelback Centre, its major-venue arena and entertainment complex. Combined, the provincial and federal funds represented one-third of the project's $25-million cost.

Rodriguez also notes generous allowances were made recently by the senior levels of government in southern Ontario, specifically Toronto's Four Seasons Centre for the Performing Arts. Home to the Canadian Opera Company and the National Ballet of Canada, the $186-million Four Seasons Centre opened in June 2006, with federal and provincial support accounting for 35 per cent of the cost, or a total of $66 million. The federal government donated $25 million and the province contributed $10 million in cash and land valued at $31 million.

The funding levels for the Steelback Centre and the Four Seasons Centre, extrapolated to reflect the cost of Greater Sudbury's legacy projects, would translate into roughly $50 million for the two local facilities. Such a figure likely would make Rodriguez salivate, given that he also expects huge support from the private sector, in particular two local mining giants that have been enjoying unprecedented profits.

Editorial aside: Penticton has no mining giants.

Rodriguez has yet to publicly provide numbers on the level of generosity he would like to see from the likes of Vale Inco and Xstrata Nickel. But the mayor has said that executives of the mining companies have not been scared off by ballpark numbers he has broached in private discussions.

The city also will be pursuing donations from the "broad" private sector, including corporations outside the city as well as various endowment funds and foundations, Rodriguez says. A community fundraising campaign also will be part of the city's approach, the goal of which will be to minimize the municipality's share of the legacy projects' costs, he says. "We're going to the private sector -- and I use the term broadly ... We intend to go far and wide to see how much we can raise."

One approach the city will not take is to sell the municipality's electrical utility -- Greater Sudbury Utilities -- to help finance the legacy projects, Rodriguez insists. There has been speculation recently within and outside city hall that council could be compelled to consider selling the GSU, which could fetch an estimated $70-million to $100-million, according to sources. That is precisely the course taken by a number of Ontario municipalities over the last several years to help finance major community projects and services.

Brampton, for example, sold its municipal utility to Hydro One in 2002, for about $260 million. About $41 million of that money subsequently was invested into the city's new performing arts centre. "That money was put into a number of funds, one of which was a specific legacy fund, to be held in perpetuity, like an endowment from which we get interest," says Gordon Smith, the City of Brampton spokesman. "Other (funds) were specifically for community investments, for projects like the Rose Theatre." Similar decisions made by Richmond Hill and the City of Burlington have helped finance their respective performing arts centre developments.

Greater Sudbury, however, will not divest itself of its municipal utility, Rodriguez says. The GSU currently generates an annual dividend of about $3.8 million to the city's coffers, the mayor points out. City officials also have long argued the GSU provides better service and lower rates than Hydro One, which would be the likely buyer if the municipal utility was sold.

"I can assure you, that's not in the cards," Rodriguez says. "Because our utility is an investment of the city ... and we get dividends ... that come every year. "We want to hold onto our utility, because our utility has subsidiaries as well. We think they're generating about seven-per-cent return on our investment and we can't get a seven-per-cent return on investment with investing institutions. So we're not going to do that. "We are going to go after what is in the private sector and what's there at the federal level and at the provincial level."

Another financing option that remains on the table is the potential for public-private partnerships -- so-called 3Ps -- in which a facility is financed, developed and operated by a corporation under agreement with the municipality. "Various configurations of 3Ps are being considered as part of the final development of business plans," the mayor's office said in a statement this week. Such agreements have been used by several municipalities, particularly to build and operated recreation complexes and those arrangements were reviewed by advisory panels working on Sudbury's legacy projects, the mayor's office noted. "Some were design/finance/build/operate, some were finance and leaseback, others were just design/build ... These options are being explored and the mayor is encouraging that all options be examined."

City council is expected to make a decision this fall on the legacy projects. Detailed funding applications to the senior levels of government must be ready before then, the mayor says. Until such details are known, it is premature to speculate on the likelihood of provincial funding -- let alone the amount -- for either project, says Sudbury MPP and cabinet minister Rick Bartolucci.

"I don't know which ministry they're applying to and they haven't contacted me," says Bartolucci. "And I can't speak for other ministries, that's where I'm caught, so honestly I don't know ... what the city is asking for. But I do know that there are so many unanswered questions that need to be answered before these projects move forward." Nor can he personally support either of the projects before crucial issues such as capital and operating costs, overall funding arrangements and long-term viability are addressed, Bartolucci adds.

"I'm not interested in a legacy that turns out to be a burden to our community," he says. "We have to be clear on what exactly this community stands to inherit. "So I am not sold on these projects at this point in time. They may convince me, but ... overwhelmingly, the feedback I'm getting from the people I'm in touch with is that they have many questions about these projects." Until his concerns and those of many of his constituents regarding the legacy projects are addressed, his funding priorities for the community lie elsewhere, Bartolucci says.

"My purpose in advocacy over the last little while has been more money for roads, I'm pushing for the school of architecture, I'm pushing for a new courthouse. Those have a greater priority, for me personally, than these two projects." Nor will he be swayed by confrontational or coercive arguments to lobby for provincial funding, Bartolucci says, responding to Rodriguez's suggestion the province may have to be dragged to the table kicking and screaming.

"I would suggest that he not lay down the gauntlet," says Bartolucci. "I won't be coerced into doing something that's not in the best interest of my community. My political legacy, if you will, will be always acting in the best interests of the community, not to fulfil personal dreams."

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