Post by jhendrix70 on Aug 3, 2008 23:49:56 GMT -5
MTS Centre a good deal for Winnipeg
By: Mark Chipman and Jim Ludlow
August 3
We feel that Winnipeg has and continues to be a desirable place to live and work. We are proud to be associated with the MTS Centre, which we believe to be a fine example of a successful private venture and which has and will continue to serve the interests of the community well and enhances the quality of life in this city and province.
In May of 2001, we announced our intention to build an entertainment centre on the site of the closed Eaton's Building in downtown Winnipeg. Some members of the community were opposed to our plans for this project, including a group known as the Save the Eaton's Coalition. The group expressed its adamant opposition to the project through the media and in various other ways. In addition, they commenced five court proceedings in an unsuccessful attempt to prevent the project from proceeding at its current location. During the construction phase of the project, and continuing to the present, we have chosen to limit our public comments relating to opposition to the project because we wanted to be respectful of contrary opinion and because we recognize that the spirited expression of views on issues of public interest is one of the hallmarks of a vibrant and healthy community. We resolved to refrain from responding to most of the opposing opinion which was expressed, unless that opposition was based on incorrect or misleading information.
Frankly, we hoped that after the MTS Centre had opened and operated successfully for several years, criticism of the project would stop.
The MTS Centre opened its doors in November of 2004, and has operated successfully since that time. Regrettably, as recently as July 13, 2008, an article appeared in this newspaper entitled "This Time Full Disclosure" written by Rocky Kravetsky, the lawyer who represented the Save the Eaton's Coalition in all five of the court proceedings which had sought to stop the project. Incidentally, all of the proceedings (one of which went to the Supreme Court of Canada) were dismissed by the courts.
Mr. Kravetsky's article contains inaccurate and misleading information on some fundamentally important points and accordingly, we feel compelled to respond.
To begin with, Mr. Kravetsky suggests that the project was not transparent, and that the capital costs of the project and the contributions of all three levels of government have not been properly disclosed and are not known.
In point of fact, from the day we announced the project over seven years ago, all of the public contributions were made known and rigorously scrutinized by various members of the media and the public. The True North Project business plan was posted on our website at a very early stage of the process. As well, we responded to requests from a significant number of civic groups to meet and speak with them about the project. In each case, we would detail every aspect of our agreement including the initial capital costs as well as the VLT and amusement tax provisions. None of those matters were kept secret.
As has been stated publicly many times, the cost of developing the MTS Centre was $133.5 million, including all property acquisition and remediation costs, construction and project management costs, expenses related to the acquisition of furniture, fixtures and equipment, (including all electronic systems and all food and beverage preparation and dispensing equipment), design, engineering, testing and surveying costs, insurance, bonding, utility infrastructure, loan, credit facility and professional services, (including legal, accounting and auditing fees). The figure of $133.5 million has been in the public domain for many years.
The three levels of government openly and transparently contributed to the capital costs of the project. The City of Winnipeg contributed $14,500,000 in cash and infrastructure services, the Province of Manitoba $14,000,000, and the Government of Canada $12,000,000. Those monies, totalling $40,500,000 were contributed through the infrastructure program operated by the three levels of government.
The balance of the capital costs of $93,000,000 (approximately 70 per cent, not 30 per cent as stated by Mr. Kravetsky) were funded by the private investors by payments of cash and the transfer of property to the project.
It was then against this project cost and the associated payment of cash and transfer of all property that a mortgage in the amount of $63,000,000 was secured. The mortgage debt and all its consequent costs and risks are entirely the responsibility of the private sector investors.
Appropriately, the public sector contribution was fixed. The three levels of government incurred no risk or obligation for cost overruns on the project, or operating deficits either during construction or once the MTS Centre was open and operating. All of those risks have been willingly assumed and borne in their entirety by the private investors.
Incredibly, Mr. Kravetsky claims that all of these risks were eliminated by virtue of the VLT and amusement tax revenues we are able to produce. He does so by claiming to know the amortization period of our senior debt, suggesting that it mirrors the length of our master funding agreement and by concluding that a "garden variety mortgage" would be covered by these revenue streams.
These assumptions are incorrect, as is the suggestion that those sources of revenue are a virtual certainty. In fact, our ability to generate amusement tax is entirely dependant on our ability to produce the events from which it is derived. The predictability of such events is far from certain. They vary in size and scope from year to year and their promoters often have a wide range of options in terms of the cities in which they choose to stop. Fortunately, our organization has and continues to work very hard at landing numerous key events, the success of which has given our facility and this community a strong reputation in the North American touring industry.
After summarily dismissing our debt obligations, all the while continuing with references to spin, myth and magic, Mr. Kravetsky then goes on to claim that the contributions made by the public sector were disproportionately large relative to the contributions made by the private investors.
Mr. Kravetsky also dismisses the notion that the governments have already received a substantial return on the monies they contributed to the project. More specifically, Mr. Kravetsky refers to but trivializes the fact that returns to the governments from taxes earned in the construction phase actually off-set a large percentage of the public supports to the project. He refuses to acknowledge the Manitoba Bureau of Statistic's assessment that 80 per cent of the province's initial contribution was paid back before the doors to the MTS Centre actually opened or that the federal government has long since been paid back through its taxation of various aspects of the development and ongoing operations.
Mr. Kravetsky then challenges the methodology by which the facility pays property tax, conveniently failing to reveal that such taxation classifications exist for arena and entertainment facilities across Canada. He further neglects to point out that the MTS Centre pays more in property taxes than Eaton's did before it went out of business. Finally, Mr. Kravetsky makes no mention of the fact that had we built the facility today, we would have likely qualified for the city's new tax increment financing program that a number of projects are benefiting from.
Mr. Kravetsky's article then makes two cavalier and perplexing assumptions relating to the success of the MTS Centre. Firstly, that a new arena and entertainment complex was about to be built somewhere in Winnipeg by someone. Secondly that such a complex would have been successful wherever it was built and regardless of who owned and operated it.
We do not agree with either of those assumptions.
The need and desire for a new arena and entertainment complex in Winnipeg was identified many years ago, but the attempts to finance and build it by other individuals and groups were unsuccessful for various reasons. Those attempts also generated a great deal of counter-productive acrimony.
In terms of Mr. Kravetsky's assumption that the success of new arenas is assured regardless of location or management, we would respond by pointing out that the sports and entertainment industries in North America are extremely competitive, and even a cursory review of the history of the entertainment and concert business in Canada reveals the high degree of variability and profitability associated with those industries.
The choice of a location for such a complex is critically important, both to the viability of the complex itself and to the role it can play in providing strength and vigour to the community in which it is located. However, the success of large entertainment centres is not assured.
According to Mr. Kravetsky's logic, we would also be left to assume that all of the resulting tangible and intangible benefits of the project would have happened anyway. CTV's new premises, which our partnership subsequently constructed, would have no doubt found its way into the empty Eaton's steam plant, the walk-way system would have re-opened and all of those 600 plus event nights that have occurred over the past 45 months would have surely happened in any event. Just how, where and by whom remains unclear.
Beyond all of the tangible and quantifiable financial benefits derived from the public sector's contribution to the project, we believe the government leaders who provided the public support, saw far greater benefit in doing so.
They were able to see beyond the lingering nostalgia associated with the old Eaton's building, a nostalgia that we, as long-time residents of Winnipeg, understood. The reality, however, was that the old Eaton's building was the site of a failed commercial enterprise. The building had been empty and useless for several years prior to the initiation of the MTS Centre project. The vacant shell of a once grand building had essentially become a vast unsecured pigeon roost in the middle of one of our major downtown thoroughfares.
Notwithstanding considerable effort by our partner and then owner of the building (a company with years of successful, North American wide commercial property development experience), they had been unable to establish a viable alternative use. The sheer size of the building, its complete lack of structural integrity and the resulting cost of bringing it to code for any purpose made demolition an inevitability. The proponents of an alternative use for the Eaton's building did not and could not have appreciated those fundamental problems.
In that context, government leaders embraced the idea of the private investors for a major entertainment centre in the heart of downtown Winnipeg. Those leaders understood that the Centre could be one of several important initiatives, both large and small, which could substantially contribute to a re-birth of the centre of the city. We believe they were right and only have to imagine an empty or demolished Eaton's building and fractured walk-way system in 2008 to remind ourselves.
We are proud of the success the MTS Centre has enjoyed to date. Since opening on time and on budget in 2004 it has played host to over 600 events ranging from sporting events to concerts and entertainment productions. These events have been attended by over four million people. The concerts and entertainment productions have been some of the leading shows in the world. As a result, Winnipeg and the MTS Centre have ranked consistently in the top five entertainment venues in Canada and the top 20 in North America.
In the next four months, Winnipeg will see and enjoy two Elton John shows, two Celine Dion shows, Steve Winwood and Tom Petty, Def Leppard and Billy Idol, Motley Crue, Oasis, Simple Plan, Neil Diamond, Reba McIntyre & Kelly Clarkson, Sheryl Crow, Feist, Lenny Kravitz, Wowowee, Sarah Brightman, The Canadian Country Music Awards, Great Big Sea, David Copperfield, James Blunt, Toby Keith, Neil Young, Manitoba Moose Hockey and NHL Hockey. All of those events will be presented at the MTS Centre in downtown Winnipeg.
The fact that shows and events of this calibre and variety are now being regularly presented in Winnipeg is the result of the MTS Centre being built, and of the talent, skill and hard work of the over 600 full- and part-time employees of the True North Sports & Entertainment Limited. Such events bring people together and significantly enhance the quality of life in our city and province.
The success of the MTS Centre is not, and never has been, a matter of inevitability. Its success has been the product of the initiative of private enterprise being properly supported by all three levels of government within a model in which True North has acquired and developed the skills and abilities to properly build and operate a sports and entertainment complex in Winnipeg.
We believe it is an example of one of the ways in which such projects can work in communities of our size. The combination of the strength of private entrepreneurship and management with reasonable and prudent financial supports from one or more of the three levels of government. In fact, some of Winnipeg's most cherished locations and institutions have been developed and have flourished on the basis of some variation of this public/private model including The Forks, Assiniboine Park, the Manitoba Theatre Centre, the Royal Winnipeg Ballet, the Winnipeg Symphony Orchestra, the Winnipeg Blue Bombers, the Winnipeg Art Gallery, Canwest Global Park and the Winnipeg Goldeyes. The Canadian Museum for Human Rights will be another shining example of such an initiative.
We have never suggested that the MTS Centre, by itself, will be the engine that drives the re-birth of our city. We are saying that the MTS Centre is a worthwhile and successful venture and that the public funding which it has received has been well earned and justified. We are extremely grateful for that public funding, and we are also very appreciative of the support and patronage we have received from the citizens of this city and province.
In conclusion, it no doubt would have been easier to ignore Mr. Kravetsky's article. However, his allegations that we did not disclose material aspects of our project coupled with the math and logic he uses to support his position were too much for us to ignore.
Notwithstanding the unfortunate process our project was forced to endure, we would do it all again in an instant. We firmly believe that Winnipeg is a wonderful place with a great future and we are proud to be playing a small part in its renaissance.
Mark Chipman is chairman of True North Sports and Entertainment Ltd. and president of Megill-Stephenson Company Limited. Jim Ludlow is president and CEO of True North Sports and Entertainment Limited and chairman of Centre Venture Development Corp.
By: Mark Chipman and Jim Ludlow
August 3
We feel that Winnipeg has and continues to be a desirable place to live and work. We are proud to be associated with the MTS Centre, which we believe to be a fine example of a successful private venture and which has and will continue to serve the interests of the community well and enhances the quality of life in this city and province.
In May of 2001, we announced our intention to build an entertainment centre on the site of the closed Eaton's Building in downtown Winnipeg. Some members of the community were opposed to our plans for this project, including a group known as the Save the Eaton's Coalition. The group expressed its adamant opposition to the project through the media and in various other ways. In addition, they commenced five court proceedings in an unsuccessful attempt to prevent the project from proceeding at its current location. During the construction phase of the project, and continuing to the present, we have chosen to limit our public comments relating to opposition to the project because we wanted to be respectful of contrary opinion and because we recognize that the spirited expression of views on issues of public interest is one of the hallmarks of a vibrant and healthy community. We resolved to refrain from responding to most of the opposing opinion which was expressed, unless that opposition was based on incorrect or misleading information.
Frankly, we hoped that after the MTS Centre had opened and operated successfully for several years, criticism of the project would stop.
The MTS Centre opened its doors in November of 2004, and has operated successfully since that time. Regrettably, as recently as July 13, 2008, an article appeared in this newspaper entitled "This Time Full Disclosure" written by Rocky Kravetsky, the lawyer who represented the Save the Eaton's Coalition in all five of the court proceedings which had sought to stop the project. Incidentally, all of the proceedings (one of which went to the Supreme Court of Canada) were dismissed by the courts.
Mr. Kravetsky's article contains inaccurate and misleading information on some fundamentally important points and accordingly, we feel compelled to respond.
To begin with, Mr. Kravetsky suggests that the project was not transparent, and that the capital costs of the project and the contributions of all three levels of government have not been properly disclosed and are not known.
In point of fact, from the day we announced the project over seven years ago, all of the public contributions were made known and rigorously scrutinized by various members of the media and the public. The True North Project business plan was posted on our website at a very early stage of the process. As well, we responded to requests from a significant number of civic groups to meet and speak with them about the project. In each case, we would detail every aspect of our agreement including the initial capital costs as well as the VLT and amusement tax provisions. None of those matters were kept secret.
As has been stated publicly many times, the cost of developing the MTS Centre was $133.5 million, including all property acquisition and remediation costs, construction and project management costs, expenses related to the acquisition of furniture, fixtures and equipment, (including all electronic systems and all food and beverage preparation and dispensing equipment), design, engineering, testing and surveying costs, insurance, bonding, utility infrastructure, loan, credit facility and professional services, (including legal, accounting and auditing fees). The figure of $133.5 million has been in the public domain for many years.
The three levels of government openly and transparently contributed to the capital costs of the project. The City of Winnipeg contributed $14,500,000 in cash and infrastructure services, the Province of Manitoba $14,000,000, and the Government of Canada $12,000,000. Those monies, totalling $40,500,000 were contributed through the infrastructure program operated by the three levels of government.
The balance of the capital costs of $93,000,000 (approximately 70 per cent, not 30 per cent as stated by Mr. Kravetsky) were funded by the private investors by payments of cash and the transfer of property to the project.
It was then against this project cost and the associated payment of cash and transfer of all property that a mortgage in the amount of $63,000,000 was secured. The mortgage debt and all its consequent costs and risks are entirely the responsibility of the private sector investors.
Appropriately, the public sector contribution was fixed. The three levels of government incurred no risk or obligation for cost overruns on the project, or operating deficits either during construction or once the MTS Centre was open and operating. All of those risks have been willingly assumed and borne in their entirety by the private investors.
Incredibly, Mr. Kravetsky claims that all of these risks were eliminated by virtue of the VLT and amusement tax revenues we are able to produce. He does so by claiming to know the amortization period of our senior debt, suggesting that it mirrors the length of our master funding agreement and by concluding that a "garden variety mortgage" would be covered by these revenue streams.
These assumptions are incorrect, as is the suggestion that those sources of revenue are a virtual certainty. In fact, our ability to generate amusement tax is entirely dependant on our ability to produce the events from which it is derived. The predictability of such events is far from certain. They vary in size and scope from year to year and their promoters often have a wide range of options in terms of the cities in which they choose to stop. Fortunately, our organization has and continues to work very hard at landing numerous key events, the success of which has given our facility and this community a strong reputation in the North American touring industry.
After summarily dismissing our debt obligations, all the while continuing with references to spin, myth and magic, Mr. Kravetsky then goes on to claim that the contributions made by the public sector were disproportionately large relative to the contributions made by the private investors.
Mr. Kravetsky also dismisses the notion that the governments have already received a substantial return on the monies they contributed to the project. More specifically, Mr. Kravetsky refers to but trivializes the fact that returns to the governments from taxes earned in the construction phase actually off-set a large percentage of the public supports to the project. He refuses to acknowledge the Manitoba Bureau of Statistic's assessment that 80 per cent of the province's initial contribution was paid back before the doors to the MTS Centre actually opened or that the federal government has long since been paid back through its taxation of various aspects of the development and ongoing operations.
Mr. Kravetsky then challenges the methodology by which the facility pays property tax, conveniently failing to reveal that such taxation classifications exist for arena and entertainment facilities across Canada. He further neglects to point out that the MTS Centre pays more in property taxes than Eaton's did before it went out of business. Finally, Mr. Kravetsky makes no mention of the fact that had we built the facility today, we would have likely qualified for the city's new tax increment financing program that a number of projects are benefiting from.
Mr. Kravetsky's article then makes two cavalier and perplexing assumptions relating to the success of the MTS Centre. Firstly, that a new arena and entertainment complex was about to be built somewhere in Winnipeg by someone. Secondly that such a complex would have been successful wherever it was built and regardless of who owned and operated it.
We do not agree with either of those assumptions.
The need and desire for a new arena and entertainment complex in Winnipeg was identified many years ago, but the attempts to finance and build it by other individuals and groups were unsuccessful for various reasons. Those attempts also generated a great deal of counter-productive acrimony.
In terms of Mr. Kravetsky's assumption that the success of new arenas is assured regardless of location or management, we would respond by pointing out that the sports and entertainment industries in North America are extremely competitive, and even a cursory review of the history of the entertainment and concert business in Canada reveals the high degree of variability and profitability associated with those industries.
The choice of a location for such a complex is critically important, both to the viability of the complex itself and to the role it can play in providing strength and vigour to the community in which it is located. However, the success of large entertainment centres is not assured.
According to Mr. Kravetsky's logic, we would also be left to assume that all of the resulting tangible and intangible benefits of the project would have happened anyway. CTV's new premises, which our partnership subsequently constructed, would have no doubt found its way into the empty Eaton's steam plant, the walk-way system would have re-opened and all of those 600 plus event nights that have occurred over the past 45 months would have surely happened in any event. Just how, where and by whom remains unclear.
Beyond all of the tangible and quantifiable financial benefits derived from the public sector's contribution to the project, we believe the government leaders who provided the public support, saw far greater benefit in doing so.
They were able to see beyond the lingering nostalgia associated with the old Eaton's building, a nostalgia that we, as long-time residents of Winnipeg, understood. The reality, however, was that the old Eaton's building was the site of a failed commercial enterprise. The building had been empty and useless for several years prior to the initiation of the MTS Centre project. The vacant shell of a once grand building had essentially become a vast unsecured pigeon roost in the middle of one of our major downtown thoroughfares.
Notwithstanding considerable effort by our partner and then owner of the building (a company with years of successful, North American wide commercial property development experience), they had been unable to establish a viable alternative use. The sheer size of the building, its complete lack of structural integrity and the resulting cost of bringing it to code for any purpose made demolition an inevitability. The proponents of an alternative use for the Eaton's building did not and could not have appreciated those fundamental problems.
In that context, government leaders embraced the idea of the private investors for a major entertainment centre in the heart of downtown Winnipeg. Those leaders understood that the Centre could be one of several important initiatives, both large and small, which could substantially contribute to a re-birth of the centre of the city. We believe they were right and only have to imagine an empty or demolished Eaton's building and fractured walk-way system in 2008 to remind ourselves.
We are proud of the success the MTS Centre has enjoyed to date. Since opening on time and on budget in 2004 it has played host to over 600 events ranging from sporting events to concerts and entertainment productions. These events have been attended by over four million people. The concerts and entertainment productions have been some of the leading shows in the world. As a result, Winnipeg and the MTS Centre have ranked consistently in the top five entertainment venues in Canada and the top 20 in North America.
In the next four months, Winnipeg will see and enjoy two Elton John shows, two Celine Dion shows, Steve Winwood and Tom Petty, Def Leppard and Billy Idol, Motley Crue, Oasis, Simple Plan, Neil Diamond, Reba McIntyre & Kelly Clarkson, Sheryl Crow, Feist, Lenny Kravitz, Wowowee, Sarah Brightman, The Canadian Country Music Awards, Great Big Sea, David Copperfield, James Blunt, Toby Keith, Neil Young, Manitoba Moose Hockey and NHL Hockey. All of those events will be presented at the MTS Centre in downtown Winnipeg.
The fact that shows and events of this calibre and variety are now being regularly presented in Winnipeg is the result of the MTS Centre being built, and of the talent, skill and hard work of the over 600 full- and part-time employees of the True North Sports & Entertainment Limited. Such events bring people together and significantly enhance the quality of life in our city and province.
The success of the MTS Centre is not, and never has been, a matter of inevitability. Its success has been the product of the initiative of private enterprise being properly supported by all three levels of government within a model in which True North has acquired and developed the skills and abilities to properly build and operate a sports and entertainment complex in Winnipeg.
We believe it is an example of one of the ways in which such projects can work in communities of our size. The combination of the strength of private entrepreneurship and management with reasonable and prudent financial supports from one or more of the three levels of government. In fact, some of Winnipeg's most cherished locations and institutions have been developed and have flourished on the basis of some variation of this public/private model including The Forks, Assiniboine Park, the Manitoba Theatre Centre, the Royal Winnipeg Ballet, the Winnipeg Symphony Orchestra, the Winnipeg Blue Bombers, the Winnipeg Art Gallery, Canwest Global Park and the Winnipeg Goldeyes. The Canadian Museum for Human Rights will be another shining example of such an initiative.
We have never suggested that the MTS Centre, by itself, will be the engine that drives the re-birth of our city. We are saying that the MTS Centre is a worthwhile and successful venture and that the public funding which it has received has been well earned and justified. We are extremely grateful for that public funding, and we are also very appreciative of the support and patronage we have received from the citizens of this city and province.
In conclusion, it no doubt would have been easier to ignore Mr. Kravetsky's article. However, his allegations that we did not disclose material aspects of our project coupled with the math and logic he uses to support his position were too much for us to ignore.
Notwithstanding the unfortunate process our project was forced to endure, we would do it all again in an instant. We firmly believe that Winnipeg is a wonderful place with a great future and we are proud to be playing a small part in its renaissance.
Mark Chipman is chairman of True North Sports and Entertainment Ltd. and president of Megill-Stephenson Company Limited. Jim Ludlow is president and CEO of True North Sports and Entertainment Limited and chairman of Centre Venture Development Corp.