There’s no clear mandate, or short-term and long-term business plans to guide St. John’s Sports and Entertainment Ltd. (SJSEL), concluded a long-awaited report by consultants KPMG, released Wednesday.
The report was commissioned by SJSEL last year. It compares Mile One Centre and the St. John’s Convention Centre to venues in other Canadian municipalities, the purpose of which was to determine possible ownership and operating models available to the city for the two facilities.
The report says a key finding from the jurisdictional review is the importance of a clear and defined mandate for the operational success of the facilities in other municipalities.
“…lacking a concise relevant mandate throughout its operating history, SJSEL has been without a compass to navigate strategic operating decisions,” reads one of the report’s conclusions.
“The current lack of a mandate and key performance measurements has resulted in general confusion and mild friction between the City, the SJSEL Board of Directors and SJSEL management,” it reads.
The report points to two options for a mandate – either an “economic engine for St. John’s and the surrounding area, where the focus is on the economic spin offs, as well as a community builder in terms of sport, arts and cultural programming, or a more business-oriented enterprise designed to operate the SJSEL facilities on a for-profit (or at least break-even) basis”.
The report says such a dichotomy is a common challenge for municipal facilities, but again adds the lack of clarity would be reduced or eliminated if there was a business plan and an agreed mandate.
Still, it says the lack of a clear mandate is also not unique to the city or SJSEL.
“For municipally-owned convention centres and arena facilities, it is common to struggle with a balancing act of driving local economic activity and reducing or eliminating the tax burden of a potential operating deficit.”
Subsidy over $1M larger than average
The report goes on to say the amount of subsidy required by SJSEL from the city is the highest among the comparative municipalities considered in the report, which looked at venues in Moncton, N.B., Halifax, and Guelph, Ont. among others.
In 2017, the subsidy for Mile One was $2,131,212, which was $1,146,760 larger than the average for all of the compared municipalities.
The report says it’s unlikely that any form of operational change, other than an outright sale of the SJSEL facilities, would completely eliminate some level of city subsidization.
In 2017, due to Mile One having the highest operating cost per visit among the compared arenas (at $18.51), the facility incurred a net cost of $6.19 for each ticket sold.
That year, Mile One had 63 events nights, “well below the average of 76 event nights of all included facilities,” reads the report.
The report notes the geographic isolation of St. John’s relative to other Canadian event destinations is a unique marketing challenge.
Such challenges are “exacerbated,” the report says, by SJSEL’s lack of a short-term and long-term business plan.
Potential operating models
The report gives an overview of benefits and challenges of five different operating models: status quo, third-party management, third-party management hybrid, long-term lease, or sale.
It reiterates, however, the importance of first having a “clearly articulated” mandate before the city can evaluate the potential models.
The report says if the mandate does not support the city’s continuation in the business of either one of the facilities, or if the mandate focuses on the bottom-line improvement for SJSEL, the city will need to explore the four privatization options.
SJSEL was incorporated in 1997 as The Civic Centre Corporation. According to the articles of incorporation, it was incorporated “for the purposes of planning, designing, financing, constructing and operating a civic centre to serve the Northeast Avalon area of the Province of Newfoundland and Labrador and to do all other things relating or incidental hereto”.
The KPMG report says the functions and operations of the organization have been modified by the board and the interests of city councillors in the years since.
One of the amending articles of incorporation mentions a business plan, however, the KPMG report says that when KPMG requested the current and historical business plan of SJSEL, “it was noted that one had not been produced.”
City comments on report
A news release from the city says the board and SJSEL has started reviewing and implementing the recommendations in the report.
“In the past two years, the board has made significant, strategic efforts towards operational efficiency,” Coun. Jamie Korab, chair of the board for SJSEL, was quoted in the news release.
“From changing our operational model and seeking a new food and beverage partner at SJCC to reaching an agreement in principle with the Edge and Growlers for a long-term lease at Mile One Centre, we are eager to explore best practices and will carefully review and consider the management models used in other jurisdictions.”