ST. JOHN'S, N.L. — While the city awaits another KPMG report considering the potential sale of Mile One Centre, documents obtained by The Telegram show the first KPMG report released last year underwent multiple modifications at the request of the St. John’s Sports and Entertainment (SJSE) board before it was released publicly.
In November 2019, city council and the SJSE board released the KPMG jurisdictional comparison for SJSE. KPMG was contracted as an independent external consultant. The report provided information to help the city decide whether it should look at alternative ownership and operating models for SJSE, which runs Mile One Centre and the St. John’s Convention Centre (SJCC).
SJSE board meeting minutes from 2018 and 2019, as well as city emails during that time, show the city received a draft interim report from KPMG dated Jan. 18, 2019. The report was titled "Operational Review of St. John’s Sports and Entertainment Ltd."
On March 1, 2019, a draft final report was emailed from KPMG to deputy city manager of finance and administration, Derek Coffey, who is also a SJSE board member.
SJSE board meeting minutes on March 20, 2019 indicate the board had reviewed the report. Then-chair Coun. Sandy Hickman said it was ultimately up to the board whether or not to accept the contents of the report.
“(SJSE CEO) Sheena (McCrate) asked what is our position and why this report was engaged?” the minutes read.
Minutes from April 10, 2019 said McCrate was concerned the report was presenting itself as an operational review.
Minutes from June 2019 said a meeting was held between McCrate, Coffey and KPMG on June 12 “at which time multiple modifications were made to the draft final report. I.e. in particular the removal of reference to this being an operational review.”
Another email from KPMG to Coffey on July 16 said the final report was attached and that it "incorporated the edits from our discussion today.”
Eight months passed between when the board discussed the report on March 20, 2019, and when the report was released publicly on Nov. 20, 2019.
In the interim months, the city terminated its memorandum of understanding (MOU) with the owners of the Newfoundland Growlers and St. John’s Edge, on July 9, 2019. The MOU had outlined a possibility of third-party management of Mile One Centre and the St. John’s Convention Centre by the teams.
On Sept. 25, 2019, the city and SJSE announced a 10-year lease agreement for Mile One Centre with the teams.
Factual inaccuracies
The Telegram interviewed McCrate and current SJSE chair Coun. Jamie Korab on Wednesday, and asked why there were multiple changes made to the report before it was released publicly.
McCrate said it’s a normal process in receiving a report from any consultant.
“When the report came to the board, senior management were first asked — and several members of the board, actually, too — to review it for factual inaccuracies,” she said.
McCrate said one example of a factual inaccuracy was the total number of hotel rooms within walking distance to the convention centre.
“We were asked as a management group to look at the report, and confirm that any of those types of statements were, in actual fact, true.”
McCrate said the title of the report was changed because it was inaccurate.
“The initial scope of work — the initial terms of reference for this report — was a jurisdictional review of basically how other municipalities operated venues similar to Mile One Centre and the St. John’s Convention Centre. … When it came back in draft form, it was titled — mistitled — an operational review of SJSEL, which that’s not what it was. … And it subsequently was corrected to what the initial terms of reference were."
McCrate said that, to her knowledge, the scope of work did not change.
However, board minutes from Oct. 1, 2019 said the scope of work was changed throughout the process.
“The CEO reminded the board that the report was commissioned, originally, to guide discussions and negotiation of an MOU, a proposal that had (been) quashed by the board and council earlier this summer,” reads the minutes.
The minutes go on to say that the board was “not entirely satisfied with the contents of the report,” but city manager Kevin Breen said it would be released in the near future.
Korab told The Telegram the new report for which KPMG has now been contracted to look at privatization of Mile One Centre could also be changed if there are factual inaccuracies.
CEO bonus
Board minutes from January 2018 say the board approved a year-end bonus of 12 per cent of salary for McCrate for 2017 without using a performance metric.
At the same time, board members suggested, that in the future, a performance metric should be developed and applied to the bonus to align it with industry standards. The board unanimously agreed to develop a metric.
Korab said on Wednesday that a performance metric will begin to be used this year.
He said that in fairness to McCrate, a performance metric was something for which she had been asking for a number of years. In the absence of a metric, he said, there were lengthy discussions and evaluation of factors, such as number of event nights, each time the CEO bonus was paid.
Convention centre concerns
Minutes from Oct. 31, 2018 included a five-month checkup on operations of the SJCC by the centre’s operations manager.
The checkup detailed significant operational challenges, including having no budget for sales or marketing initiatives, low bookings, wrong pricing, poor discount decisions and no measurement of economic impact or return on investment.
“If not rectified, these issues will result in increased subsidy but inadequate resources to yield improvements,” the minutes read.
The minutes said statistics show SJCC was the lowest of cities surveyed in terms of full-time employment, and also had the least amount of funding for marketing, resulting in staff working 291.5 hours of uncompensated overtime during the five months that the checkup examined.
A financial update on Nov. 27, 2018 for both the SJCC and Mile One Centre showed that for the period 2012-18 the operational expenses exceeded the available operating subsidy from the city every year.
In Wednesday’s Telegram interview with Korab and McCrate, they noted several improvements that have been made since 2018 when those concerns were detailed.
They said SJCC now has a tactical plan, it underwent a pricing review and it got a program to measure the economic benefit of both the convention centre and of basketball and hockey in Mile One.
“I definitely think overall since 2018, we are in a better place, pandemic aside,” said Korab.
“There’s no question in my mind we’ve got more knowledge, we’ve got more information, and then we can start putting that to good use once things start opening up.”
