Shaw Centre looking at insolvency with $4M debt payment it can't cover
David Reevely, Ottawa Citizen
Published on: October 2, 2017 | Last Updated: October 2, 2017 5:06 PM EDT
Ottawa’s convention centre won’t be able to make a $4-million payment on a loan it still owes for its construction, the centre’s bosses have told the provincial government.
The payment is due next September, after a five-year break from payments on what started as a $40-million loan but has grown to nearly $50 million.
By now, the Shaw Centre by the Rideau Canal was supposed to be turning a profit of $6 million a year on $26 million in revenues, according to the business case for the publicly funded reconstruction it undertook a decade ago. It’s not close.
The centre hasn’t published an annual report yet for past year, but its financials are included in the provincial government’s public accounts, detailed statements for all the government’s ministries and agencies recently tabled in the legislature.
“While the centre is expected to be able to meet its obligations relating to its ongoing operations as they come due, the centre does not expect to have sufficient cash on hand to make this payment in addition to meeting its other liabilities,” say the centre’s financial statements for the 2016-17 fiscal year. Can’t get much plainer than that.
The province owns the Shaw Centre — convention centres are typically public, sort of like business-oriented community centres — as a Crown corporation. The province is also the centre’s biggest creditor. A decade ago, to rebuild the centre and bring in tens of thousands more conventioneers, the federal and provincial governments kicked in $50 million each and the city $40 million.
The last $40 million of the $180-million cost was covered by a loan from the provincial government’s Ontario Financing Authority (basically its in-house bank), to be paid off with the expanded centre’s new profits. With the money in hand, they demolished an old concrete leviathan and replaced it with a modern glassy bubble.
The convention centre is gorgeous, but it isn’t bringing in the cash, or the events.
Kressler wrote in a blog post in June that the centre had 31 conventions in 2016 and was poised for 43 this year; by now, according to the projections, it was already supposed to have topped 51. By now, it was supposed to be cruising — conventions and events lined up, money rolling in and the debt a few years away from being wiped out.
In 2012, a year in which the convention centre made a $6,753 operating profit (that was supposed to be $5 million), it negotiated breathing room with the government: No loan payments for five years, while it revved its engines. The interest would keep racking up, added to the original debt, but the centre would be better able to pay it in a few years.
Now the debt is up over $49 million and that $4-million payment is on the horizon.
They’re working on it, says chief executive Nina Kressler. I asked for an interview and they emailed a statement. Here it is: “The Ottawa Convention Centre is working with the Ministry of Tourism Culture and Sport and the Ontario Financing Authority to confirm the agency’s repayment capacity and develop a debt resolution plan in advance of the first repayment scheduled for September 2018.”
The good news is that the centre might find the money, if the province waits a little longer. Profits on day-to-day operations have crept up: $1.1 million two years ago, $1.9 million last year. You’d expect 2017 to be a bumper year, too, although 2018 might bring a Canada 150 hangover.
It’s too soon to call this a stable trend, and the interest (over $2 million added to the principal each year) is still racking up faster than the profits. Making more money than before is something, though.
This is a pretty bizarre situation. The idea behind the loan arrangement was to limit governments’ responsibility if they project missed expectations. But through the provincial government, we taxpayers own the thing anyway. We’re going to, what, put it into bankruptcy? Torch it for the insurance? Sell it for parts? What am I bid for several hundred irregular triangular glass panels?
The provincial government forgave a $145-million loan to the Toronto convention centre under similar circumstances back in 2003. In exchange, the Toronto centre turns over at least $2.5 million a year from its profits. Much more, in a good year — it’s up to $72.5 million in those payments. Something like that will surely happen here, and we’ll end up with a more normal relationship between an owner and a thing the owner owns.
Plus maybe a few bucks we can start putting aside for the next time we need a new convention centre. These things aren’t cheap and they don’t pay for themselves.
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