(rdnewsNOW file photo)

By Alessia Proietti

Loan agreement

Red Deer city council helps Westerner Exposition Association towards financial sustainability

Mar 21, 2023 | 12:38 AM

Red Deer’s city council unanimously approved on Monday several recommendations to help The Westerner regain financial sustainability and meet existing loan agreement timelines.

Following the first annual review of the Westerner Exposition Association (WEA) Relationship Framework Agreement (RFA), council approved the following recommendations by administration:

• Begin the development of a Master Plan for the Westerner in 2023 and equally split the expected cost of $100,000, not currently in the budget, between The City and WEA. The Master Plan, recommended in the RFA, is a 15-year vision including land use, access and multi-modal transportation, building design principles and site servicing
• Support short-term cash flow by providing a $1 million line of credit from the Operating Tax Supported Reserve for WEA to cover expenses before realizing event revenue. The contingency loan, they say, is seen as emergency funds, with an expectation for it to be repaid once revenue is realized and only used after their current line of credit. Council also approved first reading of the borrowing bylaw as a result
• Amend the repayment formula for the $19 million Exhibition Hall loan agreement for five years to allow time for WEA to retain sufficient cash to meet current obligations, improve cash flow and build their Major Maintenance Reserve. Administration projects that while WEA would not make a loan payment until the fifth year, there is no impact to the City’s budget or to the 30-year loan payment deadline
• Amend the current RFA to have the City Manager approve all expenditures from WEA’s Major Maintenance Reserve

“This decision made by city council is important as it is a representation of Westerner Park moving forward. We appreciate the leadership that council has shown in recognizing our work to recover and by putting their trust in our promising future. This support gives our Non-Profit Agricultural Society the security we need to thrive for many years to come, to continue to be the hub for major events in central Alberta,” said Mike Olesen, Westerner Park’s Chief Executive Officer.

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In December 2019, the Westerner reached out to the City for assistance with its fiscal challenges such as the expansion of the facility with Exhibition Hall costing around $23 million, according to Olesen, major event contract negotiations, and the COVID-19 pandemic.

READ: Council approves $22M deal to save Westerner Park

In 2020, the City commissioned a Forensic Audit of WEA’s financials with the findings confirming no evidence of fraudulent activities. The Audit identified the need for the modernization of the Westerner’s business practices and over thirty recommendations for WEA.

Councillor Vesna Higham said the Westerner has implemented almost all the recommendations such as reducing management expenses by 25 per cent, full-time equivalent employees from 75 in 2018 to its current 58, and even operational expenses by 30 per cent prior to the pandemic.

In 2021, the City got a loan through Loans to Local Authorities (LOLA) to pay out WEA’s $19 million CIBC loan for the Exhibition Hall, paying LOLA $458,979.73 twice annually for 30 years. The City provided a $3 million operating grant and entered a $19 million loan agreement and repayment plan with the Westerner. Officials say a major motivator in paying this loan was to ensure that if WEA did not, the Westerner Park buildings transfer to City ownership.

Administration says that while the Westerner paid $420,818 towards the Exhibition Hall loan in accordance with the repayment terms in June 2022, they used City funds to do so.

Since February 2020, the City says they have provided $7 million in operating grants to WEA to enable them to regain their financial sustainability while not adding additional financial strain from loan repayments.

CANADIAN FINALS RODEO (CFR): NO PROFITS

The WEA said in 2022, they saw a loss of $161,656 alongside roughly $300,000 of administrative staff time involved with planning and coordinating the event.

Olesen said this year was the closest that they’ve been to breaking even with costs from the virtually sold-put event.

Councillor Higham said this may be due to lower attendance records as all-in ticket pack sales were down 30 per cent this year. However, same day sales improved. In the past five years that the Westerner hosted the CFR, she said only one year resulted in a net profit, with a cumulative net loss of $1.456 million.

She said the trend carried to other events such as Westerner Days, whose attendance was down 10 per cent this year compared to pre-COVID, and Red Deer Rebels hockey season ticket holders which were also down by 10 per cent, with an increase in game day sales.

PROVINCIAL SUPPORT

WEA is one of seven regional agriculture societies in Alberta, where each receives $398,000 in operating support from the Government of Alberta annually. The amount of funding provided to each of the regional societies is equal, regardless of the organization’s size or amenities. The City says that this results in inequity of funding when considering the percentage of each organization’s operating budget covered by the grant. Mayor Ken Johnston said he has recently advocated for increases to this funding, however, was unsuccessful.

(Red Deer City Council March 20 agenda p. 45)

CURRENT STATE

Although slower than anticipated, the City says positive signs of recovery are evident as in 2022, the WEA saw revenues among the highest they have ever earned.

Olesen says for 2022, they anticipate earnings of $1 million, which matches earnings the Westerner saw prior to the Exhibition Hall expansion. However, he says they would have been in a loss without City grants.

He says this year is looking strong, with event revenue expected around $20 million, an increase of 57 per cent from 2018/2019. Olesen says that the CFR brought around $19 million in revenue pre-pandemic, proving positive trends are showing.

“The Westerner is a key piece of our community and regional fabric. They experienced hard times over the past four years, but in 2022, their revenues showed evident signs of recovery,” said Tara Lodewyk, City Manager. “While they are managing to maintain a steady revenue stream since the world opened from the pandemic, their cashflow health is still recovering. Our community and region needs to continue to show their support and confidence by attending the many great events and by booking their facilities.”

The Mayor was questioned by council on the similarity between the Westerner and the River Bend Golf & Recreation Society, which has also deferred payments of a $1.7 million loan for 20 years from the City.

READ: In-Depth: Why hasn’t River Bend’s $1.7 million loan been repaid to the City in 20 years?

Johnston responded that the RFA allows for a constant checking-in of financial accounting and reporting leading to a close relationship between the City and the Westerner.

“City council remains committed to seeing the Westerner through these tough economic times, with the ultimate goal of creating financial and operating stability for Westerner Park ensuring we can continue to attract large events and grow as a city and region. While these are difficult decisions for The City, we are confident in the Westerner and the positive and vital role it serves in our community life, economic development, and its integral place in The City’s Major Event Strategy and Destination Development Framework. Our region and our province benefit from the influential role that the Westerner has, in bringing events to this province,” he said.

The City says funds approved to support WEA do not impact the budget as dollars were earmarked during the 2023-2024 multi-year budget process. They state the approved recommendations look to balance the financial needs of WEA to regain solid financial footing, while also protecting The City’s investment should financial recovery not occur.

The WEA has been operating in Red Deer since 1891. Prior to COVID, officials say the WEA hosted more than 1.5 million visitors annually and generated more than $150 million in economic activity.

The City owns the land at Westerner Park, which it leases to them under a 50-year lease.

For more information on the support the City provides to the WEA, visit www.reddeer.ca/westerner or read the FAQ.