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Wednesday, May 25, 2011

Surfing and the city that never learns

HRM gives $145,000 to O'Neill Cold Water Classic surf competition

Posted By on Wed, May 25, 2011 at 5:35 PM

click to enlarge o_neill.jpg
The city of Halifax is in the midst of a two-pronged sponsorship scandal.

First, of course, is the concert loan scandal, which, among other things, involved secretly handing large amounts of taxpayer money to a private company in the bizarre hope that, well, I'm not sure what they were hoping. Photo ops with aging rock stars, maybe. We'll learn more about this any day now---auditor general Larry Munroe is expected to release his report on the scandal later this week.

The second prong of the sponsorship scandal was detailed in a report Munroe issued earlier this month. Titled Corporate Grants, Donations and Contributions, the report details how the city is wasting $800,000 a year because there's no clear aim of the grants, there's no correlation between the grants and council's focus areas, there's slipshod reporting of grants and a lack of transparency back to the public, among other problems. Munroe urged council to immediately address his concerns, but council has demurred.

So what have councillors done in the wake of this two-pronged sponsorship scandal?

It is unbelievable: caught up in a multi-million dollar scandal involving giving money to a private company, and criticized by their own auditor general for a sloppy grant system, councillors have... voted to give their biggest grant ever, in essence to a private company, for unclear reasons, in the face of a community that doesn't like the event being sponsored.

Now, let's be clear: neither I nor Munroe are criticizing giving taxpayer money to community organizations. If anything, we need to give more, not less, to these organizations, which do invaluable work that wouldn't otherwise get done. The problem is first, that the city has such sloppy processes it doesn't know why or how it's giving money away and, second, because there's no clear process for giving money away, all sorts of bullshit reasons enter the equation and really, really bad decisions are made, like, say, funnelling $5.6 million in upfront loans to a concert promoter through a secret bank account outside the city's normal financial controls, or giving money for an event that benefits a private company through a non-profit shell company created for that purpose of hosting the event.

At issue here is the O'Neill Cold Water Classic surf competition. O'Neill is a private company that sells surf wear, boards and the like. Besides sponsoring various surf teams, O'Neill has a long-standing promotional event called the Cold Water Classic, which presumably is aimed at selling more wetsuits. The Cold Water Classic has been running for many years: locations have included New Zealand, Scotland and, in Canada, Tofino, British Columbia.

"The O'Neill Cold Water Classic event organizers want to move the event to the coast, specifically HRM," explains the city's staff report, "due to HRM's reputation for hosting events..."

Yep, our fair city's sucker record is attracting firms from around the world looking for handouts.

What's proposed is a competition of 144 star surfers from around the world, who will compete over six days (September 19-25), primarily in Cow Bay.

The application for city funds has all the hallmarks of past scandals and problematic city grants, as follows:

Use a non-profit organization to front the grant

The city requires that grantees be non-profit organizations. O'Neill's, however, is a for-profit business. But experienced council observers know how to easily get around that hurdle: create or find a non-profit organization to front your event.

That was precisely what the Rainmen, a for-profit business, did to land $125,000 in city funds for the Halifax Rainmen Holiday Classic basketball tournament. Owner Andre Livingston created the "Halifax Rainmen Community Assist Society," a non-profit organization, and lo and behold, taxpayers are funding the event.

In the O'Neill case, the grant application for city funds is signed by Leonard Marcovitch, the president of the for-profit Canadian division of O'Neill, but also by John Fluke, president of the Canadian Surfing Association, which is the official non-profit sponsor of the Cold Water Classic.

Create a promising budget

This Cold Water Classic, says the staff report, has a budget of $575,000. Maybe it does, who knows? Certainly not anyone reading the staff report: no detailed budget is made public.

Fudge the scoring

Even the Special Events Advisory Committee, which nominally vets applications of this sort, only gave the grant application a score of 72.5. This was rounded upward to 73 because, well, just because. A score of 73 translates into 71.1 percent of the $200,000 grant request, or $142,000.

But, staff "advised" that that scoring "contained an error," and the grant was increased to $144,000. No one ever explained what that error was, exactly, but there it is.

Then, "during discussion and review of the Score Sheet, the Special Events Advisory Committee agreed to an increase of $1,000 to a total grant award of $145,000."

I would submit this is exactly the kind of sloppiness that Larry Munroe was alluding to in his report.

But in any event, the $145,000 exactly corresponds to the $145,000 in prize money to be awarded at the event.

Go figure.

Sell the event with inflated attendance figures

When the Cold Water Classic was held in Tofino, just 6,000 spectators watched on "over the week." The grant application notes that Tofino is a "small (1400 citizens) community," but it is about a five-hour drive from Victoria, population 300,000, or a six-hour drive from Vancouver, population bazillion.

For Halifax, the grant application and city staff report project that 20,000 people will watch, presumably also "over the week." Of those, 50 percent are to come from HRM, 15 percent from Nova Scotia outside of HRM, 20 percent from the rest of Canada, and 15 percent from outside of Canada.

I guess we'll see, but I find those numbers highly improbable. At any event, no reasoning or study of past events is provided to explain how the numbers were arrived at.

Pull an economic impact out of someone's ass

On the Score Sheet is a box asking for:

Business case
-Economic Impact
-Budget Breakdown
-Pre & Post Benefits

ROI Information
-Ratio of return to HRM and/or the Pricvince (sic) in terms of local investment and HST spinoff

That's a lot of information being asked for, and it would indeed be interesting to see the breakdowns. But what we got instead is a hand-written figure of $500,000-- presumably the supposed "economic impact"--- and "Extensive online media."

This, folks, is the exact definition of pulling numbers out of your ass.

I'm sure I'll be attacked for being anti-Halifax, or some such, but I'd really like to see that $145,000 going to a true community organization that truly needs help to finance an event that will truly, in definable ways, help the community.

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