Deal with Harold MacKay makes city look bad, weakens bargaining position with TCL

I was wrong: contrary to my earlier supposition, the payment from Harold MacKay to the city just before the Metallica show was in fact related to the concert loan scandal, and not simply pre-payment for Metallica costs.

Council Tuesday released this statement:

13.3 Contractual Matter – Concert Update
That Halifax Regional Council approve the settlement with Harold MacKay and any related companies which provides for:
(a) the payment of $38,000.00 in satisfaction of the Municipality’s claim for recovery of funds advanced in respect of concerts on the Common; and in addition
(b) the payment of the cost of policies services provided for the Metallica concert on the Garrison Grounds.
It is further recommended that this report be released to the public following Council’s ratification of the recommendation.

I didn’t immediately report this because I wanted clarification as to how the $38,000 figure was arrived at. I dutifully called City Hall Wednesday morning to ask, was promised a response, but have heard nothing back. This is, I’d add, precisely why I was incorrect in my previous reporting: the city bureaucracy is treating the concert scandal as some sort of state secret; without firm information in hand, the best we can do is make informed guesses as to what’s going on.

And so now, since the city won’t give us a straight answer, we must guess again, as to what’s happening.

Here’s the best I can come up with: The city and MacKay played a game of legal chicken. If the city went ahead and cancelled Metallica services, MacKay, in my estimation, would win a court challenge. He might even had been able to sue for lost proceeds from the Metallica show. But, the huge downside for him was that his professional reputation would have been destroyed—big name performers could care less if a city and promoter are caught up in funding scandals, but when a promoter starts cancelling shows, that’s another issue entirely.

My guess is that the $38,000 represents a city claim against free tickets to the Black Eyed Peas show given away by MacKay. Recall that (Attachment A) MacKay was to pay back a $200,000 loan for the BEP concert at this schedule:

Tickets sold:
0-8,999 $0 per ticket
9,000-10,000 $50 per ticket
10,001-11,500 $100 per ticket

In the end, just 8,362 tickets were sold, and so MacKay paid back nothing.

We don’t know how many tickets MacKay gave away, but it was plenty. MacKay was so desperate for funds that he evidently thought he could make up for lost ticket sales by giving away tickets and getting at least something from beer and vendor sales. He even went so far as to “scatter” tix at Rainbow Haven beach the week before the show.

The city may have argued that those free tickets represented a strategy to avoid paying back the loan. It’s anyone’s guess if that argument would stand up in a court, hence the game of chicken. But $38,000, under the repayment schedule cited above, would be the equivalent of 1,397 free tickets (637 to reach the 8,999 repayment threshold, and then 760 more at $50 each). Seems on the low side to me but, again, both sides were playing chicken, so there was something of a compromise going on.

So the city won, right? Well, no.

First, the city comes off looking like a bully. It’s doubtful the city had a legal leg to stand on, but blustered ahead anyway, threatening to withhold services for a legal business enterprise, just because it could. This will no doubt be noticed by other businesses.

Second, even if the city doesn’t lose reputation for the deal, $38,000 is a really shitty deal. It’s less than a dime on the dollar for the $400,000 un-repaid loans. Were I to write a new headline on this, it’d be “City loses $362,000 on concert loan deal.”

Third, and most important, the city just destroyed any chance of rejecting Trade Centre Limited’s invoice to the city for the rest of the money. I’ve long maintained that the missing $400,000 was TCL’s loss, not the city’s, a view that auditor general Larry Munroe at least hinted he agreed with:

But why should the city pay TCL?

“There are enough questions in my mind,” says Munroe, “that I think council needs to take all these facts, go get some [legal] advice and make a determination of whether they should write a cheque for $359,000. I’m not saying they should or they shouldn’t, I’m just saying ‘Go make darn sure you know what you’re doing with this particular one.’”

Up until city CAO Richard Butts collected $38,000 from MacKay, and up until city council agreed to accept the money, the city could “officially” say that the concert loan deals between mayor Peter Kelly, former CAO Wayne Anstey and MacKay were deals made without authority, and that the city had no liability for the lost money. Moreover, the city could have, and should have, told Trade Centre Limited to shove their invoice where the sun don’t shine.

But by collecting the $38,000 from MacKay in an official manner, with the council’s stamp of approval, the city has lost that negotiating position. TCL can quite rightly say, “hey, you accepted responsibility for the loans when you accepted that $38,000 from MacKay.” And, TCL would be right.

All this begs the question of whether Butts or council had it in them to challenge TCL in the first place. The evidence says “no.”

Oh, one last thing: a reliable source tells me paid attendance for the Metallica show was 24,000.

This article appears in Aug 4-10, 2011.