Key funding for Moncton events centre may not be available, documents show

A key piece of Moncton's plan to finance its $113-million downtown events centre is not in place, with only weeks to go before it opens, in part because of a misunderstanding over whether property taxes would apply to it.

City council approved a funding plan for the centre in August 2015 that included a commitment from Downtown Moncton Centre-ville Inc. to provide $3.75 million over 15 years, starting in 2019.

The money was to cover the operation of the centre and help repay the city's debt to build the facility.

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But the city and business association have yet to sign a funding agreement.

Documents obtained by CBC News raise doubts about whether the association funded by a tax levied on downtown businesses can live up to its commitment after the first year.

City taxpayers would be on the hook to make up the difference if the association can't come up with the money.

Anne Poirier Basque, executive director of Downtown Moncton, declined an interview, though said the group is working on "an affordable plan."

City representatives couldn't be interviewed either. 

Plan by year's end

Isabelle LeBlanc, the city's director of communications, said the city is working on finalizing some details with Downtown Moncton and doesn't want to affect the discussions. 

Something should be final by the end of the year, she said.

The 8,800-seat arena, which received funds from both federal and provincial governments, is set to open in September.

The Moncton Wildcats, one of the main tenants, contributed $1 million as part of the city's $5 million fundraising campaign.

Lobbied for centre

Downtown Moncton lobbied for a multi-use centre in the core that could host sports and entertainment events, drawing people to the downtown, where they'd also spend money at shops and restaurants. 

An Aug. 10, 2015, letter from Downtown Moncton to the city states that "should the project scope change over the next 15 years and should the anticipated growth not be what has been proposed by the City, DMCI will no longer be able to support this project."

Its commitment is to be "on the strict understanding that the project will be a multi-use Downtown Center," the letter said.

"Otherwise, if the building is to be utilized as a single use arena, then DMCI cannot commit beyond 10 years."

Downtown Moncton's funding commitment would reduce the amount the city taxpayers cover. 

The city projects the centre will cost $3.97 million to operate, while revenue and various funding sources will cover $3.47 million, according to a June update to council.  

The revenue includes the $250,000 annually from Downtown Moncton, property tax from the casino, and a rebate from RCMP redirected to cover the centre.

Marc Landry, the city manager, described Downtown Moncton's commitment in a September 2017 letter as the "foundational piece" for the city in 2015 to go ahead with construction of the centre.

Documents obtained by CBC include a July 7, 2017, letter from Downtown Moncton to Mayor Dawn Arnold that states the organization can't afford what was promised.

The details weren't made public.

As recently as June 25, the full commitment was included in a financial update presented at a public city committee meeting.

Based on assumed growth

Downtown Moncton Centre-ville Inc. represents more than 1,000 business and property owners in the core.

It collects a tax of 16 cents per $100 of assessed value from non-residential properties in an area roughly bounded by Vaughn Harvey Boulevard, Park Street, King Street and the riverfront.

This year, those properties were collectively valued at $467,977,647.

The money raised paid for Downtown Moncton's facade improvement program, Christmas lights, sidewalk cleaning and staff.

The $250,000 annual contribution for the events centre would represent a major portion of its roughly $750,000 annual budget.

Instead of cutting regular spending, the $250,000 commitment was based on an assumption the events centre would spur new development in the downtown.

That new development would then be subject to Downtown Moncton's levy.

The city estimated there would be $108 million in assessment growth between 2019 and 2023 spurred by the events centre. This was a figure Downtown Moncton used to determine how much it would give, the documents show.

Differing assumptions

The documents reveal the city and the downtown made different assumptions about a key detail — how the new building would be classified for property tax purposes.

Downtown Moncton expected the events centre would be classified as a commercial building. 

The city assumed it would be classified as an arena.

An arena is exempt from property taxes based on a late-1990s change to New Brunswick's Assessment Act.

If deemed a commercial property, Downtown Moncton could apply its levy to the property. It would then raise most of the commitment funds from the events centre itself.

That would mean city taxpayers would indirectly be paying for the events centre via Downtown Moncton.

The city and downtown group only realized their different assumptions last year.

"Given the exemption which is now being raised as applicable to the Centre, DMCI would need $156,250,000 of new non-residential assessment in the BIA to fund its commitment," Poirier Basque wrote in a letter to the mayor July 7.

"These assessments do not currently exist nor are they projected as a result of the construction of the Centre."

Increasing the Downtown Moncton levy would be a way to pay for the commitment, but Poirier Basque rejected that approach, saying it would result in "double taxation" of the businesses.

"Your Downtown business leaders in our BIA cannot be expected to absorb DMCI's intended contribution to the construction of the Centre in addition to their anticipated respective increases in property assessment as a result of the Centre," Poirier Basque wrote.

'Regrettable' assumption

City manager Landry, in his letter last Sept. 22 to Downtown Moncton, called it "regrettable" that the organization expected its levy would apply to the events centre.

"The City decided to move forward on the Centre after great consideration and due diligence," Landry wrote. "DMCI's commitment to the project was a requirement for the City of Moncton to proceed."

Poirier Basque wrote in a letter to the mayor in January this year that "DMCI will continue to honour its pledge within its means.

"However, the pace at which and length of time for which we can contribute will depend on DMCI's annual budgets, its operational needs and the pace of growth in the BIA during the commitment period," Poirier Basque wrote.

Hints of problems with Downtown Moncton's commitment emerged in recent months.

Considers cut in services

Kevin Silliker, Moncton's director of economic development, told councillors at a March 27 committee meeting that DMCI was considering different ways to make its payment.

That includes "paring down some existing services," and expanding the zone where the levy is applied, he said.

Two city councillors sit on Downtown Moncton's board of directors and were copied on the letters last year.

"Their commitment will stand, so I don't see any issue," Coun. Charles Leger said earlier this month.

Coun. Greg Turner said the organization has the money to cover its first payment in 2019.

Asked about the contents of the documents, Turner said he couldn't comment.

"I don't believe it's been discussed publicly," Turner said.

Asked if the public should have been made aware of the issue as the centre nears its opening, he said he couldn't comment.