Moncton approves bailout for global firm running Avenir Centre

Moncton council approved a bailout worth more than $1.5 million for the international company hired to run its Avenir Centre to cover losses tied to the COVID-19 pandemic.

Council voted 7-4 at a meeting Tuesday to approve an amended contract with ASM Global. The company runs the 8,800-seat downtown arena that opened two years ago.

A staff report to city council said the pandemic led to cancellations of events and a loss of revenue that left the global company "reaching a cash flow situation where it requires assistance" from Moncton to cover expenses.

The changes to the contract allow the company to defer more than $700,000 in required payments to the city. It also allows the company to borrow up to $825,000 from the city over the same period to cover expenses. 

"This is about calculated risk, obviously it's not ideal, but neither is a global pandemic," Mayor Dawn Arnold said Tuesday ahead of the vote.

Coun. Brian Hicks voted against the motion, saying he may have supported it had it come to council in the spring once the city had audited financial statements from the company and an indication of whether ASM as a whole is profitable. 

ASM Global's website says it operates more than 300 venues across five continents, including the Barclays Center in New York City and Los Angeles Convention Center.

"They could still be making tens of millions of dollars of profits if we haven't seen their financial statements," Hicks said.

Jacques Doucet, the city's chief financial officer, said the city has not seen financial statements of the "mother company," only information about the Avenir Centre. 

I see it as a very, very small risk.- Coun. Charles Leger

The motion amends the city's 20-year contract with the company and extends it by two years. The company can get a loan from the city to cover operating expenses for 2020 and 2021, up to $325,000 this year and $500,000 in 2021.

Doucet said staff expect the amount the company owes the city to be repaid with an interest rate of about 1.5 to two per cent over 13 to 15 years. Anything not paid by the end of the contract would be forgiven.

"I see it as a very, very small risk," Coun. Charles Leger said of the possibility the city won't see the full amount paid back.

"This is going to be a subsidy that's going to be repaid," Coun. Susan Edgett said of her support for the motion.

Refusal to approve the arrangement, staff told council, could jeopardize the partnership with the company and result in the Avenir Centre becoming municipally operated, or the city needing to find a new private operator.

Marc Landry, the city manager, told CBC that the company did not threaten to walk away from the contract. 

Hicks called the original contract "bullet-proof" and thinks the company has run the facility well. 

"We should hold them to this contract, or if they default, we should sue them for millions of dollars," Hicks said. 

Councillors Bryan Butler, Paul Pellerin and Shawn Crossman also voted against the motion. 

The city signed the contract for operation of the centre with SMG Canada to shift risks away from the city and to leave day-to-day management and event booking with the company. ASM Global was formed in October 2019 when SMG merged with AEG Facilities. 

According to city staff, the company laid off its staff at the Avenir Centre, used the Canada Emergency Wage Subsidy, removed ice and implemented other cost-saving moves. 

The loss of revenue from the contract's guaranteed payments happens as the city expects a budget deficit of between $2.1 million and $2.5 million this year related to COVID-19.

Since cities can't run deficits, spending will need to be cut to make up the difference.