REAL needs loan or cash injection, long-term plan to manage its debt: report

A report going to Regina's executive committee says Regina Exhibition Association Limited (REAL) will find itself unable to make obligated payments later this year if the city doesn't give it another injection of cash or the ability to take on more debt.

REAL oversees the city's exhibition grounds, Mosaic Stadium, the Brandt Centre and — as of late last year — Tourism Regina, the city's official tourism organization.

A report by city administration heading to Regina's executive committee says REAL will be $6.9 million in the red by September.

"REAL will be at significant risk of not having sufficient funds available to honour its payment obligations and will not have flexibility to manage any variances in its forecasted cash flow projections," reads the report.

City council increased REAL's line of credit to $6.8 million from $3 million during the pandemic. REAL has used all of that credit.

That leaves REAL with few options, all of which need council's sign-off.

Options on the table

The recommendation from city administration is to allow REAL to take on another $3.4 million of debt, which would allow it to manage its cash flow through to the end of 2023.

City staff say that would fall within REAL's total debt limit of $21 million, which is guaranteed by the City of Regina. City staff would then work with REAL to develop a long-term strategy for financial sustainability. That strategy would be brought forward city council for approval during the 2024 budgeting process.

REAL's preferred option is to borrow even more. It wants to take on $4.1 million in new debt (the maximum that would keep REAL under its debt limit), rather than $3.4 million. The organization says that would provide the most flexibility.

However, city staff say REAL's cash flow forecast indicates it won't need that kind of flexibility this year.

Another option is for the city to just give REAL up to $3.4 million as a grant.

The money would have to come from the city's general reserve fund, which currently has a balance $23.2 million. If city council opted to go that route, it would move the reserve's balance below the guideline recommendation of $23 million.

The fourth and final option would be to not provide funding for REAL or let it take on more debt. Instead, council would request REAL to reduce its operating and capital budgets.

City administration says REAL informed them it has already taken action to reduce its budget, but that reducing REAL's spending could risk jeopardizing its revenue and services, negatively affecting events in the city.

While REAL does have a five-year capital plan REAL's board has not approved any capital spending, other than the minimum required to maintain its facilities.

COVID-19 blamed for poor finances

The report outlines how the COVID-19 pandemic significantly impacted REAL, depleting the organization's limited cash reserves.

Once those reserves were empty, council approved an $8-million loan for REAL. Then in the 2023 budget, council agreed to give REAL an annual grant of $700,000 — with no obligation to pay it back — to go toward that loan's interest and principal.

The report says REAL's events are still suffering from low attendance, and that the non-profit has struggled to attract events as it faces aggressive competition that is using financial incentives and other measures.

More challenges

REAL has other challenges. It has a commitment to pay the city $4 million for installation of food and beverage assets in Mosaic Stadium.

Meanwhile, an agreement that nets REAL $2.6 million annually from the provincial government is set to expire in 2027. That deal saw REAL ceasing to operate video lottery terminals (VLTs) when Casino Regina opened up. Its expiry is expected to have a "significant impact on REAL," the report reads.

The long-term plan to address the non-profit's debt will take both of those issues into consideration, the report says.

The report on REAL's finances is one of two topics on the public agenda for Wednesday's executive committee meeting.

A discussion on an investigation from the integrity commissioner will be held in-camera after the public meeting.