HANSARD
Printed and Published by Nova Scotia Hansard Reporting Services
Ms. Maureen MacDonald (Chair)
Mr.Chuck Porter (Vice-Chairman)
Mr. Alfred MacLeod
Mr. Keith Bain
Mr. Graham Steele
Mr. David Wilson (Sackville-Cobequid)
Mr. Keith Colwell
Mr. Stephen McNeil
Ms. Diana Whalen
[Mr. David Wilson (Glace Bay) replaced Ms. Diana Whalen]
In Attendance:
Ms. Rhonda Neatt
Legislative Committee Clerk
Mr. Jacques Lapointe
Auditor General
Ms. Elaine Morash
Assistant Auditor General
Mr. Gordon Hebb
Chief Legislative Counsel
Department of Health Promotion and Protection
Mr. Duff Montgomerie
Deputy Minister
Ms. Tracey Williams
Senior Director
Ms. Tracey Taweel
Communications Director
Halifax Regional Municipality
Mr. Dan English
Chief Administrative Officer
Mr. Wayne Anstey
Deputy Chief Administrative Officer, Operations
Ms. Jennifer Church
Advisor, Intergovernmental and Corporate Affairs
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HALIFAX, WEDNESDAY, APRIL 4, 2007
STANDING COMMITTEE ON PUBLIC ACCOUNTS
9:00 A.M.
CHAIR
Ms. Maureen MacDonald
VICE-CHAIRMAN
Mr. Chuck Porter
MADAM CHAIR: Good morning. I would like to call the committee to order, please. Today we have before us witnesses from the Department of Health Promotion and Protection and the HRM with respect to the Commonwealth Games bid. We will start in the usual fashion of introductions by the members, the Auditor General, his staff, and the witnesses, so that we will give Hansard an opportunity to do a sound check. I want to remind people not to move your microphones - the Hansard folks were in here prior to starting this morning and they did a sound check with microphones in a particular position, so if you can refrain, and I know it's tempting sometimes.
Then we will have brief opening comments from Mr. English with the Halifax Regional Municipality. We heard from the deputy last week. I also want to welcome in our gallery the Deputy Mayor, Sue Uteck. I know other members join with me in welcoming her to the proceedings here this morning. (Interruption)
I can't - what are you saying?
MR. KEITH COLWELL: Is it possible for Ms. Uteck to sit here rather than in the gallery? She is a member of the HRM delegation, as Deputy Mayor.
MADAM CHAIR: I think she is here as an observer. Thank you.
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MR. COLWELL: Okay.
MADAM CHAIR: The other thing I want to say at the outset is I want to ask my colleagues for permission to use the NDP questioning time from the Chair simply because I am going to be doing the questioning, only using the NDP caucus time, and the materials are so much I don't want to be moving them back and forth. Is that agreeable with members? Thank you very much, and I promise you I will keep within the timelines that are established by the Chair. So with that having been said, we will start with introductions.
[The committee members introduced themselves.]
MADAM CHAIR: Good morning, and welcome to you all. Mr. English, the floor is yours now for an opening comment.
MR. DAN ENGLISH: Good morning, and thank you for the opportunity to speak to Halifax Regional Municipality's role in the partnership with the province and the Government of Canada on the bid preparation for the 2014 Commonwealth Games. My name is Dan English, I'm the Chief Administrative Officer for HRM, and I'm joined today by Jennifer Church, to my left, Intergovernmental and Corporate Affairs Advisor for the municipality.
Let me begin by saying that I've had the opportunity to review Deputy Minister Duff Montgomerie's opening remarks made to this committee on March 28th. The chronology he presented to the committee provided an accurate summary of the events leading up to the decision by the province and the municipality to withdraw from the bid, and I concur with the details as they were presented.
Two very important observations made by Duff in his presentation are worth repeating in order to provide some context for my remarks today. Duff noted that both the former Premier Hamm and Mayor Kelly made it clear when Halifax won the domestic bid in December 2005 that the Games would only be pursued if they did not compromise the fiscal position of either jurisdiction.
As well, Mr. Montgomerie mentioned two other overarching caveats regarding the involvement of the province and HRM, and those were that the Games would have to be rightsized for Nova Scotia and leave a lasting and sustainable legacy for the residents of Halifax and this province, which would include partially addressing the significant recreation infrastructure deficit we have in this city and province.
Early on in the bid process, Halifax Regional Council approved the following principles in relation to the bid process: number one, ensure a fiscally responsible bid; two, maintain the long-term financial health of HRM; three, manage the impact on existing HRM
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services and capital projects; four, minimize the financial impact on residents; five, maximize the legacy return on investment; and six, ensure a rightsize bid for HRM.
I would also like to point out at this time that HRM is extremely proud of the partnership we developed with the province, which started during the domestic phase of the bid process, and the high degree of co-operation and collaboration between these two government partners is noteworthy.
While the complexity and requirements of preparing a winning bid for multi-sport games have increased dramatically in the last several years, the level of effort and planning exhibited by the 2014 bid team to ensure the bid was the most accurate estimate possible, with respect to Games costs, was impressive to say the least. The 2014 staff deserve a great deal of credit in this regard, particularly given the tight time constraints under which they were operating.
Following receipt of the budget documentation in late January of this year, a significant funding gap was identified. This, combined with financial risks revealed by external due diligence reports, made it fairly obvious that the principles and expected benefits originally presented to regional council would be difficult to achieve, primarily in terms of legacy and return on investment - in other words there was not a solid business case to pursue the bid without compromising HRM's financial health.
Halifax 2014 did present a summary of proposed cuts approximating $250 million on March 7, 2007, and at the same time Commonwealth Games Canada requested one week to further reduce the budget to $1 billion. The local funding partners were of the opinion that one week did not provide sufficient time to effectively manage the substantial reduction required in the Games budget, or to again conduct the necessary due diligence to fully understand how additional financial risks or any reduction of the legacy benefits could be addressed.
I think it's also important to point out that if the federal government were to stand firm on its policy of funding no more than 35 per cent of the gross budget for this international bid, this could have conceivably resulted in a reduction of the federal government contribution to $350 million from the previously announced $400 million, if the Games budget had been reduced to $1 billion.
Making substantial budget reductions would have negatively impacted Canada's and Halifax's ability to win the 2014 bid and the potential legacy benefits. As I understand it, this is the reason substantial cuts to the budget were not made sooner. Taking into account the considerable amount of time which was required to negotiate the multi-party agreement, if a revised Games budget had been approved, it was determined there was simply not enough time to develop and seek approval of a new agreement and meet the required target dates to ensure bid submission for the deadline of May 9th.
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Discussions were held between Minister Barnet, Mayor Kelly and federal Ministers MacKay and Guergis, and it was clear by March 7th that the federal contribution announced earlier was firm. Given the substantial funding gap and the other identified risks, along with the fact that the local funding partners would have been required to cover any potential deficit or cost overruns, Minister Barnet and Mayor Kelly agreed to jointly proceed to Cabinet and Council to seek direction.
On March 8th, given that the three government funding partners could not collectively close the significant funding gap, Halifax Regional Council approved a motion to advise the Halifax 2014 Board of Directors to discontinue the bid process. The process and the principles were developed in an effort to create a bid which was Halifax-built and rightsized for Halifax. In keeping with those principles, as disappointing as it was for many - including myself - I believe the decision to withdraw from the bid was the right one for the residents of the Halifax Regional Municipality and the province.
Thank you for the opportunity to be here today to discuss the process that was undertaken. I would like to close by once again thanking my provincial colleagues for their continued co-operation and collaboration on this very complex file and, as well, to all members of the 2014 bid team for their outstanding efforts. I would be happy to take any questions.
MADAM CHAIR: The opening round will be for 20 minutes until 9:33 a.m., and I will begin.
Thank you for your comments and thank you for being here today. I want to start by saying that, from the perspective of the NDP caucus, we are not here today to argue that the Commonwealth Games bid at $1.7 billion, or whatever the number was - possibly beyond that - that it should have proceeded, as the Premier has alluded to here in the Chamber during Question Period and the minister has liked to accuse us of in pursuing questions about the bid and what happened.
We accept that the bid ballooned beyond the financial capacity of the partners, particularly with the federal government having capped their contribution. But I want to be clear about what our purpose is, and our purpose here is to learn from you - what went wrong, why did it go wrong, how did it go wrong and what did it cost the taxpayers of Nova Scotia, or indeed the Province of Nova Scotia, in terms of our reputations nationally and internationally? These are questions that we have but, more importantly, they're questions that members of the public have and that have been reflected in media reports.
[9:15 a.m.]
I want to read two excerpts - one from Mr. Roger Taylor, who will be well known to you, a columnist in The ChronicleHerald. On March 31, 2007, at the end of his column - and
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we all would recognize that Mr. Taylor was skeptical and raised many questions around the efficacy of proceeding with the bid for the Commonwealth Games, I think, and the manner in which it was done. He says, and this is a quote and I will table this at the end of the meeting today: Rather than trying to revive the Games, or finding out who put out the release announcing the city had pulled its support for the bid prior to council taking a vote, there should be a thorough examination of the decision-making process. There was too little public consultation prior to the Games receiving the unqualified support from the province and regional council. Why wasn't there a cost-benefit analysis prior to the Bid Committee receiving permission to go ahead? And there was no realistic number attached to the Games bid prior to Halifax winning the right to represent Canada in the international bid process.
So there is someone who was skeptical throughout the development of the bid.
I would also like to read a small piece in Business Voice, in the April edition, from Valerie Payne of the Halifax Chamber of Commerce. She says: I think it's a lost opportunity from many perspectives in terms of what could have been in terms of construction and legacy moving forward. Payne said people will be disappointed but that they will accept this as a prudent decision that the government has made on their behalf. It's hard to put $1.7 billion into context without seeing the plans, the benefits and having a chance to think about the implications. We need to spend a considerable amount over the next 15 or 20 years in economic development. Then she goes on to say that we need to trust our elected officials but just as they had doubts about the bid process, we doubt the reasoning behind cancelling the bid.
This is from a spokesperson for the chamber, who were on the other side - if there are sides in this debate - a group that were very strongly in support of the bid.
What those quotes demonstrate is that irrespective of which side people fell on around the bid, they have - and continue to have - questions about the decision making that led to the collapse and the failure of moving forward with a Canadian competitor in the Commonwealth bid. So to be quite blunt, there are those who question the government's ability to play in the big leagues, to be able to negotiate complex processes competently to the benefit of the Province of Nova Scotia. And that is the reason why we are here - we are not here to argue that the bid should be revived, we are not here to argue that it should have gone forward at $1.7 billion - we are here to try to understand what happened. Is it because there was a failure to manage a complex process adequately?
I want to begin by asking you, Mr. Montgomerie, how often did you brief Minister Barnet and how often were others briefed, particularly the Premier and the Cabinet with respect to the development of the bid process?
MR. DUFF MONTGOMERIE: A couple of things. I would like to respond to your comments about what went wrong in the context of what went right. You are right, Madam
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Chair, this was an incredibly complex, huge project. To HRM's credit and the Nova Scotia Government's credit, during the last two years we have stayed absolutely, totally together to ensure that we get the best information we could to the decision makers that you just referred to. Our respective staffs and the fiscal resources of the province and HRM were first on the table to the 2014 committee to help get them on the road to do that job, because we knew the time frame that they were involved in was absolutely brutal. When you think of - and you've seen the documentation, you've seen the architecture . . .
MADAM CHAIR: Excuse me, I would like to interrupt you for a moment because I'm not questioning the competence or the amount of work that staff put in, I'm talking about political decision makers at the highest level in this province who ultimately had the responsibility to decide if we were going forward or not. So my focus today is looking at the minister, the Premier, and the Cabinet in terms of what it was they knew, when they knew it, how often were they briefed, what were their directions back to the Bid Committee - those are the questions and we have very little time and that's why I need to focus on that.
MR. MONTGOMERIE: Sure. I was just setting the context because it is so complex. For example, Bob Fowler, who is the deputy to the Premier, and myself sit on the executive committee and the board of the 2014 committee. Dan, and Wayne Anstey represent HRM. Outside of that process, we met regularly, so that meant I was talking to Minister Barnet on a regular basis - and more when it was to the point to brief the minister. Obviously Bob will speak to how he talked with the Premier. As we became closer, as the 2014 committee did their job, as they were getting closer to the business plan and we began to see the dynamic, it was at that time we first briefed the issues committee of Cabinet, Madam Chair, and I believe February 23rd - well, there were two, twice, early on in the process we briefed the issues committee of Cabinet which would be the Premier, the Minister of Treasury and Policy Board, the Minister of Finance, the Minister of Service Nova Scotia and Municipal Relations, of course Minister Barnet, and so on. We began to make them aware of the dynamic that was unfolding. During the piece as well, Minister Barnet and the mayor met several times, and had conversations right from the day the bid was launched to obviously the phone conversations with the two federal ministers. So there was a fair amount of dialogue.
MADAM CHAIR: You say that there was an early on briefing - can you be more specific about what "early on" means?
MR. MONTGOMERIE: Sure.
MADAM CHAIR: And did you discuss budgetary matters at that early on briefing and, if so, what level of detail was discussed around the budget?
MR. MONTGOMERIE: I'm trying to find - I think you have it in your kits, the national presentation that we made to the issues committee. The last one was February 27th,
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a reminder to the issues committee that the fiscal position of the province, HRM will not be compromised per the directive of Premier Hamm and Mayor Kelly, rightsized Games, that the domestic bid was $785 million, and our potential contribution or order of magnitude under that was $200 million, that the present Games bid was now looking to be $1.3 billion without inflation, and without inflation potential exposure to the province was $350 million without inflation. Obviously our elected officials used as the reference point $785 million.
MADAM CHAIR: That was on February 27, 2007?
MR. MONTGOMERIE: That's correct.
MADAM CHAIR: But my question is about earlier on, when were the briefings earlier on and did those briefings, I mean, we recognize that February 27, 2007, was fairly close to the announcement that the bid was being withdrawn - surely that wasn't the first time?
MR. MONTGOMERIE: No, you're right, Madam Chair. I think the first one was February 7th. Remember we got the budget the 29th of January and it gave our staff an opportunity to begin to look at the budget, identify the gap of $1 billion that faced the city and ourselves, factor in the inflation, both HRM and ourselves arrived at I think $240 million as a small "c" conservative figure for inflation. Then on February 7th we alerted the issues committee, then again on February 27th, and at that meeting the Premier directed us to set up a meeting with the mayor and that Minister Barnet and Premier MacDonald would meet with the mayor, which happened on March 1st.
MADAM CHAIR: So you're basically saying that there were no discussions around budget until after January 29, 2007?
MR. MONTGOMERIE: Right, and let me put that in context, because I appreciate where you're coming from. Our challenge was - we thought at first should we cap our amount, should Cabinet have a discussion and cap the amount, and it was felt, no, we shouldn't cap the amount from the province because it would force the 2014 committee to work to a number rather than the actual cost of the Games, and we were more interested in them doing their job and giving them the resources to do their job to come and say this is what it would cost for us to run those Games. Once we had that, that was our time to engage our senior Finance, Treasury and Policy Board staff - and I should say they've been engaged all along, quite frankly, with the 2014 committee through Tracey's leadership briefing Bob Fowler, myself, and Vicki, the Deputy Minister of Finance, on several occasions.
So to your point, yes it was when the business plan came down, that's when Cabinet wanted to know, okay, based on all the work they've done, how real is their business plan? We said we think it accurately represents what it would cost to do these Games and,
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therefore, there's a $1 billion gap, plus the consultant studies which we were just starting to see were beginning to highlight some other risks that we thought were untenable.
MADAM CHAIR: In hindsight, do you think it was prudent not having any parameters? I mean, I'm having difficulty understanding the government's message that they had established right at the outset - you and Mr. English have both told our committee, and the Premier has said this and the minister has said that the rightsize was always a requirement. It was a fundamental tenet on which the development of the bid was based. The rightsize Games, and you also emphasize that it had to be within the fiscal capacity. So how did the Bid Committee know this, what that number is? Did they have a crystal ball? I mean, it seems to me that you would have to have some discussion or there would have to be some parameters around that.
MR. MONTGOMERIE: The parameter was always very clear to us. We spent countless, countless hours working with HRM and with Fred and his team around the domestic bid. We went through a very rigorous template Commonwealth Games Canada put four cities through to cost what the bid would be, and at the end of the day it was $785 million. That's our reference point. So once they began the international piece there were other factors they now had to deal with and, I mean, the incredible time frame they're under and the work they had to do.
MADAM CHAIR: So are you telling this committee that after we won the domestic bid at $780-some million that there was no anticipation that that number would change?
MR. MONTGOMERIE: Absolutely not. I think I used the words "reference point", Madam Chair. That was our reference point. We knew, for example, there would be increased due diligence, particularly around the infrastructure side because there was an infrastructure deficit, we wanted to truly understand what it would cost to build those facilities and to maintain them. So the 2014 committee did an extra due diligence by doing the C-level drawings and so on. We knew that the $785 million, even by changing by a year, has the potential to grow, but it was our reference point.
MADAM CHAIR: The PricewaterhouseCoopers consultant's report, one of their primary conclusions, I think in their executive summary, is that the Bid Committee was directed to develop - this is directly from their report - a business plan that would not endanger the financial position of the government stakeholders. No specific investment guidelines or constraints were provided to the Bid Committee. Accordingly the Bid Committee's approach was to develop the business plan and budget, in accordance with the legacy objectives identified, the broad mission and goal statements and the broad financial guidelines provided by the government stakeholders and the CGF requirements focusing on a domestic bid.
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[9:30 a.m.]
Given how things unfolded, if you had to do this again would this be addressed, some guidelines, some specific parameters provided to the Bid Committee, some constraints? I mean, this seems to be a crucial failure in what occurred here.
MR. MONTGOMERIE: The challenge that PricewaterhouseCoopers accurately pointed out, Madam Chair, was we were asking the 2014 committee to develop a budget to win a Commonwealth Games around parameters that we put on them, but also they had parameters that the international federation put on them. Things that I took away from PricewaterhouseCoopers, as well as McMahon, and things that I found very interesting and helpful to future planning - to your point - for the province and possibly HRM is the stadium. Intuitively we felt going in that the stadium makes good sense at this time in our history, but after reading those two reports I have serious doubts, given other pressures we have around infrastructure, whether a stadium is a fit for us at this time.
The other thing to sort of appreciate - members who also had really solid input to the 2014 committee would have been Sport Nova Scotia. It would have been our sport community folks, Ken Bagnell, Jamie Ferguson and those folks, so they're like us, we all input into the mix, but at the end of the day the 2014 committee was responsible for the bid. So they did come up and say here's what it would take to build a stadium, here's what it would take to operate it, the multiplex, and both PricewaterhouseCoopers and McMahon pointed out stadiums today, the entertainment industry hardly uses them anymore and you really need a sport team as an anchor because if you don't have them as an anchor . . .
MADAM CHAIR: Thank you. I have one minute left and I have another question. We know that Premier Hamm had written a letter stating that we would fund about 25 per cent of the overall bid, but when did the province first provide its possible or its probable funding parameters to the Bid Committee under the government of Rodney MacDonald? When did that occur?
MR. MONTGOMERIE: The actual monetary amount would have been March 7th, I think. I'm trying to remember, there are so many dates. There's a letter that Bob and Dan presented to Fred MacGillivray on the 22nd that outlines the order of magnitude of the two funding partners.
MADAM CHAIR: So not until February 22nd.
MR. MONTGOMERIE: Right.
MADAM CHAIR: Thank you. The time has now expired and I recognize Mr. Colwell from the Liberal caucus. You have 20 minutes.
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MR. COLWELL: Thank you, Madam Chair. I'm going to need a whole lot more time than that, as I'm sure all my colleagues are.
Let me first say how disappointed we are about this entire process. If the Bid Committee put together a bid which seemed to be reasonable and affordable, I believe we had a great opportunity to put forward a terrific event and showcase our beautiful province, and I think there's no argument about that with anyone. Not only that, but this could be providing a wonderful opportunity to expand our sport and recreational programs and facilities in the province. However, it left us in a terrible situation between the Bid Committee, the province and council. Having said that, the entire fault, everyone seems to be trying to blame the Bid Committee, but I don't think the entire fault lies with them because I know some of the people on that committee and they're terrifically qualified and very dedicated people, but I do have some major concerns.
I think this has been an embarrassment to the province, an embarrassment to our country, and it's almost inconceivable that you can go from $700 million to $2 billion and not realize it is happening. I mean this is just simply not acceptable. I would think the chances of us, in Nova Scotia, ever putting on an event or even winning a bid for anything like this in the future, based on this operation, is probably going to be about zero for maybe the next 20 to 50 years because nobody is going to believe we're going to be able to do what we say we can do. So I think it has embarrassed the province and embarrassed the municipality and embarrassed the citizens of Nova Scotia.
Saying all that, the first questions I'm going to ask: There was $14 million put aside for the Bid Committee to do their work - how much did they spend, how much is left, and are we going to get a penny-by-penny accounting of where every penny of this was spent?
MR. ENGLISH: Madam Chair, the budget for the Bid Committee was $14.3 million. Of that $14.3 million there was $10 million in public funding, that's $3.5 million from both the province and the feds and $3 million from HRM, so basically the magic number is $10 million. If the Bid Committee exceeds $10 million then the partners probably will have to cover that deficit on a pro-rated basis.
We're actually meeting this afternoon at the executive committee meeting and the last numbers I observed, to I think mid-March, were about $7.7 million. The other revenue source, in terms of balancing that $14.3 million budget, were corporate sponsorships which are not going to materialize and, if any had been received, they will be returned. So it is $10 million between the public funding partners - and we'll be seeing an updated bid budget this afternoon at one o'clock, but right now $10 million is what we've got to watch that we don't exceed that.
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They have to honour all their previous commitments and so on and tidy up their books. There will be an audit undertaken as soon as all their previous commitments are paid out and we're hoping that at the end of the day it'll be below $10 million.
MR. COLWELL: At the completion of that audit, I would like that to be submitted to this committee - and not just the audit report, but the detailed costs of everything. That's going to be interesting to see. The only thing I can think of is - and I do stress I think that it was a good idea to go after the Games, but somebody, someplace, messed up seriously. I mean, serious - you go from $700 million to $2 billion, it just doesn't happen. If you put a business plan together and your costs went from $700 million to build a big factory to $2 billion, you're out of business. It's that simple and that's basically what happened here.
How did it possibly happen? We have facilities in this regional municipality, in my riding - and this is something other people, and I know council or different councillors have been stressing this - we can't open the doors because we don't have staff there. It would cost maybe $40,000 or $50,000 a year to do, but we look at doing something that's potentially going to cost us $2 billion - $2 billion we do not have. We didn't have $700 million.
So, how can we justify doing this and how are we going to explain to the people of Nova Scotia, particularly the people in the regional municipality, where the $3 million has gone, or potentially $3 million, from this bid preparation? I now have a shirt home that was given to me that I refused to wear from day one that says Commonwealth Games 2014 on it. I don't know how much they cost or how many other promotional things were done - how many things like that were done that ate up this money?
Money in the communities - and I can't stress this enough - we've had two murders in my community, young people senselessly killed, and maybe if we would have had appropriate recreational facilities in that community, and supported, we might not have had that happen. Maybe not, who knows? No one will ever know, but I can guarantee you in East Preston today a recreation centre is not open, we don't have anyone to work there; in Lake Echo a recreation centre is not open, we don't have anyone to work there, no funding to fund them; in Porters Lake the community centre there is not open; in Lawrencetown the community centre is not open.
For about $100,000 a year all these facilities could be open, all providing services to the young people and to the population of seniors in our community. It just aggravates me so bad when I see this happen. Again, I'm stressing I don't think the Games were a bad idea, but it wasn't our time, I don't think. If we had the facilities in place, some facilities, that would have been a different issue.
If we would have had these facilities, we had built these new facilities, say if it did come in at $700 million, how were we ever going to operate and maintain them? We can't operate and maintain what we've got, so how are we going to do that? Could you please
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explain to me, maybe from HRM, how you planned to do this and afterwards? It doesn't make financial sense to do it.
MR. ENGLISH: Madam Chair, I think the first part - I'll try to answer your questions - but I think the first part had to do with where did it go wrong or who to blame. We're not here to blame anybody.
I think the reason the $785 million jumped to $1.7 billion is due to a number of factors, not the least of which was the increase in the standards for hosting these Games, which were not factored into the $785 million. One could say that the $785 million wasn't realistic in terms of hosting those Games. We wanted to see what the real costs were, the Commonwealth Games Federation informed the Bid Committee that the standards that had to be adhered to, in terms of submitting a bid, far exceeded what was ever required in the past. That drove the costs.
Also, the Bid Committee prepared what we called Class C estimates which provided a much better realistic estimate for the infrastructure and hosting the Games than had been provided in the $785 million.
There was a lot of due diligence carried out around those numbers, so I think from the funding partners' perspective we wanted to know what the real costs were, not the estimate based on some conceptual plans. We had real costs, real plans, Class C estimates prepared, so those were the real costs on a budget. Remember, the province and HRM would have to cover any over-expenditure on that budget if we had won the Games, and had they proceeded we would have been responsible for covering the actual costs, which was a major risk that was identified.
I'm not sure, Madam Chair, what the question is in terms of our own recreational facilities, but I'll try to answer it unless you want to get the member to clarify.
MR. COLWELL: Yes, I'll clarify that. The point I'm making is we have recreational facilities that are owned by HRM at the present time in this municipality that cannot open their doors because there is not adequate funding for them to do so. So if you were going to add more infrastructure under this program, the municipality and the province go deeper in debt, there would be less opportunity to fund these existing facilities, never mind to try to operate the other ones, that's really my question - how did you plan to do all this?
MR. ENGLISH: Madam Chair, I think when I made my opening introductory statements I mentioned the principles under which Council had agreed to proceed with the bid and one of them was not to compromise the financial position or affect our future capital budgets. That was one of the principles we were to proceed under, and that wasn't met as far as we were concerned in terms of the proposed Games budget. It would have - had we
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proceeded - I agree with you it may have affected our ability to operate our existing recreation facilities. That was one of our principles, that we didn't want to compromise that.
MR. COLWELL: That raised very serious concerns for me right from day one because, as I say, we see these things happening in our communities and the young people having a great deal of difficulty. Of course, if you can work with young people at a very young age and get them involved in whatever recreational activity they're interested in, the better. I can tell you in my area - and I'm sure this is all over HRM - that indeed there is not enough funding in that now and this would have substantially taken more money out of that and made the situation even worse, even if it would have stayed at the approximate $800 million to start with. This is quite a negative impact on the whole thing.
Then we go through the consultants' reports and you look at some of the statements it was just unbelievable, let's put it that way. These consultants worked at different international games events and put together proposals for all kinds of candidate cities and bids, and they've asked some very, very serious questions as they go through this process. I'll just read one here. The consultant's report states as follows: The business plan failed to set out community goals and how the Commonwealth Games will help achieve these goals and objectives. The business plan fails to show definite links between the money that would be spent and achieve specific measurable objectives. These are things that should have been looked at in the first place.
[9:45 a.m.]
Then it goes on further to say this looks like a perfect financial storm, in other words, total disaster. It goes on further to say that the promotional value of the Commonwealth Games is greatly exaggerated and little work was done by Halifax 2014 to prove out the value attributed to hosting the Games. Essentially the business case has not been made. Why didn't we know this to start? It just doesn't make sense.
So where did the Bid Committee go wrong with respect to these statements, and did you recognize there was a lack of communication that negatively affected the bid between all the shareholders in this activity?
MR. ENGLISH: Madam Chair, I just want to make a couple of comments on that and then I'll let Mr. Montgomerie comment as well. I want to go back to a statement the member made regarding our existing recreation facilities, something that doesn't come out in the Games budget, although the Games budget did include, I believe it was a $40 million trust fund, legacy fund, that would assist HRM, because it would be HRM that would be on the hook for any operating deficits of the facilities that were created as a result of the Games. We would be responsible.
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You can see by the consultants' reports that they felt that the legacy trust fund that was being set up in the Games budget of $40 million wouldn't be enough to cover the operating deficits, which were predicted as being fairly substantial, well over $2 million as I recall, to operate the stadium in the multi-sportsplex, which HRM would have to cover in its operating budget, which would then compromise our ability to operate other facilities in the region.
I'll just go back and if the member could repeat the other question, I would appreciate it.
MR. COLWELL: No problem. Where do you think the Bid Committee failed to respect the statements that were made by the consultants?
MR. ENGLISH: My only comment there, Madam Chair, would be the consultants couldn't give any comment until the budget was prepared. The budget documentation didn't go to the consultants until early February. They were commenting on the budget that was prepared by the 2014 committee. They couldn't have made the comments before they had the budget.
MR. COLWELL: I am going to go back again. I personally feel, and Mr. English you are well aware of my feelings in this regard, I think that certain parts of the municipality are way overtaxed in property tax. I can tell you, I weekly see people in my constituency office who are behind in their property taxes, some of them have no hope of ever paying them and their homes have been sold - sold, gone. They don't own them anymore, and some of these homes have been in the families for 100 years.
The taxes have gone up. I think this year the assessment rise was 10 per cent, if I remember reading the papers properly. I know several people in the community, their assessments have gone up 50 per cent and 100 per cent and no new increased services, still deficits in the services provided in the rural areas in particular, but the assessments keep going up and up and the taxes go up and up with them. Simply, how did the municipality think they could possibly afford these Games?
MR. ENGLISH: Madam Chair, our commitment to council was that once we had all the information available, including the budgets, including the due diligence, external reports, an indication from the province what they were willing to contribute - we already knew, of course, what the federal contribution would be - we had been prepared to go into council and outline a number of different scenarios in terms of how we could "cash flow" the $200 million to $250 million that we were considering. We had a number of different ideas in terms of how to do that. We never got the opportunity to present that to council because once we had seen the magnitude of the funding gap, it was kind of a moot point then in terms of how much HRM was going to put in or how they were going to pay for it.
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We did have a presentation ready to go, and I think it would be redundant now to explain that other than to suggest that we had a number of different scenarios. We have, as the member knows, a strategic growth reserve which we were going to use. We had some other ideas and I will just mention a couple of them maybe, just for purposes of illustration - we were talking about a flat tax which would be dedicated to the Commonwealth Games; we were talking about a possibility of increasing a marketing levy for hotels, that type of thing - but these were never presented to Council because we never got to that point.
Again, going back to the principles - if HRM was to proceed with the Games we didn't want to compromise HRM's financial position. We didn't want to compromise our multi-year financial strategy, which is seeing HRM reduce its debt over the last number of years and increase its reserves. So we were hoping to get to council on the $200 million or $250 million and demonstrate how we could do that without affecting our multi-year financial strategy. That didn't occur and because, as I say, there was no way we could bridge between us and the province the funding gap that existed.
MR. COLWELL: I appreciate that and I know from working with HRM staff, whom I highly respect for their ability and the hard work that they do, it just gets frustrating when you see what I see on a daily basis. People in dire situations, and it is happening more and more. I can give you an example - a gentlemen I know, who is quite financially well off, has a beautiful home, called me here about a year ago and he said his assessment has gone up so much on his house, and his taxes have gone up so much, that when he retires he has to sell it. Now when he retires he will still be very well off. That's a horrible statement to go through.
I first thought he was just joking to make a point, but he went on to tell me more and more about this. I can tell you, it's reality and what is going to happen is we get these high assessment increases, which are due to spending both at provincial and municipal levels, and we see more and more people in financial trouble, and we are not going to have these nice homes anymore because people aren't going to be able to pay the taxes on them.
I am sort of getting off the point but I'm not, because this all contributes to what is going on here. I remember when we started working on the harbour cleanup, which is a very important project for the municipality and the province, how difficult it was to get the funding for that, and that was small compared to this program, which wouldn't have a huge long-term effect, a positive effect on the municipality. I've got a couple of questions here.
MADAM CHAIR: You have one minute.
MR. COLWELL: Are we going to have time back again?
MADAM CHAIR: Another 20 minutes.
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MR. COLWELL: Good. I'll just wrap up with that. I have some more questions at this time to ask the province, more directed at the province than the municipality, and I'm not trying to give anybody a hard time here. I'm just talking about the realities of what people are facing in our communities and I think, as politicians and as bureaucrats in all levels of government, we've got to keep that in mind. It's nice to have these projects but we've got to do something we can afford and we've got to make sure that we have the things in place that people need so badly just to maintain a regular lifestyle before we reach way out for things that would be great but maybe we're not ready for them yet.
MADAM CHAIR: The time has expired for the Liberal caucus.
Mr. Porter for the PC caucus. You have until 10:13 a.m.
MR. CHUCK PORTER: Madam Chair, first I want to say thank you very much to both the province, the provincial representatives, the deputy and your staff, as well as HRM for being here today. I know we have lots of questions for you and we've had a lot of information to go through in the last week and a half now, and some very interesting reading as well as the information provided this week from HRM. So thank you for that. It's nice to have some of our councillors here as well from HRM this morning and thank you for being here.
It's a very interesting topic and I want to go back to something, Mr. English, perhaps that you mentioned to start off. We've heard and read and seen about this and the figures of $14 million. You mentioned $10 million and then you took us to $7.7 million. I guess I missed something somewhere, but of the $7.7 million, and maybe just the first question for Mr. English, you said you were going somewhere this afternoon to review these figures to see if that's actually the figure?
MR. ENGLISH: Madam Chair, just to clarify, the bid budget was $14.3 million of which $10 million came from the public funding partners; $3.5 million, feds; $3.5 million, province; $3 million, city. Their budget now, because of the withdrawal, means they will not be receiving any corporate sponsorships and, if they did, they would be returning it. So really $10 million is the number. To date they've spent about $7.7 million. We'll have an update on that number today at our executive committee meeting of Halifax 2014.
MR. PORTER: Thank you for that and I guess that just goes to show us how easily things get misled maybe. You read an awful lot about it and all you see is that $14 million figure, not what we're talking about right now. We're not getting and haven't got really a true reflection of what the figure is - and we still don't know - according to you, you're not going to know until this afternoon where exactly we are. Just for clarification.
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MR. ENGLISH: Madam Chair, had the bid continued to proceed, obviously it would have exceeded where we are today, but there are some savings in the proposed bid budget as a result of discontinuing the process.
MR. PORTER: In your opinion, and I'll ask Mr. English and/or Mr. Montgomerie, you can both answer this if you like - being part of that committee, the money that was spent, in your opinion was it well spent? I would like a little bit of background as to how we did that, too, please.
MR. MONTGOMERIE: Madam Chair, again for context, we were absolutely committed to help make sure the 2014 committee can do their job and in a very short time frame with them to do it, we wanted the Class C drawings. We needed them to be able to provide us with a detailed budget so that when the funding partners got that business plan, which we did in January, we could then do our job and do a risk assessment around it. The bid has three components really: international travel, where they actually lobby for 36 votes, to win the Games, out of 71. So that occupies them; they have the operational budget to do, which means they interact with all our agencies, like the Department of Health, to help do their health services plan, with security, with HRM police and RCMP who work tirelessly with the 2014 committee to do that. So that's going on. Then they have the capital piece, the actual major facilities and the drawings and so on that they had to do around that piece.
One of the things that really occurred here - full marks to the 2014 committee; as Dan said, this is not a blame game, their own due diligence picked out, for example, that Shannon Park, 20 per cent of the land was not usable for building. We didn't pick that up in the domestic phase because we spent $780,000, I think, on the domestic bid but the due diligence of the 2014 committee and the consultants they brought in determined the back of stage, they call it, for that kind of event was not factored in as large as it should have been and 20 per cent of the land wasn't usable. Their own due diligence caused them to now have to look at another scenario.
So I think at the end of the day we reached a decision based on the best information, and I feel very confident that the decision our minister had and Cabinet had was based on solid information, and we gave the 2014 committee the resources to do it. So I think it was well spent in that regard.
MR. PORTER: Thank you for that. And as this thing sort of worked its way along and we had a figure of $785 million and we saw that it was maybe going to be a bit more than that - considerably more than that would be a fair statement - we knew we were going to need more money, there was no question about that, to make this thing happen. Did we go back to the federal government and ask for more money? If not, why not? If yes, how much money were we looking at, whether it be a percentage or an actual figure from the feds?
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MR. MONTGOMERIE: Part of the relationship with the federal government goes back from day one, and it was a relationship Minister Barnet had with Minister Chong and I would have had with senior bureaucrats in Sport Canada. Basically we lobbied hard, the minister lobbied hard on behalf of the province and the city that first the 2014 committee get enough resources to do the bid, and when the federal government announced their resources, they also announced a cap, and Minister Barnet and Mayor Kelly, both Minister Barnet to Chong and I believe Mayor Kelly to Minister MacKay, don't put a cap on it, let the business plan tell us whether this is workable or not.
If you put a cap on this, it's exactly what we talked about earlier, then we force them to work towards a price, not towards the actual cost of the Games. So in subsequent conversations that the Premier had with the Prime Minister and that Minister Barnet actually had with the Prime Minister in Whitehorse three or four weeks ago, the constant theme was let the business plan do its work and we have an infrastructure deficit in HRM and in the province, so if the business plan works we're coming at you for more money, particularly around infrastructure.
Our point was always around the $400 million - that's an artificial cap. Let the 2014 committee do their job, let them come to the funding partners with a business plan, then let the three funding partners make the decision about the amount or whether to go or not to go. Unfortunately that cap proved to be a constant challenge for the 2014 committee, for HRM and ourselves.
MR. PORTER: All right, I'm just giving that some quick thought with regard to Minister Chong. The cap was and was not, I guess is maybe a fair statement. It was there, the $400 million, but it was felt by the committee that if more was required, it was open for the ask to be there, the request would be . . .
[10:00 a.m.]
MR. MONTGOMERIE: I would answer that in the context of if you are going to do battle with the federal government, you best be well armed. That was our whole direction here. If that business case was closer or better than what we saw, then we might be here in front of you telling you why we're going after the federal government for more money.
So where the business case was not very good at all - big gap, too much risk - we didn't feel it appropriate to even ask the federal government for more money, at the end, but up until we saw where the business plan was, we continually said to them, infrastructure, we have an infrastructure deficit, the $400 million cap is really, we don't think, fair until you see the business plan because if the business plan is solid, we're going to come after you for more money, particularly around infrastructure.
MADAM CHAIR: Mr. English wanted to respond.
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MR. ENGLISH: Thanks, Madam Chair. I want to put something in perspective here in terms of the federal government policy on hosting international games like this. Once they announced the $400 million in late November of last year, that in itself drove the budget to $1.142 because their formula is 35 per cent of the gross budget, or they match the combined amount of the other government funding partners. So right away we're looking at a budget of $1.142 billion if we were to receive the $400 million. That is why I mentioned in my introductory remarks that if the Bid Committee were able to reduce it to $1 billion, that could have conceivably reduced the federal government contribution to $350 million.
Just to answer the member's question in terms of did we approach the federal government, the answer is yes. Mayor Kelly met with Peter MacKay in Musquodoboit Valley at the broadband funding announcement. I think that was late February. Also, I was present for a number of different conference calls that were made with Minister MacKay and Minister Guergis and, as Duff just mentioned, initially given the major funding gap that was there, there wasn't a business case to proceed. We had actually suggested that the feds join us with an exit strategy. Both ministers wanted us to provide an additional week to the committee to come back with that $1 billion budget. At that time, the mayor did question Minister MacKay as to whether there would be additional federal funding coming if we were to wait and the answer was an emphatic no, $400 million is $400 million.
MADAM CHAIR: Mr. Porter.
MR. PORTER: I guess I did have a question with regard to the additional week and I think that you have answered that. My question was why - I'm aware that there was an additional week requested and maybe, deputy, you want to just speak to that a bit more on why we didn't go the extra week.
MADAM CHAIR: Mr. Montgomerie.
MR. MONTGOMERIE: I think, as the honourable member here mentioned earlier, there is no one to blame and nobody knows more than those of us who are in this front row, the time and effort that all kinds of people put in to get to presenting a business case to government on January 29th. That business case was fundamental to us because, as Scott said when he presented it, we've done our job. We developed the business case, here is the business plan, now it's up to the funding partners to decide. We did our due diligence. There was a gap of $1 billion that the city and ourselves would have had to make up. The risk was growing. The two consultants' reports, if you have had an opportunity to read them, you will see it very clearly, the legacy was uncertain. We went to our respective elected bodies and the request to go a week later, to take a budget from $1.7 billion down to $1 billion, in good conscience, certainly I could not recommend that to my minister nor he to his colleagues, that we should do that.
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MR. PORTER: You talk a bit about trying to reduce that budget. This is maybe a kind of comparison question as to previous Games, countries, states, whichever. You mentioned a few minutes ago, in my opening question, about how the money is spent and it's well spent. Part of that was travelling to other areas that have hosted the Games and the success or not that they have had. How could you possibly, and I guess maybe you have talked that you couldn't reduce the budget. Do we, or did we along the way, and I will assume that we did but I'm going to ask the question, how do we compare in Nova Scotia trying to put these Games on as maybe to another state or another province or country attempting to do this, or is it even comparable? When we travelled around - I guess maybe just to clarify this, deputy - was there another state or province out there that was very comparable to what we are in size and infrastructure and what our limitations might have been and so on?
MADAM CHAIR: Mr. Montgomerie.
MR. MONTGOMERIE: The three domestic cities that we were up against had better infrastructure than we did and obviously a bigger population. Those are obvious cases. Of the two international competitors, Abuja has infrastructure. They built a new stadium about five or six years ago, et cetera, and Glasgow has reasonably good infrastructure. The comment I would make is I think the real challenge here is for the Government of Canada and Commonwealth Games Canada, and the Commonwealth Games Federation to really look at the future of the Commonwealth Games. They are, in fact, termed the Friendly Games. They are the Friendly Games because they grew out of a relationship of Commonwealth countries. When we were in Melbourne, as somebody mentioned earlier, do we feel we lost our reputation because of this? I don't think so.
We are defined by things like Swissair, 9/11, our people are our people. This was a business decision more than anything else. New Zealand made the same decision, they withdrew against Melbourne. Denver made the same decision around the Olympics, they withdrew, because they did their due diligence at that time and at that place. So at the end of the day I think this decision will cause a lot of conversation with the Commonwealth Games Federation about where the Commonwealth Games are going. There are only a very few countries right now in the Commonwealth that can host these games, so I think at their next international meeting I would like to think - and I know countries like New Zealand and Ireland who have already said to us when we were in Melbourne, they were concerned the way the Commonwealth Games are heading. Extravaganza, Olympic-sized, no longer the Friendly Games. Not very many countries could afford them.
MR. PORTER: It may become the "Wealthy Games" then the way you're talking, as opposed to a very popular spot in the world, right here in Nova Scotia that perhaps missed an opportunity here.
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Having said all of that, we were still chosen. When you look at infrastructure we had less infrastructure, as you point out, we have less population, less people going to the Games obviously. Any idea why we were chosen maybe over the others, given those points?
MR. MONTGOMERIE: Our folks did a great job and one of the things - I was involved in the very first Commonwealth Games bid that Victoria won and the process was informal, to be polite. This process that Commonwealth Games Canada put the four cities through was absolutely detailed, it was a 1,000-page bid book that we had to put in, and we knew, and I was part of that, Dan and our staff were all part of that, it was Fred's team. We knew the infrastructure deficit was huge and we tried to use it as a lever, like we would see this as an opportunity for Atlantic Canada to come in east of Montreal with major infrastructure like a stadium and so on. Actually, 2014 committee, I think, estimated the stadium to be $102 million and in the international bid, I think it came in at $112 million, so we really did our due diligence around that piece, they did.
Commonwealth Games Canada decided to choose us, and I think we just did a great job. Actually, the enthusiasm during their site visit here was incredible, they were well received wherever they went by our citizens. At that time they were excited about the Games.
MR. PORTER: Thank you. I just want to clarify too that by no means did I want to suggest a fine job was not done by your committee. I could tell just reading the amount of material we received and knowing there was so much more. I think it's great that we have the ability here in this province to put a team together, such as the Bid Committee that we have and the work that was done was an incredible amount and you should certainly be complimented on that. Looking back in retrospect, do you have any regrets about this process?
MR. MONTGOMERIE: My regret is the time frame. I guess somebody mentioned earlier, I think the honourable member here, how could the figure jump that high. When I look, our folks won the bid December 15th , had to be in Melbourne in February, and just to get 20-something people in Melbourne on the ground to learn all about Melbourne plus Mayor Kelly, Minister Barnet, Dr. Hamm politicking the votes and trying to get the Commonwealth countries to, you know, come back in March and get staffed up, I think, finally in May and go to Melbourne with Abuja and Glasgow and get the templates and present a business case January 29, 2007, was an incredible challenge.
The media will talk about it - and rightfully so - Glasgow had a year advantage. I never really paid a lot of attention to that in the beginning because I said, that's fine, they had a year advantage. When we got into this I really paid attention because we're doing now what Glasgow did a year ago, they went to their central government, they fought for their money, their budget and they got that resolved a year ago. We were forced, because of just starting in December, to deal with that in January and February and have to have the bid book in May 9th. An incredible time frame. That is the regret I have.
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MR. PORTER: So looking back here then with regard to that - and that's a very interesting point you do raise - this was very sped up for us here in this province and in this country. As part of the discussions - and I know I'm running out of time so I'll throw a quick question in here - you talked about the Commonwealth itself and the decision in future Games and perhaps this coming only to those who may be more wealthy, that's an unfair advantage, no question. Will we have an opportunity, as someone who has taken part in at least the bid process, to offer input around the Commonwealth with regard to your issue? There's just not enough time. You need to put out a lot more than a year or whatever it might be, and maybe request, suggest, what is a reasonable amount of time now with the experience that this Bid society has had here in this province.
MR. MONTGOMERIE: I'm quite sure Commonwealth Games Canada, in their own analysis, will go through that. I know, as much as we didn't like the $400 million cap, I have to tell you, our relationship with the federal government was incredibly positive. Keep in mind, all our respective staff in the last four months have been working night and day with 2014 committee. Sport Canada has been just absolutely amazing around trying to open doors in security, visas, customs, all that kind of stuff you have to worry about. We will be sitting down with Sport Canada, at my level, when the dust settles and talk about that point.
When I say our level, because the Department of Health Promotion and Protection, our responsibility in government is to represent our sport interests to the federal government in the national sports scene. I have real questions about spending a lot of money around an event that requires that amount of expenditure to host, with very little . . .
MADAM CHAIR: Order. Time has now expired. We'll have a second round of 20 minutes, which will take us to 11:13 a.m. It will give our witnesses the opportunity to make some concluding statements, and we have one or two other business items we need to take care of.
I want to just look for some clarification around comments that have been made now several times with respect to Olympic-sized games. My impression is that this could leave a wrong impression in the public mind versus the reality. My understanding is that the increasing standards are simply - somebody would hear Olympic-sized games and they would assume that imposes on a bidder, bigger, fancier facilities, bigger, fancier, more costly events, all of that kind of stuff.
My understanding is, in fact, different than that. We're not talking about bigger, fancier events and facilities and what have you when we talk about the Olympic standards, we're talking about the bid proposal itself having to be more detailed. So the costs that would be added to the Games' budget wouldn't be the operating of the Games itself, putting on the Games, but in fact the cost was around preparing the bid, why we needed to spend more money just in the preparation of the bid.
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Is that an accurate representation of what it meant? We weren't being asked to do the Olympic Games, we were asked to prepare a bid at the same level of detail as if we were doing the Olympic Games. That's an important distinction, I think. Is that a correct distinction? Mr. Montgomerie.
[10:15 a.m.]
MR. MONTGOMERIE: That's a fair characterization regarding the Olympic standards comment, because you're absolutely right, people will jump to that and say that a 100,000 seat stadium is required for the summer games.
MADAM CHAIR: Thank you. So that doesn't really account for this extraordinary increase in the operational costs of the Games itself. That, in fact, is more related to the goal of the legacy, the establishment of facilities that would leave a legacy, and then having to operate those facilities into the future and many of the costs associated with that.
MR. MONTGOMERIE: My sense in that would be, in the McMahon report, he is of the same opinion that we are, that yes, they weren't Olympic standards, but they were Olympic templates, that they received in June. All of a sudden, you had to drive the bid to a certain detail, but also it required, at the end of the day, if you won the bid, you had to staff- up earlier in different places, you had to do things earlier in different places, and it was prescriptive around, and I'll give you an example, netball had to have 5,000 seats. In Halifax, that does not make sense. It had field hockey fields that would go on the Common that would be ripped up. It had to have certain kinds of Astroturf or a certain kind of turf, and I'm not sure of the actual details. Those were things that added costs to the bid. Here was a throwaway facility, literally, you would put those scenarios down. We sort of felt, as we got closer to the business plan case, Commonwealth Games Canada, in particular, was a little more sensitive around saying that, but as far as we're concerned it was very real. You are absolutely right, it wasn't the thing that caused the big - no, it wasn't, it was certainly a contributor to the cost.
MADAM CHAIR: Thank you. I also want to say, when I read many of the reports and when I hear comments about, you know, these are the friendly games, and only wealthy countries can participate now and what have you, I get a little irritated because, this is Canada. We're not talking about a developing country. I would assume that if we looked at the countries in the Commonwealth and we used Gross National Product or invested product as a measurement of wealth, Canada would be pretty much in the top three, with Britain and Australia. I have some difficulty with poor us, nobody can afford to participate in these things anymore, only the wealthiest, because I think we need to constantly remind ourselves that we are among the wealthiest and this wasn't Nova Scotia's bid, this was Canada's bid.
I have some questions about the establishment of the secretariat inside the Office of Health Promotion and Protection. There's reference in the documents we received that an
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office was established within the department. I'm wondering, what was the number of staff in that office? What was the budget of that office? Were there other departments with staff seconded to that office and, in the calculation of what it would cost to prepare the bid, were the allocations of staff in the secretariat calculated as part of the $3.5 million in the preparation of the bid, or would their services be in addition to that?
Mr. Montgomerie.
MR. MONTGOMERIE: Again for context, the Department of Health Promotion and Protection, and Minister Barnet was the lead minister, we were the lead department, and one of the key challenges we recognized very early is we need to collaborate with all our other government colleagues. We had to find a mechanism that would bring them together so they could work with Dan and his staff and with 2014 staff. So we determined - and I think it was at that time, it was Howard Windsor who was the deputy - the Premier, myself, we both determined we needed a senior person in the Department of Health Promotion and Protection who would report to me, I would report to Howard, that would help drive that process. Tracey is that person, and has been that person.
The total budget salary, and travel and so on is approximately $140,000. She didn't really have a staff person. This was part of the dynamic piece, she collaborated on a regular basis. The best way to put it in context, near the end, for example, Tracey would drive our finance committee meetings, that would be Department of Finance, Treasury and Policy Board folks, the Department of Economic Development. She would also interact with 2014 committee, attend their Tuesday morning management meetings to be sure that we're clear on what they needed, at the same time, any advice that Tracey could give to them from our perspective. So it would be more a value in-kind contribution scenario from us. It was not part of the $3.5 million.
MADAM CHAIR: Thank you. So we have a staff of one at the secretariat . . .
MR. MONTGOMERIE: I think we had a temp, shared secretary between our Canada Games person with Tracey.
MADAM CHAIR: Back to the federal government's role in all this. I've noticed in the documents we have that we do not have a memorandum of understanding, we don't have a multi-party agreement, and from time to time these documents are made reference to. So I'm wondering why we don't have that. I also want to know about the federal government, was there any agreement that the federal government would wait until the numbers were in before they made their decisions? Was that a feature of the multi-party agreement? If so, would they have violated the multi-party agreement? I'm wondering why we don't have that document - will you provide it to us, and the questions around the federal government's role in making the decision to cap before the numbers were in?
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MR. MONTGOMERIE: I will go back to the time frame crunch. It's ideal - as we learned, we came to understand - in an international bid if all the partners can sign off on a multi-party agreement and have it part of the bid, it lends a lot of credence to the Commonwealth countries. In other words, the governments have signed in upfront, so as well as the 2014 committee doing their thing around the facility piece, around the operating budget, we were also having dialogue around the multi-party agreement with Sport Canada at a high level.
MADAM CHAIR: I'm going to cut you off. I'm sorry. The question is not about was there negotiation, it is about do these documents exist, a memorandum of understanding, a multi-party agreement? We don't have it - can we get it? Should the federal government have waited until the numbers were in, and would that be a violation of the memorandum of understanding if they did that?
MR. MONTGOMERIE: Sorry, Madam Chair. No, the multi-party agreement did not get signed because once we withdrew, that process stopped. But to your point - the multi-party agreement would have been the final final, and the three funding partners, at the end of the day the bottom line would have to be decided and we didn't get to that phase.
MADAM CHAIR: There are questions about whether any cost-benefit analysis was done prior to the bid developing. I want to table something that comes from the ACOA Web site, a news release from the minister of day for ACOA, back in 2002, Gerry Byrne. This is around a previous attempt to host the Games. Halifax attempted to win the bid for the 2010 Commonwealth Games, as you are aware, or there was this plan ACOA funded back then to the tune of $300,000, a study, a $500,000 study, along with the Province of Nova Scotia and the City of Halifax, who each provided $100,000 for a study at that time. That study has never seen the public light of day. I'm wondering if the Bid Committee and yourselves had this study as a reference point in any way, and could get a copy of that study?
MR. MONTGOMERIE: Excuse me, I'm very hazy on that. I'm going to have to back, and quite frankly I'm not sure. I sort of recall in all of the stuff we dealt with that there was a STEAM model that was used in the domestic bid, so I'm going to have to go back and find that out for you, Madam Chair. I apologize.
MADAM CHAIR: It is also made reference to - and fine, you can go back and take a look at that - in the minutes, I've noticed that in the minutes of your committee that there are references to a request by MP Peter Stoffer for this particular report made to Mr. MacGillivray, and some decision was going to be made with respect to that, but it sort of disappears. So if we are trying to understand what kind of cost-benefit analysis may have existed prior to getting into this process, it seems to me that this is a very important document and it would be good to know what was in that document, but also if the committee and any of the players in the committee making important decisions would have had access to a cost-benefit analysis that was only done five years earlier.
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I have a couple of other questions in my remaining minutes. I want to talk about the McMahon report. I will be honest, I haven't read the entire report, but I've read pieces of the report and I've also read a bit of the Bid Committee's response to the McMahon report. I have some concerns about the McMahon report, but we don't have time to get into this but I'll tell you one of the things that concerns me is that there is the - I don't know if it's more than an allegation, but there's information, rumours at least, circulating that the McMahon consultant worked for the Hamilton 2014 bid and that that in some way may have biased or compromised the findings of that particular consultant report.
Let's be clear, that is the report that is the most damaging in terms of the assessment of the work that had been done, of the business case. So I'm wanting to know from you whether or not you have any information with respect to McMahon, whether or not they did work for the Hamilton bid and, if so, would that concern you in terms of the potential for conflict of interest?
MR. MONTGOMERIE: I wouldn't characterize the McMahon as the most damaging, quite frankly, it was part of a whole bunch of things. But to your point, Madam Chair, the thing I've come to learn in my dealings in the sport community on a regular basis is that consultants around major games are a niche group and they, in fact, are hired in various places. As I understand Mr. McMahon, if you read the report, says upfront where he worked and who he worked for, and one of the ones he did work for was Hamilton.
Sport Canada contracted with Mr. McMahon. We did PricewaterhouseCoopers, Dan and his folks did the economic impact, and Sport Canada contracted with Mr. McMahon - Sport Canada has incredible experience around hosting these events, so . . .
MADAM CHAIR: Thank you. So, in other words, you have no concerns at all about the perception of conflict of interest?
MR. MONTGOMERIE: I'd answer that in this way - having read both McMahon and PricewaterhouseCoopers, they highlight common themes: revenues are soft; the athletes' village is $200 million at risk; the legacy is not strong. Both reports did those common themes, so to that point I was confident at that level, Madam Chair, that everything seemed to be meshing between PricewaterhouseCoopers and McMahon around the key issues.
[10:30 a.m.]
MADAM CHAIR: I want to talk a bit about PricewaterhouseCoopers. They laid out four different options, including an exit strategy and they fleshed that out. If we were, in fact, going to withdraw from the bid, exit from the bid, they recommended that the stakeholders, government stakeholders, develop a formal exit plan and a communication strategy addressing all impacted stakeholders - the Bid Committee, HRM, Nova Scotia taxpayers, sports agencies, the local Canadian international media, and the Commonwealth Games
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Federation. Was there ever a formal exit plan developed to correspond to this recommendation?
MR. MONTGOMERIE: They actually had four options, I think.
MADAM CHAIR: Yes.
MR. MONTGOMERIE: Our exit plan, after Mayor Kelly and the Premier met, was I shared with my senior colleagues at ACOA and Sport Canada where we were going and why Mayor Kelly and Minister Barnet wanted to speak with their respective ministers. So we began to communicate that way. We had already begun to strongly signal - I think the next day was March 2nd when we gave the letter to Fred MacGillivray, so we were beginning that process and once the ministers and the mayor had their discussion and it was determined the $400 million wasn't going to move, that there wasn't a business case, then we went to Cabinet, but we wanted to, again, stay joined at the hip with HRM because we worked together for two years really hard, and the Premier didn't want to pre-empt HRM by Cabinet saying we're not going. He wanted to make sure Mayor Kelly had an opportunity to meet with his council and they would make their decision. So there was that kind of effort around the communication strategy regarding an exit strategy.
MADAM CHAIR: I understand you attended the in camera and council meeting at HRM?
MR. MONTGOMERIE: I did, and I was embarrassed when our press release was sent out. Tracey and I were both in the room. I immediately apologized to the mayor and council, and Minister Barnet did it shortly thereafter. It was extremely unfortunate; two years of hard work.
MADAM CHAIR: Yes, I think we were all very disappointed. I'm not sure that we managed our exit strategy all that well either. I do recognize the incredible amount of work that went into this.
My time has now expired sadly, I've quite a few more. I'll turn the floor over to my colleague, Mr. Colwell.
MR. COLWELL: Thank you, Madam Chair. There was some discussion around costs for preparing the bid, and during that discussion you mentioned that the regional police, the RCMP, staff from HRM, and provincial government, all worked on this. Was that charged back to the Bid Committee?
MR. MONTGOMERIE: I'll do the first part, and maybe Dan can speak to the second
What we would end up doing is supplying what is called a lot of value-in-kind. I'll give you the medical services scenario - our Department of Health and Capital Health engaged in
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countless, countless interactions with 2014 to help get 2014's template about what kind of medical services, how we would provide it and what it would cost in the bid. So that went on all across government and on both levels of government. Dan, and actually the city, provided more value-in-kind than we did, because they were on-the-ground resources, like policing and so on.
MR. ENGLISH: Madam Chair, in terms of the policing, when our police and the RCMP got together and provided information for security purposes and so on to the Games Committee, that was not a charge to the Games Committee. We did have, I believe, about six staff who were seconded to the Games Committee, and the Games Committee would have covered their salaries - and that was in the bid budget. Other work that we did, like security and so on, we didn't charge. We had a number of staff working on that and, like Mr. Montgomerie said, it was just shown as value-in-kind.
MR. COLWELL: So basically - the point I'm going to get to here in a minute - you had roughly $10 million and you think you might have spent $7.7 million, but you won't know until you get the final numbers, and I appreciate that, but in reality we could be well over $7.7 million if you took the cost of everybody, and took them away from their regular work to work on this, it would be well over maybe even $10 million or $12 million on this. Would that be correct if you factored in everybody's labour in federal, provincial and municipal governments, the staff that would have to be accounted for if it was in a business?
MR. ENGLISH: Madam Chair, I wouldn't even try to put a price on that. I mean, just my own time, the deputy minister's time, Bob Fowler's time, we didn't charge that or even track that. All we tracked, not all, but where we tracked and recorded it initially, the intention was to leverage cost-sharing from the federal and provincial governments if we were to quantify time devoted or dedicated by certain personnel on the bid process, but at the end of the day, once the funding partners announced their bid budget contributions, we stopped really tracking the costs that were associated other than those that were directly involved - no, I couldn't even put a price tag on the amount of time that was spent by staff and so on in the bid process.
MR. COLWELL: So, in reality, because the staff would have been doing something else, and potentially some places, especially maybe with the workload that the RCMP and Health services people and many of these essential services we have were taken away from work they would normally do, so that work either slipped a bit because they had to do this work, or other people had to be put in place to do these things, so there was a real cost here that hasn't been accounted for - and that's the point I want to make - and it could be substantial. With no cost records on this it will be impossible, like you said, to really identify what this was. This really cost us. When you come with your final figure, whatever it is, it's going to be substantially more than it did cost the province, the municipal government - and dear knows what it cost the federal government, they can absorb it and afford it a lot more than either the province or the municipality can.
[Page 29]
This is just a real quick question - I haven't seen this information but that doesn't mean we don't have it. I'd like a list of the people who attended the Melbourne visit, a list of them and everyone who travelled with that, if you could supply it to the committee. I think it would be an interesting list to see. Who came up with this whole idea?
MADAM CHAIR: Mr. Montgomerie.
MR. MONTGOMERIE: I'll show my age a little bit, I was involved in the first bid with the Victoria Games. Then in the second bid, I believe Fred MacGillivray was the chair and led the team. There was an approach by Fred and others to the province and the city about going again and we felt well, let's sit down and talk about it. At that time I think it was Dan and Wayne from the city and myself and Scott Logan from the province who began to have that discussion.
It was actually then that Premier Hamm and Mayor Kelly sort of gently told us, if you are going to do this you can't in any way jeopardize the fiscal situation of the province or the city, so that was very early on in the piece - that's pretty well how it started.
MR. COLWELL: From the provincial standpoint, the province had committed in a letter from Dr. Hamm, if I remember the number, $300-some million, that wasn't accounted for in the budget, wasn't laid aside for that purpose - how do you feel you could afford that, because if that was a one-year hit the province would definitely be in a deficit position?
MR. MONTGOMERIE: I had a hand in drafting that letter, and really what the letter said was the percentage of the province's total would be 25-something per cent, which is approximately in a $200 million order of magnitude. Part of my recommendation to the Premier and others was that we were really concerned, to your point, that if we set an actual figure - because we never viewed that as a commitment letter, we saw it as a step and a phase of a bid process - that based on GAAP accounting we would have to put that to the bottom line of the province. The Auditor General certainly picked up on that, and I was very pleased he accepted the innocent explanation that it was innocent, we were just trying to be overly cautious when in fact there was a way we could have done it and, as a matter of fact, Finance, very soon thereafter put it in a Supplement to the Public Accounts as a liability. That was more of us being overcautious on the other side of not trying to get a commitment that would go to our bottom line in that year - the advice I gave the Premier wasn't good advice, quite frankly.
MR. COLWELL: The issue is the Premier of this province signs a document that indicates the province is going to spend some money, he's in a position that he can do that, and if anyone was going to believe that indeed they are going to move forward with this and they get a letter from the Premier - if I get a letter from the Premier that says this is going to happen, we want to make sure that we have every faith in the Premier that that will happen. So as far as I was concerned, it was a real commitment of funds.
[Page 30]
Again, the $300 million hit at that beginning would have unbalanced the books for sure, and then we would have had a whole different situation being discussed here in this Legislature today.
MR. MONTGOMERIE: I don't want to characterize that it did not imply an order of magnitude that the province was prepared to do, because it did - that 25 per cent could take it into $785 million, it's $200 million, it is an order of magnitude the province felt was doable if the business case remained sound, so I don't want to minimize that. To your point, the Premier's letter was in fact stating an order of magnitude.
MR. COLWELL: The McMahon report, the federal government commissioned that, correct?
MR. MONTGOMERIE: That's correct.
MR. COLWELL: When was that commissioned, was that commissioned very long before the decision was made to discontinue the efforts to get the Games?
MR. MONTGOMERIE: Sport Canada, normally in these events - and you should appreciate, they handle many, like the World Diving Championships that were in Montreal, Sport Canada was heavily involved in that - whenever they get a bid they always do due diligence at the end of that bid they do a risk analysis, and they were anticipating receiving the business plan in December, and they had actually gone out and tried to contract with a company. Then it got moved to January, and that is when they contracted with Mr. McMahon. The contract basically would, on receipt of the business plan - which would have been January 26th, January 29th - that's when McMahon, and from the province's perspective around PricewaterhouseCoopers the same thing, once the business plan was received McMahon would do their due diligence and we would do ours.
We had an agreement with Sport Canada, because the time frame was so compressed, Sport Canada said great, if you do the infrastructure, we will do the operating, and in the meantime HRM was driving the economic impact study. So all three of us were working together to get best information.
MR. COLWELL: So it's around January 26th that the McMahon report would have been commissioned - it would have started working somewhere around there?
MR. MONTGOMERIE: He really couldn't start until he got the business plan is the best way to characterize that, I think.
MR. COLWELL: I forget the date that they made the decision to cancel the Games.
MR. MONTGOMERIE: March 8th.
[Page 31]
MR. COLWELL: Was there any discussion with McMahon regarding the initial view he had of this, prior to March 8th?
MR. MONTGOMERY: He briefed our finance team. Tracey, I don't know, were you at that meeting? Do you want to speak to that?
MADAM CHAIR: Ms. Williams.
MS. TRACEY WILLIAMS: About the third week of February, Mr. McMahon came to Halifax to meet with the 2014 committee. And to ask him a number of very specific questions, at that time we arranged for the two finance committees, the province, and HRM to meet with him to give us an indication of his preliminary findings. At that time he did provide us with some of the early findings he had come across. We met with him, actually in the 2014 boardroom, that was sort of the first indication that we had in terms of some of the things that he was seeing at that time as a result of his analysis.
MR. COLWELL: What sort of things did you discuss at that meeting? What were the highlights of what he said?
MS. WILLIAMS: The kinds of things that my deputy has already referenced in terms of the revenues. That he felt they were somewhat soft. He talked about some of the legacy concerns, that were noted in the report as well, in terms of the cost with respect to maintaining those legacies and that infrastructure once it actually had been built. He talked about just a number of different capital and operational concerns with respect to the business plan, the governance structure and, as a result of the investment, I guess some concerns around what we would have at the end of the day, and some of the costs that he felt potentially may increase in the long term.
MR. COLWELL: As a result of that conversation were there some red flags pop up that you weren't aware of before?
[10:45 a.m.]
MS. WILLIAMS: I think it validated, and we now had an expert telling us that some of the concerns that we might have understood were becoming more apparent. That was the purpose of these consultants who we retained, to provide us with an outside expert opinion, and he did just that.
MR. COLWELL: Was there any consideration being given to a consultant to look at this whole process before it started, who had some expertise in this field before we got into this $10 million or more, probably a whole lot more when you take the in-kind value of staff in this, before this whole thing started, to sort of say, yes, this does make sense for Halifax, or no it doesn't, or these are the pitfalls you have to watch out for?
[Page 32]
MR. MONTGOMERIE: We felt that during the domestic phase and the absolute in-depth job that Commonwealth Games Canada put the four cities through, that we learned a fair amount from that, that if things were to stay as they were, or in that ballpark, it really made sense for us to go to the next step. It was probably not until Melbourne, when we were in Melbourne when we really saw the huge - how Melbourne was spending money, et cetera, et cetera, that we began to look at, okay we have to focus to the rightsize Games and make sure Scott and his team get staffed-up to go do their diligence. So, no, it was really an outcome of the domestic process, then as we moved through the international process, Commonwealth Games Canada now became a key partner, their staff came on board with the 2014 committee and with us to begin to collectively build this bid, and we looked to them a lot in the beginning because of their past experience.
MR. COLWELL: So, basically, you sort of went at this thing assuming, making some assumptions, of course, which you had to do, and you did it that you would be within the budget that was estimated. The budget discussions started a whole lot lower than $700,000, what I heard in the media - and I don't know if that's correct or not - then it grew to almost $800 million, and then it grew again and again. It seems to me, even if it was $300 million that was estimated to start, or $800 million, I would have thought it would have been prudent for the government to come forward and talk to some people who really had expertise in this field, and just get a rough idea of what was going on here before you even went into the process.
It seems like that part of it has been flawed and we could have saved millions of dollars here that we desperately need in other areas. I can give you a list, and I know everyone in this room can give you a huge list, of things that we need to spend money on in this province to make it better for our citizens, rather than a failed bid process.
So there was really no effort given to talk to anybody that had - I know the deputy minister had some experience in the past with this, which is very important and I respect that, but to really bring it up to date and to talk to somebody like McMahon and say look, we're looking at this, we're considering this, what are the pitfalls here? What do we have to watch out for? What are the real numbers we should be looking at? I think that would have been a very important first step.
MR. MONTGOMERIE: Again to the domestic phase - what we learned in the domestic phase was we really had to do more due diligence, particularly around the infrastructure piece, so a lot of the consultants you're talking about worked for 2014. As much as Scott and his team had staff, I also hired experts to come in and help put in perspective some of the challenges and, quite frankly, it was that due diligence, as I talked about earlier, that made them aware that Shannon Park, for example, wasn't big enough.
Maybe I'm not answering your question, but we really felt the domestic phase and the collaboration HRM and ourselves had done, what we've learned through that and with
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Commonwealth Games Canada becoming part of the international phase, that we were well positioned.
MR. COLWELL: Well, it's evident now, unfortunately, that you weren't. You didn't really answer my question - maybe you partly did - you said you hired some experts. Could you give me a list of those experts, who they were? Evidently they're not experts because they gave you some bad advice, or not thorough enough advice. I shouldn't say bad, but maybe not thorough enough because I think the only issue here is the cost, and if it was a commercial venture and it rose in cost, well probably almost three times - a very huge increase in what originally was thought, the people that you'd hired to do this stuff and probably make part of that $7.7 million that's spent so far, really didn't give you good advice.
MR. MONTGOMERIE: Well, could I speak to that?
MR. COLWELL: Sure.
MR. MONTGOMERIE: At the end of the day, I disagree. At the end of the day did we have the best information possible that we could give to our Cabinet to make an informed decision around one of the most complex projects HRM and ourselves have ever undertaken together? And what Scott's team did was present us with a business plan that said $1.6 billion. So, they came at us and said this is what it's going to take to host these Games under Commonwealth Games Federation guidelines in 2014. So the $7 million - look, I could use it in recreation facility development tomorrow, but it's an investment that either would put us in a good position to make decisions or to go forward, or in a position not to go forward - in this case it gave us the information for us to say this is not doable for the people of this province, it's too much of a risk.
MR. COLWELL: Maybe you're not getting my point here. My point is, you hired McMahon in January, or the federal government did, and by February or a short time thereafter he came back and put some red flags up and said that this doesn't make sense. It would have made sense to go to some outfit like that - and I know there are not too many of them in the world that do this work - and ask what do we need here, are we talking $1 million, are we talking $1 billion, are we talking $2 billion? And really get a handle on what you needed to do - it's like building a house, if you're going to build a house and the contractor says I'm not quite sure what it's going to cost, but you give me $100,000 and I'll get started, and at the end of it, I didn't get much done because you can't come up with the other $1 million that you need to do the house.
That's basically what I'm being told here. I've got some very serious concerns about this and it seems like - the concepts of the Games is a great idea and I think it would have done fantastic things for Nova Scotia, if we could afford to do it. And the key is "afford to do it" - I don't think there is any other issue here. There is no other issue.
[Page 34]
I don't think that the whole combined group that worked on this - and I'm not talking about the Bid Committee, because they were working on this thing as directed, and as the resources they were given and the objectives they were given, and that's fair enough, and I appreciate the objectives they were given, because if the objectives wouldn't have been laid down, we might have been into this thing and into $2 billion and into a fiasco beyond fiascos in this province. So I'm pleased that part of the management was there - I don't think that enough due diligence was done on the front end.
I think your point about the timing is important. I think we tend to rush into these things instead of looking out to maybe the next Canada Games and start working now - or the Commonwealth Games - towards those things and addressing those issues, and maybe put funding in place to put some infrastructure in place even before you apply, something we may need and use in the province. So that's my question. I mean, it's obvious there was not enough due diligence done on this at the front end.
MR. MONTGOMERIE: The issue would be how much effort and time, collaboratively, we put in with the 2014 committee, and they arrived at their business plan in January 29th after their due diligence. Then it was our turn, as the three funding partners, to do our due diligence. That's when the consultants came on board to deal with a business plan, a budget that had been prepared over a period of 10 months by the 2014 committee.
MADAM CHAIR: Order. The time has now expired for the Liberal caucus. I recognize Mr. Porter. You have until 11:13 a.m..
MR. PORTER: Thank you, Madam Chair. I just want to pick up where my colleague left off with regard to his thoughts on the advice that we received. I think it is probably fair to say that I would disagree with his comments, because we saved hundreds of millions of dollars of the taxpayers' money based on this advice, in my opinion, and I think that needs to be said for the record, and I think that was a good thing.
A lot of people I talked to would agree that the right decision - although maybe not one that we are happy with, many people are disappointed that these Games could not go here in this province and in and around the HRM, and I'm sure many areas outside would have benefited as well. On the other hand, they're also very happy with the decision that we didn't spend money we didn't have, in all levels of government, both municipal and our provincial government, and I should say with the federal government. It is a great deal of money to put out.
A couple of questions, picking up on the due diligence piece. I know we talked a lot about due diligence here, but I'm just wondering maybe for the record can you tell us a little bit what that is. What is due diligence and what are some of the pieces of that? I know there are people who are watching this and are interested to know that terminology. The deputy and/or Mr. English, whoever would like to touch that is fine.
[Page 35]
MR. MONTGOMERIE: I'll start. Part of the due diligence we did was to bring the Traceys of the world on board and focus the Government of Nova Scotia from a corporate perspective around this project. So, for example, the deputy ministers were told that Tracey is it, when we need to get resources and help to understand budget, to understand services, to understand review and so on, Tracey was our lead, and the co-operation was absolutely phenomenal.
The next part of the due diligence from the Province of Nova Scotia was the teaming with HRM. Tracey mentioned a meeting here a while ago where both HRM and our own officials were debriefed by a consultant, together. That was a common practice by both levels of government during that piece. Then when Sport Canada came on board, once they announced their money, their staff joined us, and so they would be a regular part of that.
One of the things we did, one of the things we learned early on, John Furlong the CEO of Vancouver came to Halifax in the Spring 2006 and actually met privately with the mayor and Minister Barnet, Bob Fowler, Dan, and others to talk about what they went through in Vancouver. His guidance not only to us, but it turns out that the 2014 committee talked to them on a regular basis as well, his comment was that this will be the toughest thing you'll ever do because, on the one hand you have to politic and woo delegates, on the other hand you have to develop a bid book that accurately represents the cost of your project. You'll be constantly challenged about that, and rightfully so, by your taxpayers in your community.
So we actually went to Vancouver twice. We went with the city and delegates in the Fall and met with the Chamber of Commerce, we met with VANOC, we met with the Government of British Columbia, and we got help and guidance from them on how we should keep our eye on the ball, too. Then our finance officials went again in January, I believe, and met with the comptroller of the Government of B.C., met with finance officials there, because they had the same accounting principles and challenges that we had. So there's a whole raft of things around due diligence - plus, at the end of the day, there was the risk analysis that the three levels of government had done on the business plan.
MR. ENGLISH: Madam Chair, yes, I agree with Duff, the 2014 team, themselves, did a lot of due diligence. Just to go back to a previous member's statement about experts giving advice, the 2014 committee in their bid budget did hire a number of world- renowned experts that were part of their team in putting together the Games budget.
When we talk about due diligence, it's really getting an independent party or internal analysis done, like a sensitivity analysis, to look at the assumptions that are being made around some of the numbers - whether they be revenue projections or costs for operating the facilities, and identifying the risks, it's all part of what I call due diligence. Rather than just accepting what's being presented to you by the Bid Committee, we determined it was proper to go out and - besides what we're doing in-house - get some independent,
[Page 36]
professional opinions on and around those assumptions that were being made, and whether or not there were any risks.
They did identify some risks - but at the end of the day those were never quantified by the way, the risks, in terms of the numbers that were being presented - but that was secondary in my opinion, because we weren't able to bridge the gap based on the budget that was presented. All the due diligence, in terms of the identified risks, did was increase the amount of the gap, but it was never quantified.
MR. PORTER: Basically, it's a step by step by step process for value-added - or explain everything out clearly just so the people . . .
MR. ENGLISH: That's correct, without just accepting what was presented. We had our own staff, provincial staff, financial staff, as Duff mentioned, look at all the numbers and run them and make sure they were accurate, but we also felt that was incumbent on our part and the other funding partners to review everything that came in and provide us with their comments.
MR. PORTER: Did the Commonwealth Games Federation rules change somewhere along the way in this process?
MR. ENGLISH: My understanding is that when part of the 2014 team went to Melbourne in June of last year, the Commonwealth Games Federation provided them with the required template for developing the Games budget, and our understanding at the time is that the standards that were required in terms of the bid submission were much higher than in the past. Whether they were Olympic standards, I think McMahon speaks to those in some of his comments. As I mentioned earlier, we were also undertaking Class C estimates which, in theory, would mean you wouldn't have to do that level of detail had we won the Games, had we proceeded and been successful, we would have been able to go right out for tender. That's what the Class C estimates provided, and that's the accuracy that was provided.
[11:00 a.m.]
The standards did change, there's no doubt about it - but the standards, combined with the major recreation facility infrastructure deficit that we had, made the budget what it was. I think we're appreciative of the fact that the 2014 committee did their job in that regard. They gave us what they felt were the real costs of hosting those Games. Then we had those verified, like I said, by our due diligence, which identified some risks which would have increased those costs.
Nobody's happy at the outcome. I wish we could have done it for $785 million. I'm glad the committee didn't come back and say, yes, I think we can do it for $785 million. I
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think they did a damn fine job and I think our external consultants did a damn fine job in terms of what they had to work with.
MR. PORTER: You talked a little earlier about the overall, the dollars, and you talked about sponsorships - are you able to enlighten us as to who some of those corporate sponsors, or other type of sponsors that you would have had, were and are?
MR. ENGLISH: Madam Chair, the corporate sponsors, most of them had been named - Keith's, The Daily News - a lot of that was in kind; and the Atlantic Lottery Corporation was another major one. They were still working on a number of corporate sponsors. All the corporate sponsors that were being identified, remember, were just part of the bid budget. There were never any corporate sponsors being sought to sponsor the Games, per se, because we hadn't won the Games. So the only corporate sponsors that were in place were those willing to contribute to that $14 million budget. I think it was identified as they were looking for close to $4 million in terms of corporate sponsors to balance that bid budget. It's up to the 2014 committee now - as I said earlier, we will be at a meeting this afternoon discussing how we are going to deal with the corporate sponsors, whether there has been any money received to date, those types of things. So those will be finalized very soon.
MR. PORTER: It's interesting, the type of sponsors is a fairly significant amount of money that was to be brought forward. It's great, actually, to see that that sponsorship is there, and I'm sure probably they would have been there for the Games, something as popular as that as well. So what happens next with the 2014 bid society? Where are we?
MR. MONTGOMERIE: As Dan has pointed out, we have actually had three executive meetings as Scott and his team moved to evolve from this and close out the books. That has been a step process, today is another part of that process, and then it will be finished.
MR. PORTER: Any idea of time frame for that? I'm just kind of curious.
MR. MONTGOMERIE: We will have probably a better sense today on what kind of time frame they are looking at.
MR. PORTER: The fairly near future, though . . .
MR. MONTGOMERIE: Well, they have office commitments, and we have some HR commitments that we have to look at very closely and be fair about. We have people from other parts of the country who have moved here.
MR. PORTER: What happens to all of the material and ideas and everything that has been collated, is it just filed away somewhere for a future day or . . .
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MR. MONTGOMERIE: It is one of the things that we will sit down with the 2014 committee and do our due diligence around, appreciating that because of the ability of the Public Accounts Committee to ask for the information we had, we gave it to you. There are some real intellectual property issues we have to discuss, particularly around the architectural drawings, who owns them, whether it is Commonwealth Games Canada, the 2014 committee, et cetera. So we do have to work that through. There are contracts, if I could, that consultants have with the 2014 committee, and may have clauses in about what they own and what they don't.
MR. PORTER: In a recent article in The ChronicleHerald, and I think even last night I may have seen on the news, ACOA Minister Peter MacKay indicated that he would have preferred that the bid been allowed to go forward even maybe to fail. Was this a course of action that the government considered? I know we didn't go forward, but was it considered?
MR. MONTGOMERIE: I think it is fair to say that we stuck to the principle that the Mayor Kelly and the Premier gave us. If the business case is there, we go for it, if it's not, we don't. The business case wasn't there. That was related by Mayor Kelly and Minister Barnet to the two federal ministers on two separate phone calls within 24 hours of each other. The federal government, as Dan said earlier, said maybe we should give them a week. We felt it wasn't appropriate or fair. Again, they confirmed the $400 million is not moving, plus whatever the deficit is at the end of the day it is between HRM and ourselves to pick up, not the federal government.
MR. PORTER: Speaking of that potential deficit, was there a figure that was realistic? What would the deficit have been at the end of the day, do you think?
MR. MONTGOMERIE: Well, to Dan's point, the risk, we really didn't, at the end of the day, quantify the risk. We knew the gap, but if all the risks that were being outlined came true, and particularly the comments that they made about the softness of the revenues and those kinds of things, we definitely would have been in a deficit situation. No, I can't quantify it, sorry. To answer your question directly . . .
MR. PORTER: No real figure, though. I hear a lot of talk, you know it costs a lot of money, obviously, to put these Games on. In comparison, how much revenue would have been generated? Is there an estimate? In all the due diligence that you did, I find it interesting when we talk about quantifying, how much was there to be made in this? This isn't the first time the Commonwealth Games have been hosted somewhere, so I just think back, and all the travelling and all the input you received, was there a number that came up there?
MR. ENGLISH: Madam Chair, is the member talking about revenue for the Games or revenue from spinoffs? I guess I'd have to clarify.
MR. PORTER: I guess the revenue for the Games.
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MR. ENGLISH: There was a projection of revenue from the Games, but remember that 92 per cent of that revenue budget was made up of public funding, which was unprecedented for games of that nature. I think the revenue projection was around $112 million, as I recall, and the McMahon and PricewaterhouseCoopers reports as well pointed out that those were maybe overly optimistic, because the major television networks didn't necessarily buy into the Commonwealth Games at the same level they would with the Olympics.
That's a bit of a dichotomy there, because here you're staging Commonwealth Games maybe at a level of an Olympics Games in terms of costs, but in terms of revenues they are nowhere near close to what you would generate from an Olympic Games compared to what would be generated in revenues from a Commonwealth Games. Those are the revenues you are talking about. There is also talk in the Canmac Economic Impact study about revenues as a result from spinoffs and so on. We just received that report, which we commissioned, along with the province and ACOA, within the last couple of weeks.
MR. PORTER: Can you speak to that?
MR. ENGLISH: I think it is in your package, Madam Chair.
MADAM CHAIR: Yes, it is.
MR. ENGLISH: The key findings were that there was a $2.4 billion industry output and $1.1 billion in GDP, gross domestic product, but all the numbers are in the report itself. They also talk about the return to the province and the feds in terms of provincial and federal revenues from income tax, sales taxes and so on, which HRM wouldn't have seen any because we don't receive sales tax or income tax - so that was even quantified in the report.
MR. PORTER: The Games, for the most part, were projected to be here in the HRM. How big would the circle have been? When we hear people talking about we would have benefited from these Games - how far out? Are we talking the Valley, Windsor, are we talking Truro, how big is the circle?
MR. ENGLISH: Madam Chair, I think given the level of additional jobs and so on that this Canmac report revealed, it would have had a tremendous impact all over the province. I couldn't identify a radius, I think the whole province would have benefited.
MR. PORTER: It would have taken that many people, probably . . .
MR. ENGLISH: They are talking 17,900 additional jobs would have been created as a result of it.
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MR. PORTER: That's an incredible amount of jobs, short term, mind you. I guess that would have been just for the period of the Games?
MR. ENGLISH: No, Madam Chair, that would include the construction of the facilities and so on leading up to the Games.
MR. PORTER: That's about all of the questions I really have. I want to thank the committee again, the members who are here today, for the time given to this and the tons of information we have had to go through, and I'm sure there is a considerable amount more. So, again, thank you very much.
MADAM CHAIR: Thank you. At this time, we will offer the floor to Mr. English and Mr. Montgomerie to make some closing comments, if you wish.
Mr. English.
MR. ENGLISH: Thank you, Madam Chair. Just a few comments. Right from the start we've consistently said that we would only support a bid that would not compromise HRM's fiscal position, was the rightsize for Halifax, and would leave a lasting legacy for residents. At the outset we committed to a process, and I believe we have seen it through until the end - an unfortunate end.
HRM felt it was very important to undertake significant due diligence, which we addressed here today. This takes time. We never received a budget, remember, until late January, and from the beginning of the international bid process the funding partners required a more detailed budget in order to make appropriate decisions, and the 2014 committee provided this. I've heard it's the most detailed budget of this nature in Canadian history.
These reviews further indicated the Games business case was weak on a number of fronts, including questionable revenue projections and the 92 per cent investment of public funding, which I indicated earlier. There were also indications of insufficient contingency funding, which would have left HRM vulnerable in the event of cost overruns, not to mention HRM's responsibility for any operating costs of the facilities post Games.
I believe the process worked the way it was intended. Unfortunately, the outcome wasn't what we wanted. I also believe that it's time to move on and we will restore our reputation as a city and as a province through successful hosting of such events that are coming up - the 2008 World Men's Hockey, the 2009 World Canoe Championships, and the 2011 Canada Winter Games. We have a history of hosting major events and we'll continue to host major events. It's just that this particular one, unfortunately, the business case was not there and there were too many risks for HRM to proceed with it.
MADAM CHAIR: Mr. Montgomerie.
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MR. MONTGOMERIE: Madam Chair, I would simply like to thank Halifax Regional Municipality for their phenomenal support. The way we worked together was absolutely incredible. The 2014 staff, as I said earlier, nobody knows more than some of us in this front row the heart and soul that they put into this, and it was a massive disappointment for them. We are a small but dynamic province, the same with HRM as a city. It's a great place to live. We will rise again and we'll work together on other projects and we will move the agenda of the province and the city forward. Our colleagues who are in 2014, we know we'll be interacting with them soon in other areas. So thank you for your time.
MADAM CHAIR: On behalf of the committee, I would like to thank both the deputy minister and Mr. English and your staff for being here - the deputy for coming again after last week, and Mr. English for taking time out of what I appreciate is a very busy schedule at HRM, especially these days, around budget. So it's very much appreciated. I would ask if you would just remain in your seats for a few more moments until we adjourn. We have one or two items of fairly minor business to conclude, and I know members will want to thank you in the usual manner, so if you would just remain for a moment.
We do have a couple of things. I believe the clerk has circulated to you an e-mail from the Deputy Minister of Finance. We had scheduled Finance - well I'll ask the clerk if that can be circulated, and just let me say what this is - Ms. Harnish sent a request that their appearance in front of the committee be postponed until May, if possible. They were scheduled to appear on April 18th on the fiscal imbalance, but she will be out of the country for that Wednesday and the following Wednesday, so she has asked us to consider a postponement on that. Although her staff could be available, she would prefer if she was able to be here. So that's the first e-mail.
I actually had thought about if we do postpone this, given the concern that has been expressed by all Parties in the Legislature with respect to the fiscal imbalance and the arrangements around the offshore accord and equalization, perhaps the committee would entertain inviting Mr. MacKay, Peter MacKay, the federal minister for the province, to appear in front of us on that date if he's available - April 18th. So would somebody like to move that and perhaps we would have some discussion.
[11:15 a.m.]
Mr. Colwell.
MR. COLWELL: Yes, I would move that. I think that's a great idea.
MADAM CHAIR: Thank you. Is there any further discussion on this?
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Hearing none, would all those in favour of the motion please say Aye. Contrary minded, Nay.
I get to vote again I guess, and I will vote again, and that makes it a majority I think in favour of the motion.
The motion is carried.
So we will write Mr. MacKay and invite him to appear in front of the committee on April 18th with respect to this topic, if he is available. Thank you.
The other matter, we have an e-mail from the Auditor General regarding scheduling around his June report and some chapters of the previous report back in December. The Auditor General and I had an opportunity to speak just briefly this morning, and a subcommittee will be scheduled after the House rises, which shouldn't be too much longer, to get these into our agenda. So if there is agreement, we will defer the scheduling until we are able to do that.
The same thing, I would like to defer the subcommittee report until Wednesday's meeting of next week. If there is agreement on that. Thank you.
I recommend that we now adjourn. Thank you.
[The committee adjourned at 11:18 a.m.]
