REAL must pay back $8M after audit on pandemic wage subsidy

A Regina municipal corporation will have to pay back millions of dollars it owes the Canada Revenue Agency.

A report heading to the city's audit and finance committee says the CRA has completed its audit of two municipal corporations — Regina Exhibition Association Limited (REAL) and Economic Development Regina (EDR)  — both of which accessed the Canada Emergency Wage Subsidy.

That was a program offered by the federal government during the COVID-19 pandemic to temporarily support businesses that had to shut down or lost income due to the pandemic.

The CRA audit found that both municipal corporations were not eligible to receive the wage subsidy, and the organizations must now pay back the subsidy, as well as interest.

For REAL that means $8 million, or $6.5 million plus interest. EDR must pay back $918,000, or $755,000 plus interest.

REAL is an arm's-length municipal corporation that operates Mosaic Stadium and the Brandt Centre.

According to the audit and finance report, both municipal corporations have asked the federal government to waive the interest, but it's not clear if that will happen.

The report — set to be tabled on Tuesday — indicates city staff believe REAL and EDR will likely seek assistance from the City of Regina to repay the CRA. Another report providing options on how that might happen is set to come before city council later this spring.

REAL problem

This is the latest chapter in the troubled history of REAL.

A report prepared by MNP for council last year indicated that as of Sept. 30, REAL carries $17 million in debt.

Some of that debt was taken on in 2017 at the request of city administration as part of the plans to construct Mosaic Stadium. According to MNP, $1.4 million of that debt remains on REAL's book as of Sept. 30.

Much more of REAL's total debt was taken on to allow the organization to continue operating during the COVID-19 pandemic.

REAL has struggled to service that debt, with MNP finding that REAL's current operating model "does not appear able to produce sufficient cash flow to meet the necessary debt servicing costs."

MNP concluded that, to fulfil debt servicing obligations, REAL will likely need to take on more debt, change its business model entirely or get financial support from external sources like the city.

A $5.8-million funding request from REAL was the final nail in the coffin for a city council already concerned with a lack of transparency at the organization. Council narrowly voted to remove the organization's board of directors. City manager Niki Anderson and other city staff were appointed as interim board members.

Tim Reid was then dismissed as president and CEO of REAL earlier this year. Roberta Engel, the vice-president of corporate services at REAL, was appointed as acting president and CEO.

City administration is currently working on a report outlining potential changes to how REAL operates.

That could include dissolving REAL and having the City of Regina assume full management of all its assets.