Regina has a REAL problem

The City of Regina has a problem on its hands with the Regina Exhibition Association Limited (REAL).

REAL, a municipal corporation meant to draw attractions and shows while also hosting events, faces an uncertain future, with Regina city council openly considering whether to dissolve the organization.

Council members said they could no longer trust those in charge and voted to fire the voting members of REAL's board before appointing city staff — including the city manager and her chief of staff — as replacements.

While REAL continues day-to-day operations, there are issues that date back years and show no sign of improving anytime soon.

As of Sept. 30, REAL carries $17 million in debt, according to a report prepared by MNP and presented to council last month. 

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 the 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.

As former board chair Wayne Morsky highlighted in a letter published last week, "Since the onset of the pandemic, REAL has struggled to pay the debt associated with facilities and was forced to begin servicing debt with debt."

In 2024, REAL is expected to pay $2.7 million in debt servicing fees.

That's a major problem for the organization, with MNP determining 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 of get financial support from external sources like the city.

REAL asked for $5.8 million in funding in the City of Regina's 2024/2025 budget.

LISTEN| Former board chair of Regina Exhibition Association blasts council in final missive: 

The Morning Edition - Sask8:04Former board chair of Regina Exhibition Association blasts council in final missive

Board chair Wayne Morsky took a few parting shots at unnamed members of city council in a final letter released last week. Get the latest from CBC reporter Alexander Quon.

Another financial pressure stems from REAL repeatedly deferring necessary maintenance for the buildings it operates such as the Brandt Centre, The Co-operators Centre and Affinity Sportsplex.

Back in 2019, the maintenance was estimated to cost $44 million, according to a report by Stantec. As officials with the City of Regina have repeatedly pointed out on other projects, inflation likely means the current cost would be much higher.

Mayor Sandra Masters has repeatedly stressed that whether those assets are on REAL's or Regina's balance sheets, it won't make much of a difference when the bill comes due.

"We've got debt that we need to get cleared off. You've got assets that are — take them off REAL's assets, they should have never been there, with due respect," Masters told a meeting of Regina's audit and finance committee last week.

The City of Regina is already facing a massive infrastructure gap of $655 million, according to a report received by council in 2022.

This year's proposed budget shows that the city will already be shortchanging a plan it green-lit to help deal with that problem. The recommended average annual funding level for facilities management is approximately $18 million, but the budget has it at $4.2-million lower than that.

Barry Lacey, Regina's chief financial officer, has said the city will soon need to make hard choices.

"If we only have $13 million to spend in a year then that should include looking at REALs assets," he told the audit and finance committee.

There's also another cloud looming. During the COVID-19 pandemic, REAL accessed $7.5 million from the Canada Emergency Wage Subsidy (CEWS).

It was used to help pay the wages of employees who helped keep REAL's facilities open.

The Canadian Revenue Agency is currently auditing REAL's use of CEWS. The audit itself is not a sign of wrongdoing — it's part of the federal government's response to the wide deployment of CEWS — but REAL could be forced to pay some or all of the money back if there is found to be an issue.

On top of the money concerns, Morsky said in his letter last week that said some councillors interfered with lease negotiations and asked for free event tickets, and one even asked for a job. Some councillors have since denied that the letter is referring to them.