Promised boom built on bluster thus far a bust

Hey there, time traveller!
This article was published 05/02/2024 (619 days ago), so information in it may no longer be current.

Former mayor Sam Katz and former chief administrative officer Phil Sheegl have been gone from the civic political scene for nearly a decade. But their negative influence is still very much present in the City of Winnipeg.

This week, the Free Press published a story confirming there is no firm completion date for the Sutton Place luxury hotel being constructed at the northwest corner of St. Mary Avenue and Carlton Street. Officials at the RBC Winnipeg Convention Centre said the hotel was an integral part of the economic justification for a $180-million expansion.

Convention centre CEO Drew Fisher said the additional hotel rooms are desperately needed to “attract an increased number of large national and international conventions and events.”

How do Katz and Sheegl work into this story? The unfinished hotel, the expansion of the convention centre and tens of millions of dollars in taxpayer money are all part of a deal that has Katz and Sheegl’s fingerprints all over it.

The full story of the hotel and its role in the convention centre expansion is hard to follow, but it goes something like this:

In 2015, the convention centre completed a $180-million expansion, a somewhat controversial project given the facility had operated at significant financial losses since it was first opened. However, proponents including then-mayor Katz and then-CAO Sheegl argued that if you built a bigger facility, they (bigger events) would come and generate enough money to not only pay for the expansion but also help provide some economic self-sufficiency on a go-forward basis.

The vision behind the expansion began to unravel almost right away.

The city, province and federal government contributed roughly $50 million each ($150 million in total) to pay for the expansion. However, the convention centre needed to take out a $33-million bridge loan to cover unforeseen costs. The city and province each agreed to pay off half of that loan, with the remainder to be serviced by the convention centre.

Key to that deal was the construction of a luxury hotel connected to the convention centre. Sheegl sold council on the deal by arguing that additional property and hotel taxes would cover the city’s portion of the bridge loan.

The math on Sheegl’s deal is almost impossible to verify or dispute.

Every year, the city contributes between $1.3 and $1.5 million from the hotel room tax reserve to service the bridge loan. Given that, it could be argued that this entire mess is a wash: money in, money out, all connected to the hospitality industry.

However, the hotel tax funds are supposed to be used to boost the economic fortunes of the entire city, not just support the convention centre. Being forced to skim off a seven-figure amount annually to service a loan for an amenity that is still not operating at capacity means less money for other worthy projects.

That last issue — Winnipeg’s continued inability to attract the biggest trade shows and conventions — is also part of the equation here.

If you subscribe to the original theory behind the expansion — that a bigger facility and more hotel rooms mean bigger events — it’s fair to argue the city and the businesses it hosts downtown have lost tens of millions of dollars in unrealized economic activity, at a time when the core of the city could certainly use an economic boost.

The worst part is that there is zero chance anyone involved in this debacle will be held to account.

It is certainly safe to argue that bars, restaurants, retail shopping and other amenities and attractions in the downtown would do better if there were more, larger events hosted at the convention centre. And the city would have done better in terms of tax revenue if the hotel had been up and running by now.

The original proponents of the facility’s $180-million expansion — which included Katz and Sheegl — have largely escaped criticism because it’s very hard to calculate the value of something that didn’t happen. But it is more than fair to say that the convention centre has not been the economic catalyst that proponents promised it would be, and city coffers have not received the promised tax windfall.

The worst part is that there is zero chance anyone involved in this debacle will be held to account.

Katz and Sheegl have moved on, although the latter has had some accountability for other misdeeds thrust upon him.

A civil court decision found Sheegl had accepted a bribe from the contractor he handpicked to oversee the construction of the downtown Winnipeg Police Service headquarters. After losing his appeal last summer, Sheegl must now pay the $1.1 million to cover court costs, his severance pay, the value of the bribe ($327,000) and a $100,000 penalty.

Katz, to date, has escaped criminal or civil scrutiny for his role in the WPS headquarters story despite the fact the civil proceeding found the former mayor likely got half of the bribe. However, Premier Wab Kinew is committed to a judicial inquiry into how contracts were awarded for the police headquarters project.

Until that inquiry takes place, a partially completed hotel on St. Mary Avenue will serve as a monument to the mayhem Katz and Sheegl brought when they were in charge at city hall.

dan.lett@winnipegfreepress.com