HECFI loses millions
Hamilton Entertainment and Convention Facilities Inc. needs $7.25 million in taxpayer money to cover its losses after a disastrous year.
HECFI, an arm’s-length city agency, wants council to pay off a $1.5 million deficit it amassed over the past several months. That’s in addition to the $5.75 million the city pays HECFI to cover its expenses, including an annual grant of approximately $2.8 million, $2 million in utility costs, and other expenses such as a $100,000 special events fee and a $214,000 subsidy to the Hamilton Bulldogs.
HECFI, which oversees Hamilton Place, the Convention Centre, and Copps Coliseum, also isn’t expected to entirely erase the $1.5 million deficit in 2011. Next year, it will ask the city for $300,000 to $400,000 on top of its $5.75 million annual subsidy.
CEO Duncan Gillespie says the losses at HECFI are due to a combination of factors, especially the lagging economy and a difficult year for concert venues.
“What one needs to understand is that the entertainment business is a high-risk business. The tail end of ’09 and 2010 has been a brutally bad year for the entertainment industry. The kinds of pressures we’re experiencing are being experienced nationwide, across North America, and in fact, globally.”
But Marcel Mongeon, HECFI’s chairperson, says the board is “extremely concerned” about the deficit and is having “the candid confidential discussions that people would expect us to be having” about HECFI’s future.
“We’ve taken a 2.8 million subsidy and turned it into what some people will regard as a difficult financial situation. And they would be correct,” he said.
Gillespie said HECFI is facing bigger losses than other venues because many entertainers are forgoing smaller cities like Hamilton in favour of bigger cities like Toronto and Montreal. That led to the cancellation of eight concerts between May and September.
“We had a number of concerts — and they total about $850,000 to our bottom line — that we were anticipating in 2010 that within a period of three months just moved,” he said.
Sagging attendance was another financial drain. Gillespie points to the American Idol concert, which was expected to attract 12,000 to 14,000 people and only drew 2,000 to 4,000. The low attendance in Hamilton led to the cancellation of the remainder of the American Idol tour.
“Those expectations of attendance were based on three previous, very successful shows. All of a sudden, that show didn’t do well,” Gillespie said.
HECFI has also suffered losses on the convention side. Because of a lack of large conferences in Hamilton, Gillespie said HECFI has been forced to lower its prices on banquets, weddings, and conventions to attract business. That means those events haven’t been profitable.
“We were being overly competitive, I think, would be the best way to put it,” he said.
To help save money, HECFI has laid off four employees and has given all of its managers a 5 per cent pay cut. Other employees in the administrative departments have been working reduced hours. Travel and other expenses have been cut.
“We’re hoping that as 2011 rolls out and we dig ourselves out of this hole that we will be able to reverse those,” Duncan said.
Gillespie will be preparing a plan to present to the board and to council in the coming weeks. Council will have to approve any additional funding for the agency.
Mayor-elect Bob Bratina, who sat on the HECFI board as Ward 2 councillor and who will continue this role as mayor, did not return a request for comment. Councillor Terry Whitehead, the other council representative on the HECFI board, is out of the country.
Mongeon said the board is “very sensitive to the fact that we cost city council money” and will be looking to Gillespie to come up with a plan to ease the financial burden.
“Certainly as recently as our June board meetings, we were anticipating being able to operate pretty close to budget. Three or four months later, you’re getting a deficit in to seven digit size,” he said.
“Absolutely, the board is as concerned as any citizen of the city is. The challenge for the board is we don’t drive the bus. Duncan drives the bus.”