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Monday, March 21, 2011

No fair taxation

London’s Western Fair Association (WFA) has some big ideas. Unfortunately, those big ideas could jeopardize the big ideas that Mayor Joe Fontana has for the downtown. This city may not be big enough to hold both of them.

The WFA has been doing a little blue skying. The fair itself has not proven to be too lucrative with attendance and revenues declining year after year. However, with the help of the city, it has been expanding as an entertainment centre, competing with other businesses in the city, while receiving tax exemptions and subsidized rent.

According to The London Free Press, the big ideas being considered include a daily market, demolishing and replacing some of the buildings, buying additional properties including some houses along Rectory St. to create RV parking, and even building a 10-storey hotel.

Any of these could pose a threat to the downtown as London’s entertainment centre, a major plank in the city’s downtown revitalization vision. To date, the city has invested over $100M in the downtown in the form of the market, the John Labatt Centre, and the library and the mayor is looking at additional projects that could add up to another half billion dollars. And we haven’t yet finished paying off the JLC!

The WFA is a rather unusual beast.  Under the Ontario Agricultural and Horticultural Organizations Act, it is recognized as an agricultural society whose objectives are “to encourage an awareness of agriculture and to promote improvements in the quality of life of persons living in an agricultural community by,

(a) researching the needs of the agricultural community and developing programs to meet those needs;
(b) holding agricultural exhibitions featuring competitions for which prizes may be awarded;
(c) promoting the conservation of natural resources;
(d) encouraging the beautification of the agricultural community;
(e) supporting and providing facilities to encourage activities intended to enrich rural life; and
(f) conducting or promoting horse races when authorized to do so by a by-law of the society.”

That’s a little different from the WFA’s own description on its website that “[t]he Western Fair Association is an Agricultural Society that through its people activities and facilities excels in creating unique experiences that fulfil the evolving entertainment/recreational and educational interests of our customers.”

As an incorporated non-profit agricultural society, the WFA is also exempt from municipal taxes, a decided advantage in the entertainment business.

Shortly after I was elected to the Board of Control, the Board of the WFA, which includes members of council, came to the city to ask for continued relief on the rent for the city-owned land on which the businesses sit. The existing agreement was to expire in a couple of years and the WFA wanted to negotiate a longer agreement, one that would take them through 2019.

The existing agreement had the WFA paying rent to the city in the amount of approximately $200,000 per year although the market rents, that were to begin in 2009 when the agreement expired, were than double that at $475,000. The WFA wanted to gradually increase its rent until reaching the market rate at $580,000 in 2015 and then continue with yearly increases tied to the consumer price index. Although the WFA had generated a surplus of $3.5M, it felt that those surpluses were needed to continue to upgrade their holdings and to pay off debts accumulated as a result of expansions and property acquisitions.

A review of the history of the WFA-City relationship to that point indicates that no rents were paid from its beginnings in 1888 until 1969. Instead, there were a series of agreements to deal with interest free loans from the city to the WFA and the occasional conveyance of land acquired by the WFA to the city. At that point, an arrangement was made for the city to receive a share of the profits subject to certain limits. The city forgave the remainder of a 1922 debt. The terms of the lease were renegotiated in 1989 because the city was concerned about how the WFA was spending its revenues in order to avoid paying rent. At that point, a joint ownership understanding was entered into, giving each party a half interest in all the lands and buildings.

At one time, the WFA had nine members of city council on its board, clearly an advantage when negotiating rent agreements. That was scaled back to three, but when I joined the Board of Control, those three positions were hotly contested.

In fact, one former councillor, who had sat on the WFA board for nearly two decades at that time, pointed out that he had made a special trip back from Florida to “defend his seat” on the board. To accommodate all the contenders, a motion was made and supported by the majority of council to split one appointment term between two councillors and to recommend that the board consider adding more councillors.

Clearly, members are very loyal to the WFA board, raising the question of who is being represented by the appointees. Certainly, all the city’s representatives spoke in strong support of the WFA request to the city for continued subsidized rent.

The WFA has also been very effective in getting community support for its requests. Over the years, it has established a “Community Enhancement Fund” which provides grants to a wide variety of non-profit organizations in London and some outlying areas such as Shedden, Ilderton and St. Thomas. Additionally, it provides discounted rents and services to many organizations to assist them with their fundraising. Although it can be argued that these funds are acquired at the expense of the taxpayers through rent subsidies and tax exemptions, the practice leads to strong letters of endorsement of the WFA as a responsible corporate citizen.

Although some objections were raised at the Board of Control to the new deal, and a few stern words issued, it was clear that the new deal would be supported. At council, a few of us tried to limit the extension of the agreement to 2010 to allow for further review, but there was not sufficient support and ultimately the proposal was adopted.

For the better part of a century, the WFA has paid little or no rent. It continues to be subsidized to this day. During this time, it has acquired significant amounts of additional land, and each time it does, it turns tax generating properties into tax exempt ones costing the city millions of dollars. The WFA argues that it contributes millions of dollars to the city in economic activity and jobs, but at what cost?

The expansions being proposed will be in direct competition with those downtown, and elsewhere in the city, whether with hotels or parking lots. The main difference is that other hotels and parking lots also create jobs but pay taxes to boot.

And how is it that an organization needs a subsidy for rent but can invest millions in land acquisitions and expansion? Can you imagine the outrage if an individual on social assistance did that?

And how do the businesses at the Western Fairgrounds- the trade shows, the London Music Theatre (former IMAX) owned by Councillor Dale Henderson, the slots, the restaurants- qualify as meeting the needs of the agricultural community and therefore deserving of tax exemptions?


Anonymous said...

It is quite clear that the city councillors who sit on the Western Fair Association are in a conflict of interest situation. No wonder the whole picture is muddy.

As a matter of interest, who are the current city councillors on the WFA?

Are they paid for sitting on the WFA?

Do they receive perks or benefits from sitting on the WFA?

Did Bernie have a good trip back from Florida?

anon one

Gina Barber said...

Harold Usher is a governor; Denise Brown and Bill Armstrong are directors.

Members of council who sit on boards and commissions are not paid.

I believe there are some "entertainment" benefits.

Dean Sheppard said...

While Western Fair should be commended for being innovative and strategic, they have CLEARLY morphed beyond their orginal mandate and scope. While this is not a bad thing, it does come with consequences and it certainly, they do not deserve tax free status nor further taxpayer subsidized rent.

Anonymous said...

It will be very interesting to see what attitude is taken to the WFA's gradiose expansionist plans by the members of council who sit on the WFA, by Arva resident Mayor Joe and by Komoka resident and WFA beneficiary Ward 9 Councillor Dale Henderson.

The current arrangement does not pass the basic smell test.

Given the WFA's original agricultural purposes, the image that keeps coming to mind is PIGS AT THE TROUGH.

Taxpayer tired of loopholes

Anonymous said...

I'm of the view that the Western Fair Association should annex east London and perhaps the entire city.