Letter to The Honourable Carol Skelton, Minister of Economic Diversification Canada regarding federal centennial funding in Saskatoon - June 30, 2006

June 30, 2006



The Honourable Carol Skelton
Minister of National Revenue and
Western Economic Diversification Canada
House of Commons
Ottawa, ON K1A 0A6


Dear Minister Skelton:

I am writing regarding the Canada Celebrates Saskatchewan centennial capital initiative Request for Proposals (RFP) process in Saskatoon that was administered by Western Economic Diversification Canada (WD) and concluded on March 24, 2006. I have a number of questions I would like to ask concerning the program. As information please find attached several federal and provincial documents obtained through Freedom of Information (FOI) requests.

On March 30, 2006, two representatives from the Mendel Art Gallery met with WD’s acting manager of special programs. The focus of the meeting was to receive feedback from WD on the assessment of the Mendel’s application for funding under the Canada Celebrates Saskatchewan initiative. On March 24, the Mendel learned that it was not among the recipients to receive this special centennial funding.

I understand the Mendel was advised that the amount of capital confirmed for its expansion project was the major factor as to why they did not qualify to receive funding. The application rules stated that 20% of funding must be confirmed, but the assessment committee required the applicants to have 30% confirmed (This was the committee’s own in-house rule and not communicated to the applicants in the application form or verbally). Apparently, the assessment committee assumed that the Mendel did not meet the 30% criteria, but in fact, the Mendel exceeded this benchmark.

Minister Skelton, could you please explain why WD officials did not communicate to applicants the department’s “in-house rule” that the confirmed funding criteria was 30% and not the 20% stated in the RFP submission guidelines?

What is the purpose of this “in-house rule” and when was it created?

Was the 30% “in-house rule” applied only to the Mendel’s application, or was it extended to all 19 proposals? If only applied to the Mendel could you please explain why?

What other “in-house rules”, if any, did WD apply during the evaluation process that was not communicated to the applicants?

The Mendel was requested to provide a letter from the City Manager that the City’s contribution of $4.5 million was confirmed (which the Mendel did), but it was not requested to provide confirmation letters of confirmed gifts, which the Mendel could have done.

Could you please explain why WD officials did not ask the Mendel to provide confirmation letters of confirmed gifts?

WD advised the Mendel that it would have received a higher score if it had had confirmation from the Province of Saskatchewan of its contribution of $4.5 million.

The proposal process for the Canada Celebrates Saskatchewan centennial capital initiative closed December 9, 2005. At the deadline I believe neither the Mendel nor Persephone Theatre had confirmation from the Province of Saskatchewan of its contribution. According to Persephone’s proposal it appears it would not have met WD’s 30% “in-house rule” either. (Attachment 1)

The three-page RFP submission guidelines posted on WD’s website did not state that provincial funding was a requirement. The eligibility criteria say only that projects must “leverage funding from other sources”, while the proposal rating criteria ask applicants to show “financial support from either public or private sector supporters (a measure of community support)”.

According to WD, during the eligibility screening process 7 proposals were eliminated and “Another three proposals required confirmation of pending provincial funding to meet eligibility requirements. These were passed through to the next stage on a provisional basis until such time as the status of the provincial funding could be confirmed.” WD refused to disclose which three proposals these were. (Attachment 2)

It appears, however, that the Mendel Art Gallery and Persephone Theatre may be two of them – since both applied for provincial funding – with the third possibly being the Meewasin Valley Authority, who apparently received a letter of support from the provincial minister responsible but their funding request still required cabinet approval. (Attachment 3)

Could you please explain why WD officials did not communicate to prospective applicants before the RFP deadline that provincial funding would be a strict eligibility requirement? Why did the submission guidelines not state this more clearly?

With respect to the Saskatoon Prairieland Park Corporation proposal WD’s April 6, 2006, draft Due Diligence Report (DDR) appears to indicate that WD will be covering 80% of the project’s cost and will be the only government agency to contribute funding. Could you please explain why this particular applicant was not required to leverage funding from other levels of government, when at least three other applicants were required to do so? At the RFP deadline it appears that this project would not have met the 30% “in-house rule” of confirmed funding either. (Attachment 4)

The Mendel was advised that it wouldn’t have received the highest marks for “uniqueness” of project. The explanation was that the Mackenzie Art Gallery in Regina is a similar operation. WD gave no further rationale as to why the Mendel’s application was not successful. Could you please explain why no further rationale was given?

There is one further dimension that was considered by the assessment committee. The application guidelines specified that the City of Saskatoon must state the priority it would place on each of its proposals. The City provided WD with the following list: 1) The Victoria Bridge; 2) Persephone Theatre; 3) Mendel Art Gallery; 4) Riverfront Park.

The RFP submission guidelines, released November 7, 2005, said, “Where an applicant, applies for more than one project, it must state, in writing, the relative priority that it assigns to each project being submitted.”

The City, however, in a November 3, 2005, letter to WD had already identified Persephone as a priority saying, “we request that $2.5M of the funds be dedicated to this project.” This was more than one month before formal city council approval on December 7, 2005. (Attachment 5)

In its December 8, 2005, RFP submission the City confirmed its decision saying, “As per your request for proposals, City Council, by the attached resolution, has formally set its priorities for the four projects submitted.” (Attachment 6)

For whatever reason, WD did not take the City’s recommendation and put the Mendel below Riverfront Park. The City included Persephone Theatre on its list of proposals even though Persephone is not owned by the City.

Could you please explain why WD officials accepted a proposal from the City that included a project it did not own?

It appears that the Mendel Art Gallery had little chance of receiving provincial or federal funding.

City Council made one of its top priorities known to the other levels of government on September 19, 2005, when it committed $1M towards Persephone Theatre’s proposed new facility. Furthermore, the entire $6.7M unconditional provincial Community Share 2006 Program grant was allocated to the Olympic-pool facility in the Blairmore development. The City never revealed what other projects were considered or why only two were chosen for consideration: the Victoria Bridge and the Aquatic Facility. The province, in an April 7, 2006, letter to the Mendel, seemed to be hoping that the City would fund the gallery from this money. (Attachment 7)

It appears as well, that a unique deal was struck with the theatre that reduced land costs from $32.50 to $30 per square foot. The City apparently “obtained a fresh appraisal that differentiates between the values of the north half and the south half of the River Landing cultural block.” (Attachment 8).

In November 2005, the province’s Standing Committee on Human Services debated a request by the government for an additional $3M in cultural operations funding from the General Revenue Fund that were not included in the main Estimates presented with the Government’s 2005-06 Budget. The government said that the money was required “to provide grants for cultural activities, for carry-over costs of Saskatchewan’s 2005 Centennial commitments.”

The Supplementary Estimates – November for Culture, Youth and Recreation – Vote 27 – Subvote CR03 – Cultural Operations Support shows a budget line of $3,033,000. (Attachment 9)

The November 24, 2005, Standing Committee on Human Services Hansard Verbatim Report indicates that $533,000 of this money was targeted for the Regina Globe Theatre. The remaining $2,500,000 was required “in anticipation of the request coming from the city of Saskatoon that’s going to be cost shared with a federal government, and that’s targeted to be a centennial legacy capital project,” said then culture minister Joan Beatty. (Attachment 10)

It is interesting to note that the $2.5M set aside by the province is, I believe, the same amount Persephone requested in its July 2005 proposal to CYR. Furthermore, Beatty’s comment seems to suggest that perhaps only one centennial capital legacy project would be funded by the province and cost shared with the federal government.

According to the April 28, 2006, Standing Committee on Human Services Hansard Verbatim Report, during discussion of the Mendel and the federal centennial funding issue, culture minister Glenn Hagel said, “I would like to see a federal-provincial-municipal collaboration in dealing with these kinds of capital requests…”

“Had the federal funds come forward to the Mendel, the province was not in a position where we would have been able to respond in this fiscal year...” he said. (Attachment 11)

As for the federal government I feel that in May 2005 WD exposed its bias in favour of River Landing when it told The StarPhoenix that, as far as it was concerned, the federal centennial funding should go towards the proposed cultural block, which would include Persephone. It was the department’s “No. 1 choice”, said director general David James. The federal government had been working with the City, and other stakeholders including Persephone, for over a year in trying to establish a Destination Complex; something, which WD has consistently said, was its “expectation”.

Additionally, throughout 2004 the federal government made it absolutely clear that it was not a funding partner on the Gathercole Site and that development of the property would be “funded entirely” by the City. The federal government has since reversed its position on this arrangement and thus far declined to elaborate on the matter.

In a February 9, 2006, letter to WD – stamped as received on February 14 – Persephone indicated they provided the province with a “significant update” and were “still on track” to be dealt with as part of the spring budget process. (Attachment 12)

On February 14, 2006, CYR sent an email to Persephone thanking them for the updated information, which the deputy minister’s office received on February 13. The department had several concerns, one being that the new theatre’s “novelty factor will create greater interest”, but that the theatre was proposing a “fairly dramatic increase in ticket prices that may stem the interest.” CYR requested clarification but it remains unclear what the theatre’s response was. (Attachment 13)

The following day, February 15, 2006, Culture, Youth and Recreation recommended to the finance department that Persephone’s $2.5M funding request be approved. Among the reasons were “the Government of Canada has indicated that the Persephone project was highly rated among the projects that were submitted to it for the Canada Celebrates Saskatchewan’s Centennial program.” (Attachment 14)

It seems that the senior levels of government were in close contact throughout the process.

WD prepared a draft Due Diligence Report for Persephone’s proposal on March 16, 2006, which was eight days before the official announcement and five days prior to the signing of the provincial Order in Council approving Persephone’s funding request. Under “special conditions” it reads: “The payout of the WD funding on this project will be conditional upon the client being approved for funding of approximately $2,500,000 from the Province of Saskatchewan as has been requested. If this provincial funding is not approved, it is doubtful that the project can be successful.” (Attachment 15)

The provincial Order in Council approving $2.5M in unconditional funding to Persephone Theatre was forwarded to CYR minister Glenn Hagel on March 14, 2006, and signed March 21, 2006 – some three months after the advertised deadline for RFP submissions. (Attachment 16)

The provincial Grant Approval Request for Payment of funds to Persephone Theatre was signed on March 23, 2006. The theatre was subsequently advised of payment “in the coming days”. (Attachments 17 & 18)

The near simultaneous provincial and federal funding announcements occurred on March 24, 2006.

It appears the federal government was simply waiting for the province to conclude its approval process.

According to a December 5, 2005, WD memorandum “By early February the project selection process should be complete, and a recommendation for project selection should be ready for approval by the Minister.” (Attachment 19)

A February 27, 2006, briefing note to Minister Carol Skelton identifies the four highest-ranking proposals but does not say when the final review decision was made. Furthermore, the note says that the eight projects with the highest number of points were “reviewed against several strategic Government of Canada criteria” including “the extent of support for the project from other orders of government, both in terms of financial support for the capital costs and in terms of ongoing operational funding.” (Attachment 20)

The reference to “strategic” federal criteria in terms of support for “capital costs” and “ongoing operational funding” from “other orders of government” was not stated as such in the RFP submission guidelines. Could you please explain why?

A March 7, 2006, WD email seems to indicate that federal officials had targeted March 24 as the “possible launch date”. On March 23 WD told a Saskatoon StarPhoenix reporter that the announcement would not come until April, which of course proved to be untrue. It happened the very next day. It appears the media were misinformed. (Attachments 21-24)

The federal government promised a fair, open and transparent process. The Mendel was apparently refused access to a copy of the points ranking for projects. My recent FOI request (A-2005-033) seeking access to those records was denied as well. In fact, the public has been denied access to a significant amount of River Landing related documents by the City, Province and Federal Government.

Could you please explain how fairness, openness, transparency and accountability were achieved in this process?

Thank you for your time. I look forward to receiving your reply.

Sincerely,



Joe Kuchta
Saskatoon, SK

/Attachments

Cc:
Saskatoon City Council
Mendel Art Gallery Board of Trustees
Meewasin Valley Authority Board of Directors
Hon. Glen Hagel, MLA, NDP, Minister of Culture, Youth and Recreation
June Draude, MLA, Saskatchewan Party, Culture, Youth and Recreation Critic
Catherine Bell, MP, NDP, Western Economic Diversification Canada Critic
Don Bell, MP, Liberal Party of Canada, Western Economic Diversification Canada Critic
Jeremy Warren, Planet S
Lori Coolican, The StarPhoenix