CMHR to Politicians: We Lied. So, Whatcha Gonna Do?
We can't say it any better than Winnipeg's most colourful city councillor, Slaw Rebchuk: "It's right there in black and writing."
'There' is the pages of the Canadian Museum for Human Rights Summary of Corporate Plan and Operating and Capital Budgets for 2009-2010 to 2014-2015.
'It' is the scam being perpetrated on taxpayers.
Within the pages of their "corporate plan", the proponents of the museum admit they have no idea how much the "magnificent" building is going to cost to construct; they state unequivocably they have no intention of scaling back or changing the design to adapt to a budget; and, in fact, they are adding features to make the cost even higher.
An urgent priority will be to address the anticipated capital funding pressure that has resulted largely from an escalation in construction costs since the the Statement of Intentions was signed.
The total project budget included a base building construction budget of $165 million, which was the estimate made in 2007 based on the early architectural drawings by Antoine Predock.
However there remains a real risk that the construction costs will be higher than estimated in 2007. Despite some optimism that world prices for key construction inputs such as steel and cement will fall considerably-resulting in cost savings for the Museum-manufacturers are reducing output to stabilize prices. As well, many many key inputs (steel, major equipment and glazing) need to be sourced outside of Canada, increasing the risk of currency fluctuation. And, the competition in Manitoba for labour remains very strong, due to an existing shortage of skilled workers and the number of major construction projects underway or planned to start in 2009-2010.
The Board has determined that a significant re-design is not a viable option as it would result in little, if any, cost savings-in part because the delay would result in further inflation - and would result in this national museum being opened with no prominent architectural feature and significantly reduced programming space.
The elapsed time, however, has also had an inflationary impact on the budget, as have modifications to the design required to qualify the building for LEED silver designation and to reduce long-term operating costs (no additions have been made to the original design).
Oh, but they're developing a "mitigation strategy" to address the higher costs. That strategy, it seems, is to get the government to give them all the money they want, no questions asked.
This sloppy report to Parliament would be an embarassment to any legitimate organization trying to justify the millions its getting.
Take Table 1 for instance.
Under the heading Capital Funds, there are two columns detailing the financial contributions for the museum from three levels of government and the private Friends of the Museum.
The first column shows cash contributions: Canada, $70 million, Manitoba, $38.8 million, Winnipeg, $16 million, and Friends, $89.52 million.
Total, $215.6 million, right?
It's $214.32 million.
The corporate plan is off by $1.28 million.
Column two shows in-kind and previous cash donations that were received before the CMHR formally became a federal museum: Canada, $30 million, Manitoba, $1.2 million, Winnipeg $4 million, and the Friends, $15.48 million.
Total, $49.4 million, right?
It's $50.68 million.
The museum understated the money its already received by $1.2 million and overstated the amount it expects to get by the same amount.
The plan has some good news.
The former Liberal government gave the museum backers $30 million in 2004 to be doled out by Western Economic Diversification Canada. The museum backers say they used only $10 million, so the remaining $20 million was going back into the pot. Except...they spent $8.26 million of that last year.
So only $12.74 million is left to be spent. Right?
$8.26 million subtracted from $20 million is $11.74 million.
So, what's a million, eh?
The museum proponents can't pass a Grade Six arithmetic test, but they expect us to believe they have a handle on the multi-millions the project will cost.
Numbers? You want numbers? The plan buries its readers in numbers with pages upon pages of incomprehensible tables and columns. It's an old gimmick. People are afraid of looking stupid, so they glance at the numbers and nod as if they understand.
Enron used it for years, successfully, until a pesky reporter declared that the reason their numbers didn't seem to make sense is because---they didn't make sense.
But we've managed to mine some nuggets of information out of the barrage of numbers in the report, however incomplete.
Start with $265 million, the federal cap on the project's cost.
Subtract $35.7 million, the cost of exhibits, the first time that's appeared anywhere.
Subtract $3.3 million for furniture.
Subtract $165 million, the budgeted cost of the museum building, which everyone admits is outdated.
Subtract the $10 million spent from Western Economic Development.
And the $8.2 million spent last year from the initial federal contribution
Subtract the $4 million value of the land, part of the city's contribution.
Subtract $15.4 million of the money raised by the Friends of the Museum which, as best we can tell, has been spent already.
Subtract $1.2 million in provincial seed money handed out years ago.
And you're left with about $22 million.
Is this the contingency fund that was built into the project?
If it is or isn't, the costs have swept the money away.
Public and private construction projects report construction inflation was in the vicinity of 18 percent in 2007 and 2008. That alone would add about $59 million to the project.
Less the $22 million we can't account for, the project could be $37 million in the hole already.
Intriguing is the asset value this corporate plan puts on the completed museum building--$199 million--- $34 million above the $165 million budgeted cost. Coincidence?
The decision to be holier-than-thou environmentally friendly is not cheap either. Northbridge Environmental Management Consultants of Westford, MA, prepared a report in 2003 titled, of all things, Analyzing the Cost of Obtaining LEED Certification.
"While this is potentially the larger area of incremental costs (sources we consulted variously estimated these additional costs at up to 30 percent of construction costs), many of the available examples do not isolate these costs and for those that do the data vary across a large range. We believe a reasonable estimate is that greening adds between three and eight percent to the cost of a "typically" constructed building."
The CMHR is the opposite of a "typically" constructed building. If we assign costs to the high end, 8 percent, that adds about $13 million.
Sub-total then, $50 million.
To which we have to add operating costs.
The museum spokesmen confessed they screwed up royally by forgetting to account for payments in lieu of taxes that federal museums pay municipalities. That's put them $5 million short this year, 2009-10, and from here on in they're looking at a $5 million to $9 million annual hole in the operating budget.
Looking at the short term, the CMHR could be $55 million in the red to date, with millions of unbudgeted costs in the wings.
But let's not forget the risk mitigation strategy, aka begging for more money.
But from whom?
They obviously plan to come to Winnipeg City Hall to plead for the payment in lieu of taxes to be waived. Two words come to mind immediately: Bugger Off.
The last city budget was a touch-and-go affair, but we managed to stay in the black without a tax increase. Councillors are already hinting strongly that they intend to raise taxes next year.
How will they explain giving away $9 million a year to a millionaire's pet project? How much will they have to raise taxes to fill that budget gap? Exactly what services will have to be reduced so that Gail Asper gets her money? We can't wait for that debate.
The CMHR is also planning to go to the federal government, cap in hand, for more money. Let's see….yup, the good times are over. The federal government is broke. It's going to be running $40 billion a year deficits for the foreseeable future. So are we supposed to borrow even more money to give it to the Asper museum? Another two words come to mind… in both French and English.
That leaves Gail Asper's boyfriend, Gary Doer. He's already doubled the provincial contribution from $20 million to $40 million without any debate. Is he willing to dip into the rainy day fund to give the museum an extra $50 million or so?
And why must we watch this process anyway?
It was March 3, 2008. The event was the Standing Senate Committee on Human Rights. From the transcript of the proceedings:
Senator Jim Munson (Acting Chair) in the chair.
The Acting Chair: I am pleased to introduce the witnesses from Canadian Heritage who are here to discuss Bill C-42, to amend the Museums Act and to make consequential amendments to other acts.
The witnesses are Lyn Elliot Sherwood, Executive Director, Heritage Group, Canadian Heritage; Patrick O'Reilly, Director, Implementation Strategy, Canadian Museum for Human Rights, Heritage Group; and Rina Pantalony, Legal Counsel, Canadian Heritage.
The primary purpose of Bill C-42 is to create a new national museum for human rights. It is to be called the Canadian Museum for Human Rights. As provided by clause 1 through clause 4 of the bill, it will be established as an independent Crown corporation through amendments to the Museums Act.
The remaining clauses of the bill amend acts that are related to the proper functioning of a Crown corporation. For example, the bill amends the Financial Administration Act to provide for federal funding, as well as both the Access to Information Act and the Privacy Act to exclude museum material from their jurisdiction. The bill adds the Canadian Museum for Human Rights to the list of federal entities that receive funding for property taxes owed to municipalities due to ownership of real property.
Senator Cowan: (Addressing Lyn Elliot Sherwood, Executive Director, Heritage Group, Canadian Heritage ) On the page of your presentation entitled ``Background,'' it talks about $165 million having come from various sources other than the federal government and $100 million coming from the federal government. On the next page you say that the budget to build and fit up the museum, including exhibition development, would be capped at $265 million.
These projects have a tendency to run over the expected costs. Who will pick up the tab if the costs exceed $265 million?
Ms. Sherwood: It is the responsibility of the board to develop an approach to the building plan that includes a generous contingency provision designed to stay within the budget. A number of steps can be taken in planning for a construction project with detailed design, development and costing prior to the letting of construction contracts that enable a board to accurately assess whether the project can come in on budget.
Senator Cowan: Does the $265 million include a contingency provision?
Ms. Sherwood: Yes, it does.
Senator Cowan: This is not one of those projects where the federal government is left to pick up anything over and above the $165 million that is contributed by other parties, is it?
Ms. Sherwood: The total budget is $265 million. You are putting your finger on a very real risk in the current environment, which is the impact of inflation on construction budgets. That has been factored into planning and is one of the reasons for the urgency of this bill because at the moment the purchasing power of that $265 million is being eroded at the rate of between $800,000 and $1.5 million per month.
Senator Cowan: I am not being critical of this project. However, someone has to hold it at the end of the day.
Ms. Sherwood: The board of trustees will be accountable for bringing this project in on budget and making decisions with respect to the building design and the contingency fund set aside that allow it to bring the project in on budget.
Sitting at Ms. Sherwoods elbow was Patrick O'Reilly, representing the Canadian Museum for Human Rights. He heard every word spoken and approved every commitment Sherwood made to the Senators.
The people getting the biggest laugh out of this have to be the federal bureaucrats who raised warned Heritage Minister Bev Oda in 2006 of of financial and accountability concerns involving the Asper family's pet project.
At the time Gail Asper was trying to get the newly elected Conservative government to come onside with funding the museum. Get this, they wanted Ottawa to provide annual operating funding which they said would cost $12 million. Three years later operating costs have climbed to a conservative $30 million with no end in sight.
Winnipeg Free Press reporter Paul Samyn reported in 2007 on briefing memos provided to Oda which were obtained by a private researcher in Ottawa. The bureaucrats obviously raised the right questions even back then.
"Many of the concerns raised in the documents released to Ottawa researcher Ken Rubin deal with the finances of the project and Asper's call for operating funding on top of the $100 million Ottawa has already pledged for capital costs:
* "It is clear that project funding will not provide a stable future for the CMHR."
* "The CMHR would have the eighth largest budget among museums in Canada. Including the national museums. It would have the largest operating budget in Western Canada, larger than the Royal British Columbia Museum and larger than the Glenbow. Its operating budget would be almost three times that of the either the Manitoba Museum or the Winnipeg Art Gallery."
* "Matching funds from other sources must be assured to cover the remaining costs of the project before federal funds are spent; a source of operating funds must be identified."
* "The government does not provide operating funding to non-federal museums. Should a precedent be set in this case, you could expect pressure to provide operating support to other non-federal institutions."
* "You (Oda) could ask what options they are considering if the government does not provide operating funding (e.g., raising endowment funds for this purpose, reducing the scope of the budget.)"
As a sign of how desparately Gail Asper was fighting to maintain control of the museum for herself is the warning to Oda that the museum's backers were proposing that it become a "hybrid institution" as part of a "multi-jurisdictional, public-private partnership." In other words, the museum would be privately controlled, and publicly funded. La plus choses change.
The red flags over this project have been flying for more than 3 years now. It's time for someone to take a stand.
We must have a 'drop dead number'. Fixed and immutable. If the red ink reaches that figure at any point, then the project is declared dead. All work stops. The hole in the ground becomes the world's largest goldfish pond.
The scam is working exactly as we predicted.
Now that the digging has begun, there will be no end to the bleeding of the taxpayer.
Barely five months after the phony groundbreaking, the operating budget is hopelessly outdated, they're hinting at unrestrainable costs for construction, -- and there's three more years of this to go.
If there is no politician willing to challenge this travesty, then we have to start naming people who must be held pubicly accountable.
Our first nominee is Patrick O'Reilly, the museum's chief operating officer, who sat at that meeting with the Senate committee and with his silence misled them over who would ultimately pay for the cost overruns which even then were totally predictable.
The higher the bill goes, the closer to the exit he moves.
As Slaw Rebchuk said, "You've buttered your bread -- now lie in it" .