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REVEALED: the two bombshell secrets Sam Katz is hiding from city council, and you, about the CMHR

In between whining that Winnipeg doesn't have enough money to fix the mythical infrastructure deficit, and waiving taxes for his friends, the Aspers, Mayor Sam Katz is hoping you never find out two things about the finances of the Canadian Museum for Human Rights.

Secret Number One

Sam Katz wants city council to kickback $3.6 million in property taxes that the CMHR is supposed to pay sometime in the future, but he's hiding from the public the fact that the CMHR HAS NOT PAID ITS TAXES for 2009 and 2010 !

Its already $241,000 in arrears PLUS penalties, despite collecting $24.9 million from the federal government over those two years for operating expenses -- which were to include payments in lieu of taxes.

Secret Number Two

Former Premier Gary Doer was in such a rush to give Gail Asper money for her museum that he not only doubled the province's contribution, from $20 million to $40 million, but he secretly loaned another $11.1 million to the City of Winnipeg so that Mayor Sam Katz could pretend the city was also contributing.

The loan was carefully hidden in government departments so it couldn't be traced back to the NDP, but someone may have made a mistake -- which could cost the city at least $1.6 million (and counting).

We waited almost two weeks last year to check whether the CMHR had paid its tax bill to the city.

The result:
The Black Rod Monday, July 12, 2010

The Canadian Museum for Human Rights tells Wpg taxman "Talk to the Hand"

... the Canadian Museum for Human Rights, has stiffed the City of Winnipeg for $360,000 in property taxes.

The story created such a buzz that CMHR CEO Stu Murray went on CJOB to "set the record straight."

"There's been some concept about property taxes. I want to be very clear, the Canadian Museum for Human Rights will ... pay ... property tax. That's an absolute. Uh, there's basically a process that goes between Public Works and the City. That process is undergoing right now, so the fact is we will pay property tax." he said.

We, foolishly, took him at his word, and never checked further.

The 2009 tax bill for the CMHR, which was for the period April-December 2009, was $157,792.21.

The 2010 bill, for the entire year, was $202,938.63.

Imagine our surprise to read in the newspaper last week that the CMHR had paid all of $119,652.51 (on taxes owing of $360,000). That didn't even cover the bill for year one.

Property taxes owing as of June 30, 2011 on the Canadian Museum for Human Rights will be $439,835.

When the building is open, possibly in 2013, the taxes are estimated to be anywhere from $6 million to $9 million a year. The CMHR has a plan to cover their tax bill --- ask the federal government for more money. It's in their last annual report.

Winnipeg council's executive policy committee voted last week to kickback $3.6 million in taxes from the CMHR to, uh, help finance the construction of the building. That, you'll note, makes absolutely no sense. How can we refund taxes to help build the museum when they won't pay the taxes until after the museum is built and open to the public? Not one of the geniuses on the committee asked.

Neither did anyone ask any questions about the vague reference in the EPC agenda to a mysterious loan from the province that has to be paid back before the city refunds property taxes to the CMHR. An astute reader sent us the "recommendation" from city bureaucrats to approve the kickback which reads:

b. The funding contribution commencing after the requirements of the Loan Agreement between the City of Winnipeg and the Manitoba Development Corporation have been met.

What in the hell was that about? we asked. We had to know, so we released the tracking hounds.

They led us to this long, long, long list of city bylaws...

...where we found Bylaw 194/2007:

Borrowing: Authorization of a loan from the Manitoba Development Corporation re Canadian Museum of Human Rights (CMHR) 194/2007 Dec 17, 2008 Active Finance/Taxation Corporate Finance 311

That led to the City of Winnipeg Annual Financial Report (2009)

"Also included in general government expenses is a $16.0 million cash contributiion to the Canadian Museum for Human Rights ("CMHR"). Part of the cash contribution was financed by the Province in the form of an $11.1 million interest-free loan. The loan will be repaid based on future payments-in-lieu of taxes received by the City on the museum facility. Further as part of the contributions to this project, the City has agreed to sell, transfer, and convey to the Government of Canada for the price of one dollar, land located at the Forks which will form part of the site on which the CMHR will be constructed...The city will also return development and permit fees up to an estimated value of $1.3 million. "

...and eventually, to the NDP cabinet room and, guess who, the dirtiest politician in Manitoba, Greg Selinger.

DATE: January 23, 2008
ORDER IN COUNCIL NO.: 00023 / 2008
RECOMMENDED BY: Minister of Finance (that would be Selinger)

1. The Minister of Finance is authorized, on behalf of the Government of Manitoba, to:
a) to make advances of up to $11,100,000 million to Manitoba Development Corporation
(.MDC. ) out of funds designated for the Manitoba Industrial Opportunities Program (the
.MIOP. ) under The Loan Act, 2007 for the purpose of making a loan to The City of
Winnipeg (the . Loan. ); and
b) to determine the terms and conditions of the advances to MDC.

2. The advances to MDC shall bear interest at the rates established by the Minister of Finance
under subsection 61(2) of The Financial Administration Act.

Under Background, the order-in-council said this:

2. The Minister of Competitiveness, Training and Trade requests that the Government make a loan to The City of Winnipeg from the funds authorized for the MIOP. The Loan is to be made to a maximum aggregate amount of $11,100,000 million and is to be administered by MDC, as agent for the Government.

By the time we plowed through the info on the Manitoba Development Fund and MIOP sites, we had the story pieced together.

In 2008, Gail Asper was trying to create the pretense that the Canadian Museum for Human Rights had the support of all three levels of government.

The only problem was that Winnipeg Mayor Sam Katz didn't have millions of dollars to piss away on a museum when he was trying to create the pretense of a balanced budget.

So Gail's best friend, Premier Gary Doer stepped in to create the pretense that Winnipeg was so enamoured of the idea of the museum that it would kick in $20 million to the cost of building it.

In reality, Winnipeg could (see above) only put up land, which it sold to the federal government for $1, and $1.3 million in kicked-back development and permit fees. The rest of Winnipeg's "contribution" was made up of a secret loan from the province for $11.1 million, a loan that's been hidden from public view until now.

Doer did his best to obscure the loan from scrutiny.

The government gave the money to the Manitoba Development Fund which channeled it through the Manitoba Industrial Opportunities Program as a loan to the city. The what...?

From government websites, we can see the MIOP has nothing to do with museums, and certainly not with this loan to build the CMHR:

Manitoba Industrial Opportunities Program (MIOP)
The objective of the Manitoba Industrial Opportunities Program (MIOP) is to secure significant business investment that would not occur in Manitoba without provision of some level of government assistance. The major criteria in assessing the project will be the viability of the business proposal and its resulting benefits to the Manitoba economy. The Program provides secured loan or loan guarantee assistance to recipient companies in return for fixed asset investment and long-term job creation.
Grow your business with a secured loan or government loan guarantee for projects related to the diversification of the technological/industrial base in Manitoba. Access is based on eligibility criteria and a comprehensive business plan.
Size of Loan:
Typical Range for MIOP loans is:
Minimum loan amount $300,000.
Maximum loan amount $5,000,000.
Larger loans may be considered.
Assistance from all levels of government must not exceed 50% of eligible project costs.


5 The corporation may
(a) subscribe for, obtain, or otherwise acquire and hold, and dispose of shares, share warrants and securities of any company or acquire assets or any interest of any person carrying on any business capable of being conducted to enhance the industrial development of the province or any part thereof;

(b) acquire, develop, maintain, manage, operate, rent, let on hire, option or dispose of industrial sites, buildings, plants, machinery, equipment and utilities or any interest in the foregoing, and enter into agreements with a municipal corporation or municipal development corporations or any other companies for that purpose;

So how did MIOP justify its loan of $11.1 million to the City of Winnipeg for the CMHR?

Simple. There's a slush fund provision in the Act creating the MIOP.

Agent of Crown on special projects
41 The Lieutenant Governor in Council may authorize the corporation to act as agent for the government in respect of projects or matters, undertaken or carried out pursuant to an order in council, for the advancement of the industrial or economic development of the province.

Finance and accounting
42 The moneys to be used for the purpose of this Part shall be supplied by the government, and shall be accounted for by the corporation separately from its other accounts.

The provincial cabinet can authorize any spending it wants by claiming its for "the economic development of the province". The money is then kept off the books of MIOP and away from prying eyes.

And that's how city taxpayers wound up on the hook for $11.1 million for a museum they don't need and don't want. That "loan" is supposed to be repaid by, guess what, the property taxes received from the Canadian Museum for Human Rights. Yep, we're on that road again.

But there's one problem.

Somebody forgot the law.

The law, even for secret loans like the one to the city of Winnipeg, sets the interest rate. The government's own order-in-council cited the law on interest rates to be charged by the government:

Interest rate
61(2) Subject to subsection (3), the Minister of Finance shall, at least monthly, establish a schedule of interest rates to apply to advances made by way of loan under this or any other Act of the Legislature.
Minimum rate of interest
61(3) No rate of interest shall be less than the rate of interest estimated at the time the schedule of rates is established to be the government's cost of borrowing for the term during which the advance is to be repaid

Uh, oh.

In case you skipped over the 2009 City of Winnipeg annual financial report cited above, you missed this key sentence:

Part of the cash contribution was financed by the Province in the form of an $11.1 million interest-free loan.
Uh, uh.

The NDP could NOT, legally, give Winnipeg an interest-free loan.

Somebody has to be paying the interest.

How much are we talking about? At the very least the interest rate in 2008 was 5 percent for the province. That, on a loan of $11.1 million, works out to about $550,000 a year.

For the past three years, somebody owes the Manitoba treasury $1.6 million. More money swallowed by the money pit.

Either, a) the province is swallowing the interest or b) the City of Winnipeg is going to get a great big unexpected bill sooner or later. And we'll have to pay it with real money now, instead of pretend future money.

Given that the CMHR can't or won't make payments-in-lieu of taxes to cover their property tax bill, we're betting not a penny of the loan has been paid off yet. And won't be for years to come, with the bill adding up at least $550,000 a year.

City council as a whole will vote this coming week on the recommendation to refund $3.6 million in payments-in-lieu-of-taxes to the Canadian Museum of Human Rights.

At least now they know the hidden facts.
Who knows? Maybe one of them will actually ask the right questions before rubber-stamping the Mayor's motion.

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