Friday, January 23, 2009

Northlands credibility hurt

Northlands - Edmonton's non-profit operator of Rexall Place (the old Northlands Coliseum), CapitalEx (Edmonton's smaller version of Calgary's Stampede- well kind of...), and the Rexall Edmonton Indy race, is taking a beating over some of their numbers.

Northlands announced on Wednesday that their 2008 Rexall Indy race lost $5.3-million dollars. It was also announced on Wednesday that Edmonton's city council agreed to cover the full shortfall.

Second, Northlands also announced on Wednesday that the total economic impact of the Edmonton Indy was in excess of $80-million (2nd page of 5-page report).

While city council was defending the expenditure of $5.3-million for a car race, others were picking apart Northlands' numbers and credibility.

The Canadian Taxpayers Federation took the first shot, issuing a news release on Thursday pointing out that the $5.3-million shortfall was over 400% higher than originally predicted by Northlands ($1-$1.3-million) in May.

The CTF also suggested the $80-million estimate of economic impact was likely overstated (likely because Northlands won't return our calls to explain how it was calculated), because it included both local attendees expenditures and those expenditure of visitors from out of town.

Dr. Brad Humphreys, the internationally acclaimed economist and expert on economic impacts of sporting events, took the next shot suggesting that Northlands must be pulling their economic impact numbers out of thin air. Click HERE to watch his reaction.

For those not hip to video, here's what Dr. Humphreys had to say:

"They're basically numbers they're pulling out of thin air."

"It's very doubtful that this event had any tangible economic impact on Edmonton's economy."
630 CHED/iNews880 were next up, citing two unnamed insiders suggest that the $80-million estimate is bogus.

Friday saw both the Edmonton Sun and the Edmonton Journal take a swipe at Northlands for their unbelievable numbers.
Graham Hicks of Hicks on Six said flatly that he didn't believe the impact numbers and did a bit of calculating on his own:
I don't buy multimillion-dollar "economic impact" numbers.

Real numbers, please.
...
Here's (speculative) numbers a hospitality expert and I came up with.

* Spending by out-of-towners, here for the Indy, staying in hotels: The bump in downtown hotel occupancy for those July days was an extra 1,200 hotel rooms a night. We guessed another 600 hotel rooms outside downtown.

Hotel revenues from the Indy: 1,800 rooms for three nights at $150 a room, or around $800,000.

Per diem spending by hotel guests: $50 a day for 3,600 people (two per room) times four days, or $720,000.

Air fares: We guessed half the hotel guests flew in, $400 each on air fare, so 1,800 times $400, or $720,000.

* Spending by those who came for the Indy but stayed with friends or relatives: We generously guessed that half the attendees, say 16,000, were out-of-towners staying with friends.

They're not big spenders, $30 a day each, over four days for $1.9 million, say $2 million.

So, in cold, hard, guessed-at numbers, a total of $4.2 million. Round it off to $5 million.

Five million "out" in a tax-dollar subsidy. Five million "in," dollars not otherwise spent in Edmonton.

The Edmonton Journal was next up to the plate whacking Northlands twice for being so far off their original loss estimates.

From the Editorial Page (not online):
"The current projection for the 2009 Indy Racing League race at the Muni is a $1.5-million deficit. But as we head into an unpredictable economic downturn, it's worth remembering that after a deficit projection of $1.3-million for 2008, last July's event actually devoured $5.3-million of your money - four times what was expected."

Journal Sports Columnist Dan Barnes also had this to say in his column entitled "400 per cent off":

"In Edmonton, the thrill was gone the moment Northlands made its event summary public on Wednesday afternoon. Or rather, after a reader made it through two pages of glowing reviews and a hard-to-believe $80 million economic impact estimate to reach page three of the four-page report, which detailed the massive loss."
...
"In the heady days following the signing of that IRL contract, city councillors were told the race might lose $1 million in 2008 and they unanimously agreed to cover the loss (or share in the profits) as it was so optimistically stated in the event summary. Council jumped into the passenger seat without bothering to place a cap on their financial support.

That's either blind faith, stupidity or -- what did Knowles call it -- oh yes, an investment. Fast forward to Wednesday and we find out the Northlands budget estimate was off by a mere 400 per cent."

Ultimately, this all means exactly what the Edmonton Journal wrote in their editorial today - you can't trust Northlands when it comes to numbers. This is bad news considering taxpayers are already on the hook for their deficits for 2009 and 2010.

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