The termination of the Keystone Centre’s 12-year catering contract with Canad Inns will provide some much-needed choices at Brandon’s premier agricultural and convention venue.
It also serves as another reversal of what was previously deemed as a good deal for the Keystone Centre by the Dave Burgess administration.
As the Sun reported on Saturday, the contract that was in place between the two entities allowed for the Keystone Centre to end the agreement by giving 30 days notice and by paying a termination fee.
Keystone Centre chairman John Macialek would not reveal how much the Keystone Centre paid to get out of the catering project, but he noted that the centre could likely make enough in the first year of catering to override the cost of paying the termination fee.
Perennially in the red for much of its existence, the Keystone Centre has been continuously looking for ways to boost revenues, including the recent sales of naming rights for the Agricultural Centre of Excellence and its main arena, which garnered nearly $1.5 million in total.
The big question here is viability — will this move help put the Keystone Centre on more stable financial footing? Ironically, the original deal to outsource catering was touted as a sure way to do just that.
In 2003, it was estimated that the Keystone’s own banquet catering service brought in roughly $600,000 in sales annually.
When the Keystone Centre, the city and Canad Inns finally inked a deal for the construction of a 13-floor hotel in Brandon in 2005, the new kitchen at Canad Inns was to take over the catering at the Keystone for a 12-year term, while giving the Keystone a 12 per cent cut of its sales.
By taking over catering, the new hotel was supposed to help eliminate the centre’s kitchen costs and the new facility would help attract bigger events and put a fresh look on a tired facility.
The original deal also called for Canad Inns to pay an annual rent of $190,000 for the first five years and an annual property tax commitment of an estimated $225,000.
At the time, former mayor Dave Burgess was one of the most outspoken advocates for Canad Inns’ proposal. It was his hope that the deal would help the centre become self-sufficient down the road.
“That will allow the Keystone to have a solid, long-term financial plan and a continuous flow of support so they can make long-term financial decisions,” Burgess said in 2003, before the council made its final vote on the deal.
But as former Sun reporter Rod Nickel wrote in a June 2002 paper, it wasn’t completely clear how contracting out catering would affect the centre’s bottom line.
And there were to be other significant obstacles down the road that would serve to further weaken the Keystone financially.
In 2007, the city and Keystone Centre were forced to refund more than $250,000 to Canad Inns after the hotel chain successfully appealed to have the assessed value of its Brandon property reduced.
The Municipal Board of Manitoba ruled that the hotel should be valued at $11.2 million for 2006 as opposed to the original assessment of $13.8 million. As well, the 2005 assessment was also reduced from $12.5 million to $10.1 million. That meant the city and therefore the Keystone Centre was to receive significantly less in future property taxes.
The Sun later reported in 2010, the 2008 provincial reassessment forced a drop in tax revenue funnelled from the city to the Keystone Centre from $188,000 to $164,000.
And like every aging building, the Keystone Centre has had a difficult time keeping up with repair bills as there are millions of dollars in required renovations to make up.
So when the Keystone sought to revisit its catering contract with Canad Inns this year, Macialek said they had been working on the details to determine whether cancelling the contract was a viable business decision, especially as he noted the termination fee was quite substantial.
“It’s a very significant amount but it was a business decision and a great one to make,” he said. “For our bottom line, it will be a positive impact for our future.”
And so the Keystone will get back into the catering business, hiring chefs, renovating its old kitchen space and planning new menus. No doubt this will be a good thing for several community events, including groups like the Lieutenant Governor’s Winter Festival, which will appreciate the choices that will be available come Aug. 1.
While we can’t say whether this will provide a better revenue source for the Keystone — only time will tell that — we are certain about one thing.
The prior arrangement didn’t live up to the hype.
Republished from the Brandon Sun print edition July 2, 2012