Blunderdome: politics, positioning and a costly retractable roof
BC Place.
Anyone who wonders how government mega-projects manage to take the public to the cleaners time and time again can step right up for a front row seat at the dog and pony show put on by PavCo’s David Podmore and BC Lottery Corp’s CEO Michael Graydon over the Edgewater Casino expansion and the BC Place Stadium roof.
The good citizens of Vancouver might be forgiven for thinking that if this casino expansion goes ahead the provincial government and City of Vancouver will be awash in cash. We’ll pay for that $563 million roof in our sleep, and provide a lifetime stream of cash for the province and city. This deal, whatever its warts, will bring hundreds of millions to the province in new revenues, and $23 million to the city every year. The Deloitte report tells you so.
We’ll all be rich!
Except we won’t, and PavCo and the BC Lottery Corporation are not telling you everything they know.
Over recent weeks Messrs. Podmore and Graydon made the rounds of radio talk shows , Board of Trade luncheons, editorial board meetings, and Vancouver City Council public hearings waving an October 2010 report from their Deloitte consultants which they said showed how profitable this venture would be. But there was just one catch, only spotted by those who read the fine print.
The Deloitte report didn’t project casino revenues at all. It took estimates of casino revenues supplied by Paragon Gaming, the casino developer, and projected economic impact to be expected from them. No one at Deloitte considered whether Paragon’s projections were reasonable--the report authors merely assumed them to be true for the purposes of making their own projections. When Podmore and BCLC waxed poetic about the river of cash that Deloitte says will flow into our coffers, they weren’t being straight with the public.
And they kept quiet as a mouse about one tiny detail.
The Other Report
There’s another report. This is the one they don’t want you to see. It’s the real one, commissioned by BCLC in 2009. Conducted by hospitality and casino industry consultants, HLT Advisory Inc, this report arrived at its own independent assessment of the likely revenue outcomes of the casino expansion, and it makes mincemeat out of PavCo’s numbers.
This shouldn’t come as a surprise to anyone familiar with Paragon Gaming, the Las Vegas casino promoters who supplied Deloitte with its base data. Paragon has a history of making extravagant claims that don’t withstand scrutiny.
In their failed bid for a new casino license in Missouri, for instance, Paragon stated they would create revenue of $103.4 million. As internationally renowned Vancouver economist Richard Lipsey cautions, the key variable to look at is not the estimated gross figure, but the incremental, or new net revenue. This matters because a casino can take market share from other casinos, and also from the surrounding economy--a process colourfully referred to as ‘cannibalism’ in the usually grey argot of number-crunching.
For BC Lottery, any cannibalization by Edgewater of the Hastings Park and River Rock business has no impact on its bottom line, positive or negative. Since all cannibalized revenue is neutral, the only earnings that count are new dollars brought in from tourism or an expanded market. States and provinces typically order independent studies to determine a project’s genuine potential earning power.
Back in Missouri, the state was cognizant of cannibalization and commissioned an independent study to measure this new incremental number against Paragon’s projections. They found that Paragon’s submission overstated new revenues by 476%.
When it came to reviewing Paragon Gaming’s proposal in Vancouver, the BC Lottery Corporation asked HLT Advisory Inc the same question that Missouri did. And their conclusions are close to right on the money with Missouri’s. Retired BC Supreme Court justice Ian Pitfield reviewed both the Deloitte/Paragon and HLT reports and compiled from them the net new revenue estimates of both.
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(7) Comments
Are the questions you pose at the end of this article intentionally naïve? It would seem that private profit (and the accompanying public debt) is the obvious answer.
Though I know it's probably a more difficult case to make, it seems that one of the best arguments against the casino is that many or most who live in the downtown area just don't want the kind of city that this kind of crass entertainment represents. In the city's misguided approach to become "world class" by building massive sports and entertainment complexes, rather than the art and cultural institutions that ACTUALLY make a city world class, we are emulating Times Square, rather than the likes of the Museum of Modern Art or the Metropolitan Museum of Art. Imagine if we put a half billon into a new art gallery.
Buddy, this isn't an art destination. People who wish to visit half billion dolllar art gallery head to Paris, London and New York.
But thats not to defend this casino and roof rippoff.
Chris I think you have it half right, but I wouldn't chastise the author of this story. I fail to understand get why you do not recognize retorical questions. Questions that have yet to be answered by our elected officials and our paid bureaucrats.
I'm a Whitecaps seasons tickets holder. I rue the day I have to walk into BC Place. I resent that this soccer team was fanagled into that location by a self interested province, city, Port of Metro Vancouver and development community.
Vision Vancouver would do well to wash its hands of this project lest they be tossed on the ash pile of politcal history.
Peter, I guess I'm not confident that rhetorical questions will be recognized for what they are by a wider audience. Maybe I'm being pessimistic. But why not answer these questions in the article?
"People who wish to visit half billion dolllar art gallery head to Paris, London and New York." Yes. But we in Vancouver have what I call "world class city disease" right now. What makes "world class"? You don't get there by building billion dollar sports stadiums. I'm not saying we should do either, but it seems to me that there is zero awareness or real debate.
What a gong show and a moral fraud! So much for our government looking out for our best interests; they're the greatest threat to our economic stability!
Time to vote out the BC Liberals.
Blunderdome -- catchy, I like it.
I woner if we can get Tina Turner to record a theme song for it.
It certainly looks like Pavco and BCLC went too far, too fast. And now the City of Vancouver is holding some big cards in the game.
In return for approval, we want… {fill in wish-list here}.
It’s also beginning to remind me of the 1970s’ freeway proposals, against which the citizens of Vancouver fought with vigour. And won. It seems the citizens in 2011 may not want a massive casino.
And the deal now begins to stink.
Peter,
You might be interested to know that the owner of the Whitecaps, Mr. Kerfoot, is also in this story. As you will recall, Mr. Kerfoot originally wanted his own soccer stadium downtown. That was not approved, after several years of reports, presentations, etc. to city council.
Meanwhile, Mr . Kerfoot makes a loan to the finanicially troubled Edgwater Casino's first owners, who were declaring bankruptcy. After Paragon Gaming, the current owners, bought them, Mr. Kerfoot apparently got some or all of that money back.
Do you see how our fair town works? It's not what you know, it's who you know.
Oh, by the way, this is Mr. Podmore's 2nd kick at the casino cat. He was standing by, eager to help build the casino through his own company, Concert Properties, when Steve Wynn of Las Vegas tried to set one up here in 1994, promising to build a new convention centre in the process. Wynn was run out of town on a rail. The new convention centre WAS built, years later, and the new PavCo Chairman, Mr. Podmore, was tapped to come in and "save" it for then Premier Campbell, due to gross overspending on the project. What a guy! And all one $1 a year!
Now, miraculously, we see Mr. Podmore involved yet again with a casino application. Since Paragon is a private company, and already houses former BCLC Chair Richard Turner on it's board, we may never see the extent of the deals being put together between Paragon and some of "Vancouver's Finest!".
These guys, they love gambling with our money! And better yet---they are the ones who never lose--even when they do.