An internal audit that says the city is not receiving its rightful share of advertising and concession revenue for the Barrie Colts' use of Sadlon Arena has been referred to city staff by councillors in order to bring the Ontario Hockey League club "into compliance" with existing agreements before a new lease is agreed upon.
The 2023 year-to-date internal audit status report was referred to recreation and culture services staff last night, with no discussion.
“Referral motions, as you know, are not debatable,” Mayor Alex Nuttall told members of general committee on Wednesday night.
City council could consider final approval of this referral at its Oct. 25 meeting.
It reads: "That the 2023 year-to-date internal audit status report dated Sept. 27, 2023 be referred to staff in recreation and culture services in order to bring the Sadlon tenant into compliance with existing agreements prior to execution of a new lease agreement."
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The current lease agreement, which was extended last spring, runs until the end of February 2024.
After Wednesday night’s meeting, Deputy Mayor Robert Thomson, who tabled the referral motion, was asked by BarrieToday what needs to happen to bring the Barrie Colts, who are the Sadlon Arena tenant, into compliance.
“I believe that we need to have all our partners follow our procedures and policies and the contract they signed,” he said, “and the audit report had a few things that both parties (Colts and the city) need to work out and until that’s done. I think that should be done prior to signing a new agreement.”
Thomson was asked by BarrieToday if that means the Colts are not in compliance right now.
“I wouldn’t say that they’re not in compliance,” he said. “I think there was some discrepancy in, you know, with COVID and stuff like that, in reporting and I think there’s issues on both sides that they need to work out, moving forward, as I believe that we need strong partnerships, but on both sides.”
The city's audit claims that thousands of dollars in Barrie Colts revenue has been under-reported and/or unpaid to the city in exchange for the OHL club’s use of the Bayview Drive arena.
This year’s Sadlon Arena budget includes total gross costs of $1.7 million, according to financial figures from the city. With total revenues of $1.2 million, the net cost is $510,000 — which is funded from Barrie property taxes. The net cost is expected to be slightly lower in 2024, although next year’s city budget is still being drafted by city staff.
Colts officials have taken issue with the city's audit report. Howie Campbell, the team's majority owner, could not immediately be reached for comment after Wednesday’s meeting, but has made online comments about the matter.
He has said the disputed amounts of advertising and concession money from Sadlon Arena are "small in nature."
Campbell has also said he sent the city a letter July 17 requesting “abatement” for all the things he says have been promised to the Colts during the last 10 years of the lease, things that he says were not done by the city.
And what’s owed to the Colts is far greater than the disputed amounts, Campbell said in his statement, which was posted on social media and the team's website. The statement does not include any specifics on the amount of money the Colts claim to be owed.
HorsePower Sports and Entertainment Group, which owns the Barrie Colts, has also taken issue with a column written by former deputy mayor and longtime councillor Barry Ward, which was published Oct. 4 on BarrieToday.
Last week, Coun. Gary Harvey, chairman of the city's finance and responsible governance committee, was asked by BarrieToday if he had concerns with the advertising and concessions revenue claimed to be owed by Barrie Colts to the City of Barrie, as outlined in the 2023 year-to-date internal audit status report.
Harvey noted his committee received the audit status report Sept. 27, along with its recommendations.
“It is my understanding that there are continued discussions between the city and the Colts to resolve any differences,” he said.
Michael Prowse, the city’s chief administrative officer, has said there are five recommendations from the internal auditor with respect to the city’s contractual rights, advertising revenue and concession revenue, and the city’s goal, and that of its internal audit team, is to work with the Barrie Colts to achieve compliance with those five recommendations.
They involve the city’s contract rights to examine records, identify and collect city advertising revenue, collect outstanding advertising revenue, check the accuracy of advertising revenue and whether it’s complete, and check concession revenue earned but not reported.
Nuttall has said the Colts and city staff are working to bring the last contract, for leasing Sadlon Arena, into compliance.
The status report, from city internal audit director Sarah MacGregor, says the review assesses third-party compliance with the user and licence agreements, determining whether advertising and concession revenues reported to the city are adequately supported by the city’s contractual right to examine records.
It says that advertising revenue reported to the city by the Colts is not accurate and/or complete.
The report also says the city’s portion of eligible advertising revenue for three seasons (2019-20, 2021-22 and 2022-23) has not been paid to the city.
The audit says that a net total of $19,296 in eligible advertising revenue, not including harmonized sales tax (HST) — for which the city is entitled to a portion — was determined to be under-reported for the 2017-18, 2018-19 and 2019-20 seasons.
The review also claims that concession revenue earned by the Colts from September 2021 to June 2022 at Sadlon Arena was not reported or paid to the city. According to the review, the city's portion of that revenue was calculated to be $50,717, not including HST.
The audit report concludes the city should work with the Colts to identify and collect the city’s portion of non-cash consideration received, such as services and gift cards, and collect the city’s portion for the three seasons owed (2019-20, 2021-22 and 2022-23) for eligible advertising revenue.
And the city should continue to perform periodic physical observations of the signs inside Sadlon Arena, by comparing the signs seen there to the advertisers reported on the corporate sales summary. If significant discrepancies are noted, the city should exercise its contractual right to examine records to support the advertising revenue reported.
The city could also consider whether alternative advertising revenue-sharing arrangements with Sadlon Arena, such as a flat fee rather than a portion of advertising revenue, might be beneficial.
