Winnipeg Free Press

Winnipeg Free Press (Newspaper) - October 11, 2008, Winnipeg, Manitoba C m y k Page a6 i n 2004, Sam Katz swept into the mayors office on the basis of his reputation As an affable shrewd and highly motivated businessman. He was the Man who created can West Park the open air downtown stadium thatus the envy of minor league baseball. But a month Long City Hall squabble Over a property next to the Ballpark has brought to Light the complicated connections Between the Katz owned Winnipeg Gold eyes and a Ball club controlled non profit organization that built the taxpayer funded stadium. A free press investigation into the interlocking relationship Between the for profit Gold eyes and the non profit Riverside Park management has raised questions about the transparency of the arrangement both in terms of common business practices and the involvement of Winnipeg Gas highest elected official. Legal accounting ethics and non profit governance experts suggest that the relationship Between the Gold eyes and Riverside Park is unusual from a business perspective casts a negative pall Over City Hall and May permit the baseball team to put off paying some of its taxes. Co founded by Katz in 1997, Riverside Park management was created to hold a leasehold stake in the future can West Park a stadium that would eventually seat 7,482 after it was completed in three stages for approximately $ 15.9 million. Three Levels of government and the pan am games society contributed $ 8.8 million to the project while the Gold eyes and Riverside financed the remaining $ 7.1 million. Under a Complex arrangement Riverside Park leases four parcels of City land the baseball stadium and adjacent parking lots from the City of Winnipeg and sublets the land to the Gold eyes. The team in turn receives payments from Riverside Park presumably to pay Back part of the construction debt. Between 2000 and 2005, Riverside Park reduced its debt to the Gold eyes by $ 1.3 million according to financial statements filed in court in response to a lawsuit from Crocus fund investors. During the same period the Gold eyes increased their annual rent payments to Riverside Park from $ 575,000 to almost $ 1.09 million according to the financial statements. In 2000 and 2001, the Gold eyes were Only supposed to pay Riverside Park $ 75,000 a year according to a copy of the original lease filed with the provincial municipal Board. A corporate lawyer and taxation expert hired by the free press to review the Gold eyes financial statements could not draw any conclusions about the purpose of the accelerated rent payments primarily because he did not have Access to Riverside Park managements books. Former president Katz and current Riverside Park management president Jason Mcrae King have refused to release the company is books. Unlike charitable organizations non profit organizations Are not required by the Canada Revenue Agency to release their books. Without Riverside Parks statements it is impossible to Tell whether the non profit organization amassed a surplus during the years 2000 to 2006. Under Cra rules non profit organizations Are allowed to carry surpluses but the excess Money can not be distributed to anybody because non profit organizations do not have shareholders. Riverside Parks main expenses Are lease payments to the City of Winnipeg in lieu of realty taxes. In 2008, those payments should have amounted to $ 328,000, according to City documents obtained by the free press. But in 2005, when the Gold eyes paid Riverside Park $ 1,092,000, the non profit was Only required to pay the City $ 243,000, according to City documents. The company Likely also had other expenses such As professional fees and salaries paid to its three directors president Mcrae King and property developers Robert and Sandy Shindleman. But since the non profit Riverside Park does not pay corporate taxes it is possible for the for profit Gold eyes to reduce its own corporate taxes albeit Only in the Short term by paying its sister company More Money than Riverside needs to cover off its expenses. In simple terms the More the baseball club pays in rent during a Given year the less taxable income it has the test of whether the accelerating rent payments Are legitimate would be if a third party that is a company with no connection to the Winnipeg Gold eyes or Riverside Park management would deem those rent payments reasonable according to the corporate lawyer hired by the free press. But again that can not be determined without reviewing Riverside Parks books to see the company is actual expenses. Riverside Park president Mcrae King said he does not want to release the books because that would result in another newspaper Story about the company. I dont see anything to gain he said in september. Katz who resigned his Riverside Park presidency on april 23, declined to answer questions about the accelerated rent payments during an interview earlier this week. But in a september interview Katz said there is no Long term tax advantage to transferring Money from the Winnipeg Gold eyes to Riverside Park. It has nothing to do with tax avoidance whatsoever he said. In the end everything has to be accounted for. Gary Miles a partner in the Winnipeg chartered accounting firm Miles & Shaffer lip said he too does not see any Long term tax advantage to the interlocking relationship Between the Gold eyes and Riverside Park. But he said he can see no reason for the baseball club to set up a non profit company to build can West Park when it could have created a for profit company. Riverside Parks ostensible non profit mandate Katz said it was created to allow children to Access can West Park although the company is articles of incorporation make no mention of this does not make sense since the Ballpark is used by Amateur sport and Community groups Only 11 times a year Miles suggested. Theress something were missing he said. Ism totally mystified As to Why they need a non profit corporation. Colin Craig the Manitoba director of the Canadian taxpayers federation said the Winnipeg Gold eyes never should have created Riverside Park management. Why was it set up this Way in the first place it just seems to be a Messy operation land from the City is leased to a non profit which then leases it to a for profit company. It should have been leased directly to a for profit he said. Craig a former City Council employee called on Riverside Park to release its books especially because the company came before City Council to change the terms of one of its leases in september. Riverside Parks non profit status was also questioned by Pat Hardy a Winnipeg consultant who helps charities and non profit organizations create governance structures and raise Money. Anybody can set up a non profit she said and theress not a lot of oversight the corporate lawyer hired by the free press to review the Gold eyes financial statements said he has never seen a relationship similar to the Gold eyes Riverside Park management arrangement. He said he would never advise a client to set up a non profit organization calling such an entity a regulatory Black Hole. As of april 6,291 Active non profit organizations were registered in Manitoba according to a provincial finance spokesman. A further 331 non profits registered federally or in other provinces were also Active in Manitoba he said. According to Manitoba ass corporations act company directors officers shareholders and creditors can go to court to ensure their non profits comply with their intended mandates. So can the director of the companies office but Only where there is some overriding Public interest involved such As fraud or Public safety the provincial finance spokesman said in a statement. A spokeswoman for the Canada Revenue Agency declined to be interviewed about Federal oversight procedures for non profit organizations. Typically Cra audits Are triggered by unusual filing patterns. Non profit governance consultant Hardy said she is not aware of any oversight mechanism employed by the Cra to ensure non profit organizations conform to their mandates. Winnipeg Gas leading ethics expert said it of Manitoba ass Centre for Gold eyes rules Are wrong they re mistaken. They promote cynicism in the political process and they discredit the whole system he said. A 6 Winnipeg free press saturday october 11, 2008 saturday special Winnipeg repress. Com fair Ball examining the ethics at Riverside Park 1 3 Bartley Kives follow the 1. Winnipeg Gold eyes the baseball Park and the adjacent parking lots from Riverside Park management. In 2005, it paid $ 1,092,000 in rent to Riverside Park. In 2000, it paid $ 575,000. 2. City of Winnipeg owns can West Park and several adjacent parking lots which it has leased to Riverside Park management. 3. Riverside Park management leases can West Park and the adjacent lots from the City for $ 1 each plus rent in lieu of realty taxes. Those taxes should amount to approximately $ 328,000 in 2008. In 2005, they were approximately $ 243,000. Riverside Park is also in debt to the Winnipeg Gold eyes presumably to repay the Cost of building can West Park. Between 2000 and 2005, Riverside Park reduced its debt to the Gold eyes by $ 1.3 million. Sources City of Winnipeg records Winnipeg Gold eyes financial statements. The Winn 2 does not matter whether Riverside Park managements relationship with the Winnipeg Gold eyes complies with Federal statutes. The issues in this Case dont pertain to legality they pertain to morality. Its what we Call Public service ethics said Arthur Schafer the director of the University professional applied ethics. Schafer one of katzes former teachers is a regular critic of the mayor. Schafer said the mayor should go out of his Way to engage in business practices that surpass the minimum ethical Standard expected of people who Are not elected officials. He believes Katz should have divested himself of the Gold eyes and any other companies that do business with the City. If the rules in place at the City permit the mayor owning the Gold eyes the allow dollars Nipes l club sublets can West Fol he d g $ a 06_ oct 11 08. Ind a6 10/ 10/ 08 7 35 27 pm ;