Third in a series of articles examining the Comox Valley Economic Development Society
If a citizen wants to know the salaries or travel expenses of their elected officials or local public employees, or how much their municipality spent on new streetlights, that data is readily available. If not, the public can obtain any financial data through a Freedom of Information request.
Private individuals and organizations, on the other hand, have no obligation to talk about their finances in public. And the Freedom of Information Act doesn’t apply to them.
The Comox Valley Economic Development Society exists somewhere in the grey area between these organizational models. It is neither a private or public organization.
CVEDS is a so-called arms-length entity. It delivers a service that CVRD directors two decades ago determined did not easily fit into the traditional administrative government model. It takes public funding, but acts independently.
And the limited financial information that the society releases publicly has long been a frustration for both citizens and elected officials.
CVEDS does not follow the standard financial reporting model used by all public institutions. They have created their own reporting format that does not break down the individual cost of its various initiatives or the wages and benefits of individual employees earning more than $75,000, a requirement of public reporting since the early 2000s.
Despite requests for more detailed financial information the CVEDS board has declined to provide it. That has raised debate over whether the public should expect that the finances of groups and organizations funded largely, but not exclusively, by taxpayer’s money be open for public scrutiny.
A 2014 performance review of the organization by Urbanic Consultants observed, “While CVEDS has been providing audited financial statements annually per the Service Delivery Agreement, the statements do not necessarily give an account of how taxpayer money is being put to use.”
And, the consultants added, “the unique political landscape of Comox Valley warrants an effort to earn, build and maintain social license within the community.”
Sources of CVEDS income
The society holds a contract with the Comox Valley Regional District and received more than $1.2 million from local taxpayers in 2018 and another $290,000 from provincial and federal governments, according to its most recent unaudited financial statements.
Complicating the issue of financial transparency, the society also received the Municipal and Regional District Tax, better known as the hotel tax. Those funds come from private businesses — primarily hotels — that have agreed to add a two percent surtax onto their room rates to promote overnight tourism for the Comox Valley.
Visitors Centre on a weekday
CVEDS other income comes from advertising and ticket sales, retail commissions and bookings and earned interest, which are not technically public funds, although they wouldn’t be possible without taxpayers’ money propping up the society.
From the 2018 unaudited statement of financial position obtained by Decafnation, the Economic Development Society received $1,202,310 from local taxpayers as of Dec. 31, 2018 and another $1,003,522 from other public and private sources. With amortization of deferred capital contributions, last year’s total revenue came to $2,272,618.
Those other sources of revenue included the hotel tax ($320,781) and funding from the provincial government and agencies ($289,976). Other income amounted to $460,051, and the deferred capital contributions added $66,786.
CVEDS spent all but $76,742 of that income.
The society’s financials also show capital assets of $4,989,058, which is the assessed value of the Visitor’s Centre property and the building.
How CVEDS spends it
Wages and initiatives are the society’s two largest expenses.
In 2018, wages and benefits at $704,473 were the second biggest expense, accounting for about 58 percent of $1,213,605 total general expenses, not counting the cost of initiatives and contract services that CVEDS breaks out separately. Wages and benefits were about 32 percent of all expenses ($2,195,876).
There is no breakdown of how wages were split between CVEDS’ five full-time employees and roughly 4 FTE at the Visitors Centre, although some public officials have unsuccessfully requested information about individual compensation.
According to Schedule 6 of the financial statements, which shows income and expense by its three main focus areas — economic development, the Visitors Centre and destination marketing — wages and benefits are almost evenly split between economic development ($276,955) and the Visitors Centre ($282,388).
But only $145,129 in wages were attributed to destination marketing, which is the source of the largest share of CVEDS revenue, coming from the hotel tax, provincial grants, the CVRD and event revenue from the BC Seafood Festival and Expo.
An analysis of the wage break down indicates that CVEDS staff spent nearly as much time managing the Visitors Centre as it did on economic development, and nearly twice as much time as they spent on destination marketing. That has raised some questions considering that the festival is the society’s single largest event.
Decafnation asked Board Chair Deana Simpkin and Executive Director John Watson on Sept. 23 to explain the distribution of wages among the society’s activities. Neither have responded.
Cost of initiatives
CVEDS spent $982,271 on initiatives and contract services in 2018. It was the single largest expense item.
But the financial statements provide no further details. The line item is not broken down to explain how much was spent on individual initiatives or even similar types of initiatives.
However, from an analysis of the individual MRDT and destination marketing operating statements, included in the overall financials, it appears that about half of the amount spent on initiatives, $464,978, represents the cost of staging the BC Seafood Festival.
Watson would not confirm or deny that estimated cost, but did say the festival is the society’s single largest initiative.
“(The Seafood Festival) is the largest single event and is steadily growing each year. Starting from a single evening it has now grown to 10 days of various activities and many, many partners,” Watson told Decafnation.
Lara Greasly, CVEDS’s marketing and communications manager said the “Festival/Expo Income and Expense … is the largest event supported by the Destination Marketing program.”
Greasly said tickets and related sales make up approximately 43 percent of revenue for the Signature Weekend and Expo. Sponsorship and related contributions comprise the other 57 percent.
On the expense side, 38 percent of total expenses were spent on marketing the event. Other expenses include the Seafood Expo – 12 percent, rentals/site – 20 percent, food and beverage – 12 percent, entertainment and competition – 5 percent and production — 13 percent.
Guarding CVEDS financial data
Getting CVEDS financial information can be difficult.
Even the Comox Valley Regional District is unclear whether it should share CVEDS’ financial statements. When Decafnation asked for a copy of the 2018 statements, the CVRD initially said it would provide them, and then later changed its mind and refused.
The audited statements were available, however, at the society’s annual general meeting in May.
The availability and depth of CVEDS financial reporting partly results from the nature of its unique contract with the CVRD.
Private contractors with local governments have no obligation to provide any public information. But they bid on competitive contracts.
Because the CVRD created the Economic Development Society through a bylaw, its contract is regarded differently. There is no Request for Proposal issued and no other individual or organization can bid on the contract. And the regional district is the society’s only contract.
According to some, that makes CVEDS immune from divulging further financial information.
So the question arises: Can taxpayers and elected officials reasonably assess whether CVEDS provides an acceptable return on investment with the limited financial information available to facilitate public understanding?
Return on investment
In the 2014 CVEDS performance review, Urbanics Consultants notes that the results of economic development activities are “notoriously difficult” to quantify. But the consultants recommended that CVEDS start tracking their work for its direct monetary impact versus resources expended.
“We feel that there will always be a certain level of scepticism surrounding the value of CVEDS activities unless it can produce the metrics that taxpayers want (e.g. jobs added, tax revenues increased, etc.),” the consultants wrote.
That recommendation has not been addressed says CVEDS Director and Vice Chair Bruce Turner because economic development is a complex activity. He says there are no metrics that could measure the results of some initiatives.
Besides, Turner says, only about one half of one percent of annual Comox Valley tax revenue is allocated to CVEDS.
“We’re not spending a lot of money on economic development,” he said.
But figuring out how that money is spent concerns Area B Director Arzeena Hamir.
“One of the frustrating things for me as an elected official is tracking where tax dollars are spent,” she told Decafnation. “The CVRD provides a certain amount for destination marketing and a certain amount for economic development. With the way the financial statements are currently presented, I have a hard time tracking if citizens are getting value for their tax dollars. Where where those ED dollars spent and what was the impact? I have a hard time getting those questions answered.”
Hamir says if individual industries can’t say that CVEDS activity helped move the dial, “then what are we doing with our tax dollars?”
Turner says every CVEDS activity has a KPI — key performance indicator — attached to it, and they are listed in the strategic plan as expected results.
But when asked for the KPIs for the BC Seafood Festival and Expo, Turner referred Decafnation to CVEDS Business Development Officer Geoff Crawford who provided a link to a document showing photos and statistics from the most recent event.
Turner says these KPI statistics, such as number of tickets sold, are “output” measures, which he distinguishes from “outcomes.”
“Outcomes are those longer term results beyond the control of CVEDS alone,” he told Decafnation. “While CVEDS can contribute to their achievement, outcomes require the collaboration of all the primary stakeholders in the Comox Valley … and the province.”
Turner said investments in economic development compares to a municipality investing in infrastructure, “it’s not so easy to measure.”
“How do we measure the value or benefit of the information provided by CVEDS that helps small businesses make better business decisions to remain competitive?” he said. “How do we measure the contribution to well-being and wealth preservation and growth that economic development contributes to all community members. For example, would our homes retain their value with economic decline?”
But Area A Director Daniel Arbour asks that question in a different way.
“If there was no BC Seafood Festival, would the Baynes Sound shellfish industry collapse?” he told Decafnation. “There should be measurable outcomes.”
CVEDS Board Chair Deana Simpkin takes a more practical approach.
Simpkin measures the success of events like the seafood festival by the increase in traffic through her downtown Courtenay restaurant, High Tide Public House.
Next: How different sectors of the Comox Valley view CVEDS and has the society rebuilt relationships with complimentary local organizations.