Public Accounts Committee

1997-03-04

Newfoundland and Labrador — Committees

March 4, 1997

The Committee met at 9:30 a.m. at the Glynmill Inn,

Corner Brook.

CHAIR (Mr. E. Byrne): Order, please!

Good morning. First of all, I would like to take

the opportunity to introduce the Committee members. My name is Ed Byrne. I am

the MHA for Kilbride and Chairperson of the Public Accounts Committee. On my

right is Doug Oldford, MHA for Trinity North; Anna Thistle, MHA for Grand Falls

- Buchans; Tom Lush, MHA for Terra Nova and Vice-Chair of the Committee; Jack

Byrne, MHA for Cape St. Francis; and Don Whelan, MHA for Harbour Main -

Whitbourne.

If you would like to, you can go ahead and

introduce yourselves, just for the record.

DR. SEXTON: Thank you very much, Mr. Chairman.

First of all, on behalf of the Marble Mountain

Development Corporation, I would like to take the opportunity to welcome all

these gentlemen and ladies and your staff here to Corner Brook for this hearing.

My name is Bob Sexton. I am Chairman of the Marble

Mountain Development Corporation. On my left is Mr. Bill Kennedy, our former

Vice-Chair. He is now retired from the board. On my right is our former

Executive Director, Mr. Michael Blackmore, who is no longer with us. These are

the three people we were asked to bring to this hearing.

CHAIR: I would like the Auditor General to go

ahead and introduce herself and her staff.

MS MARSHALL: Thank you. I am Elizabeth

Marshall, the Auditor General. Immediately to my right is Mr. John Noseworthy,

Deputy Auditor General. To my left is Mr. Martin Hattenhauer, an auditor with

the office. I have also invited one of my staff members from the Corner Brook

office who worked on the audit, Mr. Scott Walters, to attend here this morning.

CHAIR: Thank you.

DR. SEXTON: If I could add, too, we also have

one of our staff members, Ms Lorraine Patten, our Administrative Assistant now

at Marble. She is not our staff member now, but she was during this period. I

invited her along.

CHAIR: Fair enough. I believe, in getting some

formalities out of the way, some of the witnesses have to be sworn in for the

record. You might do so Elizabeth, thank you.

SWEARING OF WITNESSES

Martin Hattenhauer

Michael Blackmore

Dr. Robert Sexton

William Kennedy

CHAIR: Thank you, Elizabeth.

I would like to take the opportunity now to welcome

some members of the general public. This is an opportunity to exchange

information on the matter before the Committee dealing with concerns or opinions

raised in the Auditor General's report of 1995 with respect to the Corporation.

On being appointed Chairperson of the Public

Accounts Committee, over the last couple of months when we first met with

groups, I took the opportunity to come out and meet with Dr. Sexton, just prior

to Christmas, to explain the process. This is a process that is not politicized.

We are not a political body although we are politicians. Our role is to deal

with the expenditure of public monies, an accounting of the whole hearings.

We decided to come as a committee, and honestly, to

deal with the Marble Mountain Corporation for a variety of reasons, not the

least of which is because the Corporation has never been before the Public

Accounts Committee. It also provides an opportunity for the Corporation to

outline their concerns with what may be in the report, what their view of Marble

Mountain Corporation is now and where they see it going, and for a frank

exchange of information.

I would like to ask the Auditor General if she has

any opening comments, and then we will provide the same opportunity to the

Corporation. From there, the process we normally follow is to then have members

of the committee ask questions and we will get into the direct exchange of

question and answer. I will turn it over now to the Auditor General.

MS. MARSHALL: Mr. Chairman, I do not have an

opening statement so I will just turn it over to the Corporation.

CHAIR: Dr. Sexton.

DR. SEXTON: Mr. Chairman, I would just like to

express our thanks for the opportunity to explain all of the things that came up

in the Auditor General's Report, and also to take you at your word that this is

certainly not a political venture, and towards the end of the day, or whenever

it is appropriate, to put forth our views as to where we think Marble Mountain

should go. To me, this is the single most important part of this whole process,

in that it gives us a public venue and it goes into the record as to what we

think, having been involved with Marble Mountain for almost five years, should

be the future of Marble Mountain. That is what I look at as the greatest part of

this process.

Thank you.

CHAIR: We will now open up the floor for

questions. Would anybody like to start?

Ms Anna Thistle.

MS THISTLE: Thank you, Mr. Chairman.

I would like to direct my question to any of the

members of the panel. I know that here on Marble Mountain, as it is with ski

hills throughout the Province, that weather is a big concern, and I know, over

the past two or three years you have experienced some mild temperatures, which

has no doubt adversely affected conditions financially and otherwise at the ski

hill. Weather plays an important role in the bottom line of the ski hill. Do you

feel that weather is an obstacle or is it a big concern in determining the

future of Marble Mountain as being a four-season facility?

DR. SEXTON: Weather, I guess, other than money

- because you have to have money to put something there, but other than money -

is the single biggest factor, you can put what you like up there. If we had time

to take you on a tour of Marble Mountain, for instance, you could see that we

have what we would consider now almost a world-class facility in the ski world.

It is not in the all-season end of it because we have not gotten that far with

our development but, if you were up on the weekend, just to give you a very

graphic and specific example, on Friday, our attendance up there was pretty much

the norm, we had 1,000 people floating around on a Friday afternoon. On

Saturday, we had a couple of thousands because it was two days just like you see

out here, a little warmer. Sunday, it poured rain all day and other than the

crowd of us who were there say, running a race - there was a couple hundred of

us involved with the race - there were probably fifty skiers at the hill. So

when you put that on a graph on Monday for what your take was on the weekend,

which is what determines how well the place runs, it just drops right out of

sight.

On the back here, if you can see that, and we can

bring it a little further forward, because I think it is very germane to your

question, is a graph that Mr. Kennedy had put together back some year-and-a-half

ago, and I would defer to him now to go back and explain to you, just how

critical skier visits are, because the whole thing works on the basis of that

graph back there. I also have for you, and you can take this with you, a bar

graph I made up myself on the computer that shows skier visits are at the centre

of everything. If we do not have the skier visits, nothing works.

MR. KENNEDY: May I reply as a follow-up to

that, that weather is the single biggest risk, I guess, in the ski industry

business. About a year ago, government brought in consultants, Ernst & Young, to

work on the privatization of Marble, and they prepared a very detailed report of

the ski industry in North America and worldwide. It is quite a report - a lot of

statistics, a lot of information, and the single, biggest risk is the ski hills.

Anywhere in North America, anywhere in the world you can see the world cup, the

weather - if the weather is good, things are good. And I think probably I should

stand up very briefly and point out, the projections that we made (inaudible)

forward to sell the hill to (inaudible) and to ACOA in getting on with this

(inaudible), we really joined the board somewhere here in 1992, and at that time

when we were asked (inaudible). Up to that time, the total revenues for the ski

club from 1963 was about $14 million, and that is (inaudible). It generally

climbs a little every year - $300,000 or $400,000, $500,000, $800,000, or

thereabouts.

The expenditures picked up in 1988 when the

Corporation was established and climbed and the total money invested and that

would be from every source including: UI, works services, social services,

sometimes there are people who go out and set up (inaudible). So the total

investment was $14 million and the total revenue was $14 million, and that was a

deciding point that this thing has a positive trend. Skier visits were up and

down, depending again on weather and so forth but they would generally climb up

to almost look at a break even. What then happened was, a decision was made to

put $9.2 million into a lodge and services associated with the lodge, $6 million

for the lodge and $9 million for the services. In 1995 we spent another $6.1

million to put a new lift in and sort of finish the hill. The total would be $15

million, $15 million was spent. So we now find ourselves up here with government

investment, but from that year, they are (inaudible)to (inaudible) skier visits.

What happens, the skier visits - this is forty, dropped to forty-three. So that

line has gone down to here and that is a disaster. This environment now that we

are talking about, a wonderful facility and I think something that we really

believe in and the potential but when you go from 75,000 to 76,000 skiers down

to 43,000, the revenue drops, the whole thing drops. Now people are asking: How

come we got so much money in Marble Mountain? So, yes, weather is indeed a

determining factor. If the weather had been good and we had met all our

objectives, we would be up to $100,000, somewhere there. This thing is

(inaudible). I do not know if that gives you your answer.

MS THISTLE: Yes, it does.

On a smaller scale - I am from Grand Falls -

Windsor and we have a Exploits Valley Salmon Festival there and to use a small

comparison, weather is the biggest factor in whether or not we make a profit or

we experience a loss. You have always had some good advertising here saying that

you are the best ski slope east of the Rockies, which is true. Has a season of

poor weather damaged that image and what have you done on a marketing scale to

counteract that?

DR. SEXTON: Well, it certainly has damaged it,

there are no two ways about it, because it is - I do not know if you have time

for this answer, but it has certainly taken us down a road we do not want to go,

in the sense that we have had to curtail a lot of things, development at Marble,

some of the things that we wanted to do with relation to skier visits and

everything. So the damage has certainly been done from that bad season we had

last year and I think what you have to appreciate, from a financial view, is

that if you are going to crank up an area like Marble Mountain to get ready for

anticipated 80,000 skier visits - as Mr. Kennedy explained on that chart in the

last season - we went out, before we even opened the doors and turned on the

snow-makers and spent $108,000 in snow-making and spent roughly $250,000 in

marketing in like August, September, October, November, leading up to

anticipation of a good Christmas season. Because most ski areas probably get

about 40 per cent of their revenue during Christmas, if they get a good

Christmas. So we had all that money spent before we even opened the doors last

year. The weather really severely let us down. Then, of course, it ends up with

a terrific deficit at the end of the year because our skier business dropped

back to 43,000 when we had budgeted for 80,000.

MS THISTLE: Have you done any tracking to see

if you have repeat business coming to your doors from outside the Province? How

widespread is that?

DR. SEXTON: Perhaps Mike Blackmore might be

able to give you more detailed information. I know we have systems in place that

- we have basically two types of skiers. You asked earlier about a skier visit

and how the weather affects it. We have essentially two types of skier visit:

one is a season's pass holder, and what we do is put in a factor of twenty-six.

We assume that if a person buys a season's pass, like Mr. Kennedy and myself,

for instance, this year, that he will make twenty-six visits. If you go to the

counter and buy a ticket, you will get included as a day pass, and then, at the

end of year, we can count up how many skier visits we had. When you get that

pass at the counter you will be asked where you are from and that sort of thing,

so we do track where people come from.

MR. BLACKMORE: The quick answer to that was in

1993 we had 79,000 skier visits: 58,000 of them were local, 16,235 were from

outside the Corner Brook area, from Grand Falls, St. John's or whatever, and

5,200 were from outside the Province. That would be anywhere from Halifax or

whatever. That made up 79,000, 80,000 skier visits in 1993. The percentage

generally outside the Province runs from 5 per cent to 10 per cent. Of course,

that is where we were working, to try to up that market.

MS THISTLE: Where -

CHAIR: If I could ask, just for a second, Anna.

Each time you speak, just mention your name for the record.

MR. BLACKMORE: Oh, I am sorry.

CHAIR: I neglected to tell you, that is my

fault.

Go ahead.

MS THISTLE: I would just to like to ask you

where, outside the Province, do these skiers come from? Is it basically Atlantic

Canada or the U.S. seaboard? Where are they coming from?

MR. KENNEDY: By far the majority are from

Atlantic Canada, and that is clearly shown in our 1994 master plan and marketing

projections. The bulk are from the Maritimes, Atlantic Canada, but there are

smaller numbers quite widespread.

MS THISTLE: Thank you very much.

DR. SEXTON: Every province is represented.

MR. KENNEDY: Yes, every province.

DR. SEXTON: Every province each year and most

of the northeastern United States, that area.

CHAIR: Jack Byrne.

MR. J. BYRNE: I imagine you have a copy of the

Auditor General's Report.

DR. SEXTON: Yes, we do, yes.

MR. KENNEDY: On Page 5 of that report the

Auditor General dealt with Board Governance. Basically, he said there were no

terms of reference for the board and some of its committee, and also that some

of the committee decisions are being made without final approval of the board. I

wonder if you could comment on that?

DR. SEXTON: Are you on Page 5?

MR. KENNEDY: Page 5, Board Governance.

DR. SEXTON: Board Governance, but does it not

flip over onto Page 6?

MR. KENNEDY: Page 6, too.

DR. SEXTON: Wait now until I get my own copy.

If you look halfway down we also found that the corporation's board is actually

involved in the day-to-day operations of the corporation, for instance. What you

have to appreciate is that at the particular time that the Auditor General came

and did their audit on us we looked upon it as a snapshot that they took on us

at that particular time, and they cut off their snapshot as it were.

If you would look at that chart back there we can

get into some detailed explanation of it. Bill, would you like to move that over

a little?

The green line that runs down that chart, and it

runs from 1992 up to the present, well, to the end of 1996, anyway, represents

the period that they were here and examined pretty well everything ahead of us.

You cannot read the chart, of course, from there, but if you could what you

would appreciate is that we were just really getting this whole thing cranked up

from the point of view that we came on the board, Mr. Kennedy and myself in

particular, and some new board members in late 1992, and then in 1993 our first

efforts were put into trying to secure some money from the government to keep

this master plan, not this one, this is the update, but the original one, going

because up to that point the government had put a certain amount of money into

Marble Mountain but it had kind of stalled. That was, certainly from my own

sake, the biggest reason that I took the job, was to try and keep that

development going, to find that money and get it into the hill.

That took all of our energies initially, getting

that money in place to get the thing going. Once we did we were fortunate. We

got the money in place, we got the lodge ready to go and all that. We did not

have any staff at the beginning. When Jim Walsh called me, or Minister Walsh at

the time called me and asked if I would take the job I told him that as a

volunteer it would be pretty tricky, but he said, do not worry, we have a

topnotch executive director coming down from somewhere who is going to do this,

but when we took the job and got into it there was no executive director, so we

had to start the search all over again.

In the meantime we could not operate without a

staff. We had, thank heavens, Ms Patten back here who had been with the board

all along and she was certainly very, very helpful in keeping us on the go. Mr.

Kennedy and Mr. Greg White, a local chartered accountant who was on the board

took over as interim executive director and we paid them on a per diem basis to

do all the things they had to do to get us up to a certain point. Then from

there we started to search for a new executive director which turned out to be

Mr. Blackmore.

When he came on the scene he immediately dived into

starting on that building, so in that particular period, when we should have

probably been reorganizing some of the things on the board we didn't because we

were just so involved with all these other things. It is not that we did not

give this a priority but you had to prioritize things and this ended up a little

further down the list.

MR. J. BYRNE: So, is there now a term of

reference for the board and the committees, all committees, and also with

respect to decisions being made? Has that been the case?

DR. SEXTON: No. I am going to defer to Mr.

Kennedy to answer that one because he had the best rehearsal of it.

MR. KENNEDY: I will probably add to the

question because the question is a very good question. We came on the board in

1992 and 1993 was a period of trying to get organized and get the funds and plan

the construction of the lodge, and it was an extremely busy year. In early 1993

when I came on we were going to be a development corporation and I was going to

use engineering skills and construction background to say, well, as a board

member here is how we should get this thing done and get it done efficiently and

effectively. Within four months we were now operating a hill with eighty

employees, a lodge, heat, lights, and roomers to take care of.

So our mandate changed like that from a development

corporation to a development operations corporation. We lost the executive

director of the operations part of it, the ski hill, when we took over the

assets. There was a lot of studies and there is a book there on how we should

run the facility, reorganize it and an organization chart put together, that was

in '93.

Through '94 our main objective again was to try to

get the thing on track as to how we could get tenders out there to get this

thing done on

schedule and on budget because that was one of the conditions laid

down by ACOA. There are many references throughout the notes we have there, one

in January and another one in March where we had executive and board meetings

and the comment was made, `we're bogged down, we don't have any people.' What we

had is one person, Mr. Blackmore, who came out of the private sector, not out of

the bureaucracy. We were now into a major government spending program where none

of us were government people, from talking about procedures and how to get

things done. I think our goal, my particular goal was to make darn sure that

from a dollar point of view, from a construction point of view, from a monetary

and cost control point of view, things were done properly and that is where our

energies were put. Unfortunately, it didn't come together to say, well we will

organize a board but it was constantly mentioned bylaws, board and so forth -

all throughout, no action. Why was there no action?

Somewhere in late '94 when we started to see the

light and we said well we are going to move into a new lodge. We now had the

ability and the funds to hire three directors. A director of marketing, who came

in in September and on October 31, 1994, we had a director of operations and a

director of finance. These people came on again, October 31, by November -

December, six weeks later, there was a PMP directive saying the corporation is

now going to be privatized. The act is going to be changed and there is going to

be a Marble Mountain Development Corporation Act. We were faced with - because

we had discussions on it saying, well what are we going to do with bylaws now?

We don't even know who we are anymore or where we're going to be. So again,

everything was put on hold to get through the next year.

With a bunch of citizens - I call them -

volunteers, coming in to do the things we had to do, it goes back to probably -

this is going to be a recommendation - somewhere, somebody owes it to the

volunteers, to the citizens that come in and say: I will give you my best shot

for this thing. They're saying, Mr. Kennedy, this is what is expected of you.

You are now going on a government board -now I am also on another government

board, I am on a Workers' Compensation Board, we have an enormous set up. We

have a very streamlined bureaucratic system. I call people that are familiar

with government procedures, obligations, directives, policies and so forth. Here

we are a bunch of people, all out of business saying: well what is it we are

supposed to do? The only thing we knew we were supposed to do is make darn sure

that the money was spent properly. Do you know who told us that? ACOA.

Throughout all of this there are dozens of references to ACOA. They put auditors

in, they put inspectors in, they gave us contract agreements, there was a team

of people that monitor every darn thing so that Gordon Slade eventually came in

some time here in late '94, early '95 and said, we are totally encouraged by the

performance of - actually it was July 12, 1995, we had a meeting with Gordon

Slade. Slade and Sterling Paton, they said they were totally encouraged by the

performance of the MMDC. My answer is that no we didn't do it because we had too

many other fires and that was incidental. It's not a good answer but that's it.

MR. J. BYRNE: With respect to that, I mean I

can see problems of people coming from the private industry into a government

situation and the format and what have you but your answer leads me to this

question, when will we see some action taken with respect to terms of reference

as directed by the hon. -

DR. SEXTON: As Mr. Kennedy just pointed out to

you, during this period from late '92 up to - again the snapshot period, if you

want to use that - we were constantly changing direction because our mandate was

constantly changing. One of the very first things

I did when I came on the board was to ask Mrs.

Patten, behind me here, to give me the ten most important things she thought,

having been there, and the continuity and that sort of thing, we should be

dealing with right away. She drew out several things, and one of the things she

put on the table was bylaws. So I started to read through them, and one of the

things that I did bring to the corporation was some good baggage, I thought, in

relation to bylaws and boards because I had just finished ten years as Chairman

of the Western Memorial Regional Hospital Medical/Dental Staff Bylaws and Rules

and Regulations Review Committee. After ten years at that, believe me, you get

to appreciate the value of bylaws, and how important it is to have them current

and up-to-date, especially working in a hospital environment.

I looked at it and thought: Well, gee, if this is

'93 - this was '93 by now - and these things... Well, here is part of the file;

I could not lift the whole file, to be quite honest with you. I put that down as

one of the very first items, that we should have an updated set of bylaws,

because I think perhaps in my opening statement what I should have given you is

a little bit of the history of how the Marble Mountain Development Corporation

came about way back when the ski club had gotten to the point where the

government would not put any more money into the hill, and let just a pure bunch

of volunteers spend that money around the hill. If the development was going to

go ahead, there had to be a government-run corporation put in place, and that is

where the development corporation came from.

The original bylaws - and I have not had a chance

to look at this record that you brought with your today - there they are, just

put together on several sheets of typewritten paper that were never really sort

of properly authorized by the government at the time. You have to realize we

have had two changes of government since then. This started with a P.C.

government back in 1987-'88 and then moved into a Liberal government.

The point I am trying to make is that when I went

there myself I was certainly very cognisant of the fact that the bylaws here

just did not apply. There were things in the bylaws that were written in 1988 to

get the thing going that just did not apply any more. We started out as early as

1993 when, as Mr. Kennedy made reference to before, we hired the firm of Earle

and Squires to produce this document which was the changeover from when the old

Corner Brook Ski Club, which is now the Marble Mountain Ski Club, for the

purposes of record, was running the ski hill. Because when the government took

it upon themselves to put this corporation in place they had to have total

control, obviously, of the hill; so they took over all the assets that were up

there. The ski club sold it to them for the dollar, which has really never been

paid yet.

From that point on the government needed someone to

run the ski hill part of it while the board was doing the development. The

obvious one to do it was the Corner Brook Ski Club, and they had a five-year

contract with them. And the bylaws were essentially written in that formula at

the time, in 1988. That is why I quickly realized that these things had to be

reviewed.

Then, when we got to the point where we were

prepared to take over the operation ourselves because the ski club, when they

saw that we were building that lodge, and what that was going to entail from an

operations point of view, they did not want to be involved with the operations

up there any more, so we took it over. Based on that, we produced this. And even

in this document we asked Earle and Squires at the time - they did it, and they

did it as sort of a financial, procedural type of thing - to put together

organizational charts, and what they felt would be job descriptions and proper

bylaws, and things like that. This was mid-'93 that we asked them. They did not

produce the document until late '93.

The point I am trying to make is that even though

we did not follow the bylaws that were there, they were not adequate but we were

constantly striving to change them, but people kept changing the rules of the

game. We went from the lodge development; then we ended up with another $6

million to put into the hill, so we had to spend all our energies on that, as

Mr. Kennedy has already said, to make sure government dollars were spent - not

that we were not aware of them. This is a document of our old bylaws, and I

follow the same format that I did in other venues, and put it on a spreadsheet

and gave it out to our board members to start looking at it and write the

changes they thought necessary. Before we even got into it the government, at

one of the meetings - was it P&P, you said, or -

WITNESS: P&P (inaudible).

DR. SEXTON: Told us they were going to change

the whole board anyway because with the sort of ongoing development that was up

there, it was time it was operated. And they were doing that on our advice,

actually, because Mr. Kennedy and I, and a couple of other board members, had

had meetings with one of the four. If you could see the red writing on that

chart over there, you would see that during this time span we have had four

separate ministers and six different ADMS and DMs to deal with. So we went at

them at one point and said: Look, we would like to get some changes in our

bylaws (inaudible) get through the system. They said: Don't bother, because we

are going to change the whole Corporation anyway. I hope that answers your

question. It is long, I know, but....

MR. J. BYRNE: I'm not sure if I'm missing

something here or not. I can understand the problems that have gone on because

of the way things developed and that, right -

DR. SEXTON: Yes.

MR. J. BYRNE: - but I think the last question I

asked you was when do you actually see something in concrete with respect to

terms of reference for the board of governors?

DR. SEXTON: I don't know. It is very difficult,

sir, to answer your question because we are in a total limbo right now. Again, I

can't answer the question specifically for you without giving you some of the

background again.

MR. J. BYRNE: Yes, I know (inaudible).

DR. SEXTON: If you look at that chart which

starts in 1992 and on the bottom comes out there about 1996, when we had that

particularly bad year that we had and privatisation was on the go, the board

again sat in limbo all through that period wondering: Are we going to privatise,

what is going to happen? We weren't told anything until September 17 1996.

Government held a press conference in the room next door here and announced -

and that was - 8:30 that morning I knew what was happening, but at 2:00 that

afternoon at the press conference the word came out that it wasn't going to

privatise. It was going to put a different corporation in to run the hill, that

we as a development board would stay there and... do what? We still don't know.

We are still sitting there sort of wondering what do we do. We obviously haven't

put any energies into rewriting the bylaws or anything because we just don't

know where we are going. I hope that answers your question.

CHAIR: I would just like to ask for

clarification (inaudible). I think the question has been answered. Earlier Mr.

Kennedy you alluded to the fact that you have been a board member since 1992. It

seems, and correct me if I'm wrong, and if you would like to elaborate on it I

would like you to do so, but in terms of government's role in the development of

Marble Mountain that it has never been clear. It hasn't provided the direction

that, if I'm to assume that is what you are indicating, you as a board member

think it should have. As a result it has left not only the board members in

somewhat of a dilemma, but it has also left the development of Marble Mountain

therefore in somewhat of a dilemma. Can I assume from your statements

(inaudible), or would you be able to...?

MR. KENNEDY: Mr. Chair, what a question. You

really have zeroed in on the nub of the issue. I think probably most people in

this room, when you look out on a day like today, or drive past that hill, the

potential is tremendous. I am a believer. I mean, I'm a real believer. I think

there are a lot of believers, but there are some non-believers too. The question

is constantly being asked: Why is government putting so much money into Marble?

A lot of people don't have the vision.

The thing you are referring to, the nub of your

question, is we didn't get the support. We had verbal support. People's hearts

were there, but there was no funding, no organization, even though we had a very

solid action plan in 1988 and another one in September 1994, in the master plan,

which was our action plan. It clearly outlined where and what we wanted to do.

Every cent that our Corporation obtained from

government from the time I joined the board, Bob and myself - December 1 1992

was our first board meeting -, up till my last meeting, which was November 22

1996 - and back to the question you asked. The reason I resigned is because it

is in limbo, we have no funds and have no staff. What the heck are we going to

do with the terms of reference when we don't know where we are or who we are?

Every cent - back to the question you asked, Mr. Chair - had to be dragged,

worked, visits to St. John's, discussions, pleading, begging, such that if

somebody takes the time to read here, many times around the board table said:

What are we here for? They appoint us as an agency, ask us to come in, they

don't recognize or give us any funds or budgeting. What are we doing? Why don't

we all resign? Either they have us here to do a job, or not.

There are so many examples in the nine million and

how it was given in two different stages and, despite all the excellent support,

and I want to make that point, we got from ACOA and the SIID committee and the

SRD committee, both these people came forth with funds. The difficulty in

getting it through whatever the system is, whatever goes on, was extreme, and it

caused us untold hours and as an example: Board meetings, all meetings that took

place in 1993 was 134. That is not bad; we had a bunch of committees and so

forth. In 1994, there were 244 meetings. I happened to be on about four

committees. I was Chair of the Development Committee, I was vice-chair, acted

with Bob in all our trips to P&P, resource policy and ministers and others and

our begging because we were known as beggars -

CHAIR: So outside of weekends there was a

meeting every day or two.

MR. KENNEDY: Every day. I mean, every

day-and-a-half-

DR. SEXTON: There was a committee meeting or

somebody meeting.

MR: KENNEDY: The other thing is, that I was a

retired person and I was able to sit in on many of the job meetings because I

was interested in construction; I was interested in what was going on but, we

did not have and it is referred to - we did not get the involvement, we

complained about the lack of involvement from our department, we complained

about the difficulty in obtaining funds for construction - somewhere here we

lost our marketing director. That marketing director was with the corporation

going back to 1989 or before we came on the board, so we were left with one man

who was hired somewhere around mid-summer 1993, right here. Our marketing

director now had to go out the door; it was not four months later then another

marketing director was hired and that was through a whole process of: how do you

expect us to do this thing.

For many of us, professional people do not have

time to put in 244 meetings to be here at them and there were a lot of meetings

things had happened and not recorded. So we had lost our marketing director;

four months later a new marketing director was hired. You know how long, sir?

That is a rhetorical question and you don't know the answer but maybe I can tell

you very quickly, do you know how long it took us to get marketing funds to

allow that marketing director to work? From September 14 until sometime about

January 2nd or 3rd. We were four months without funds to market the hill and

incidentally, the lodge was officially opened February 10, 1995 and the lodge

was being built here.

Now any time you want a marketing director and you

want to sell a hill and you want to say what a great place to come, you want to

have money, and it would be while construction was going on, so you are saying:

Who is going to open this, you have to come and see it, just to see it. We had

no funds to market. That same analogy applies throughout this in construction,

grants for management because every year there was $135,000 for four or five

years given to the corporation to pay for administrative services.

Everything that we did, was like squeezing, you

know like taking blood out of a rock and that had caused the corporation and the

board and the single staff and a couple of staff members, extreme difficulty,

and then the question was asked, you know, and I think the question was well

directed about references and bylaws or committees and so forth.

We were so engaged in trying to put out fires and

keep this thing on schedule, and I think the beauty of it is, it did come in on

schedule, it did come in within budget and we met all the requirements that we

were supposed to meet from a financial point of view. If all the I's and T's

were not crossed and so forth that could be discussed later, but the thing was

done and it was done the way it should have been done and it was done on

schedule and budget, but it was with great difficulty, Mr. Chair.

WITNESS: (Inaudible).

CHAIR: No, no. That is fine, take the

opportunity and if I feel you are going on, I will interject.

WITNESS: Thank you, (Inaudible).

CHAIR: I would just like for the benefit of the

committee, Dr. Sexton, if you could, just explain, because you referred to what

your role is now since the change in terms of focus as of the September 21,

press conference in terms of where government is going now and what your role as

a board is right now. If you can just explain quickly, in a nutshell, the

organizational structure, for our benefit and for the benefit of the people in

the room, and for the record as well.

DR. SEXTON: Yes, Mr. Chairman.

As I said, that press conference was September 17,

and prior to that - I have to give you a little bit of background here, to

answer your question - we had spent the whole summer virtually on hold up there

because we were told that privatization was going to take place. Mr. Kennedy had

been appointed as our liaison with this privatization committee that the

government had put together, and they had called all the necessary tenders, and

things that they had to do. Only through sort of the rumour mill, which is

always working quite well, as you are all aware, did we have any inclination

that privatization was not going to occur, so we had no input whatsoever, as

again you are all aware because you were all involved, as politicians, at the

time. There had been an election, a complete change around in everything. We

ended up with a new minister who was totally foreign to what was going on at

Marble Mountain, and that was the fourth one that we had in this time period, as

I alluded to earlier, and we were, I felt, just totally adrift. We had actually,

with the previous minister, a very good liaison with him and his deputies in the

Department of Tourism.

Before the press conference came down, we were

asked to put together a board meeting that day. The press conference was 2:00

p.m. that day. At lunchtime we had a board meeting, and at the board meeting,

before we knew it, our minister had changed from the Department of Tourism to

the Department of Finance, the reason being that because of the severe loss that

we had suffered in the operations end of it the year before, the government felt

they would like to totally separate the operations from the development end so

they could get a good reading.

I told them at the time: All you have to do is look

at our books; it is separated. We have it there now, because by that time we had

finally gotten to the point - because we were quite cognisant of the fact that

we should separate our operation's expenses and revenues from our development

money, and I think we were pretty much there with our bookkeeping and accounting

systems. But they went ahead with that anyway, so we said: What is our role? If

we are not going to do the management, what is our role? They said: Your role is

still to be a development corporation, and any profits that the management

corporation makes we will give to you and you can develop with that.

So are still sitting there, wondering what the

profit is going to be for this year. We just still do not know. As I said

earlier to this gentleman, that is why we are not putting any effort into doing

anything like bylaws, or changing our governance methods, things that we know

need to be done.

We felt, when we finished the second phase of the

two developments - the lodge was the first one, $9.3 million for the lodge and

the base area development. As we both mentioned earlier, that took so much of

our energies. Before we got out of that we had secured the dollars from the

government to do the hill changes, which was another $6.1 million, and we put

all of our energies into that. When that was all finally finished, we thought:

Well, alright, let's get at some of this stuff. That is when I started

resurrecting this file here. That is what happened, so we have not done

anything. We are still sitting in limbo, waiting to -

CHAIR: Your role clearly is the development

aspect of the mountain.

DR. SEXTON: Yes.

CHAIR: The day-to-day management,

administration, is a separate entity altogether.

DR. SEXTON: Is a separate role now with... yes.

CHAIR: That is just what I wanted to clarify.

Okay, you have one more question Jack?

MR. J. BYRNE: Mr. Kennedy, you addressed this

question somewhat with your previous answers, but not specifically.

On page 3 of the Auditor General's Report there

were six incidents where the Public Tender Act was not followed and there was

work awarded, over $5,000 in each instance. The diagram there, figure 3 - one of

them I was curious about for sure was the marble work at $26,750, and the

explanation was that the architect knew of only one supplier.

DR. SEXTON: Yes.

MR. J. BYRNE: Could you go through those six

and give some kind of an explanation on those? That seems to be pretty weak,

that one in particular.

DR. SEXTON: Mr. Kennedy can certainly do that,

and Mr. Blackmore as well.

MR. KENNEDY: I think I may need some help on

it. I am not right into that kind of detail, but (inaudible) answer.

On the first one, for the marble, it was decided,

as the thing was drawing near completion somewhere in October or November, that

it might be beneficial if we were to put a local product, local marble, in

there, since it is Marble Mountain. We got a proposal from the architect

outlining how that would be done, and a rough estimate was put together that it

was going to cost us $70,000. We did not have it in the budget, because we had

strict guidelines on the committee that was set up by ACOA, which included Mike

Blackmore and myself and a person from Intergovernmental Affairs and ACOA, to

make darn sure that there was no (inaudible) expenditure.

We then talked with the Department of Mines and

Energy and said: Look, this would be a great thing if we could put marble on the

counter-tops and the tables. They said: Yes, it would be, because you are

selling a local product. If anybody has been up (inaudible), there are many

types and colours of marble, green, ground, browns and greys. What we then did

was brought it to the board, it was discussed at the board. It was agreed that

if there was some way of covering off the cost, or the bulk of the cost, because

the total cost was somewhere around $70,000, Paul Dean and the Deputy Minister

of Mines and Energy worked out a program with the federal government and got the

federal government, not in St. John's but anyway somewhere in Atlantic Canada

that is into this industry trade thing, to come to the table.

AN HON. MEMBER: (Inaudible).

MR. KENNEDY: Halifax, was it? To come to the

table and agree to pay half, 50 per cent, because it was selling a local

product. From that point of view we said: We are still stuck with about

$30,000-some odd here. I think it was $30,000, wasn't it, whatever the figure

might have been. It was about $26,000 there now, yes. What we then did is said:

The only way we can cover this off, we had some additions, deletions, things in

the budget that we were working on, and I can provide a list of things that we

cut out trying to save money, because other things - there was a contingency

built in there. We knew we were going to have to spend more money. We were

getting this thing down to a manageable figure.

Then what we decided to do - of about $26,000 - if

we did buy eighty of these tables, what about if we cut a slot in the side of

the marble and put a brass plaque there and said: This table is donated by Bill

Kennedy, and Bill Kennedy would have to pay $300 for it? If we could do that

with a bunch of tables we would bring in another $10,000 or $12,000, and we did

that, and there are plaques on the tables and so forth. In the final analysis we

had it down to what we thought was a workable figure of about $10,000 which we

could take out of our budget.

Did we go to public tender? No, we did not go to

public tender. Should we have gone to public tender? Again, I say: Where is the

directive? Nobody was standing over us saying make sure you do so-and-so, and

the limit. We weren't familiar. Ignorance is no excuse, I realize that, but we

were ignorant of the fact.

What then happened was we had a proposal. We talked

to the architect through the development committee, said: What are we going to

do here? What the architect then suggested was: Look, Nova Tile does some of the

best polishing in marble in Atlantic Canada and they are in Halifax, or in the

Nova Scotia area there. Then we worked on a - this is a very ingenious deal. We

got a local supplier here to go out about eight miles outside of Corner Brook on

a place called Lady Slipper Road and Twelve-Mile Dam Road, collect marble

boulders, green, browns and greys, get a loader, bring them to the side of a

woods road, get a truck to put them on. What truck were we going to get? The

only truck we could get is the people who bring in the Nelson monuments. When we

are all buried we are going to get a Nelson monument. So you bring in the

headstones. They were going back to Nova Scotia empty, so we asked: Would you

take these things back empty for no charge? They said: Oh yes, we will take them

back.

Now what were we going to do with them? Nova only

polishes, so we had to ship them to Sussex, New Brunswick, to get them cut into

one-inch slabs. They cut them in slabs. They had to be taken from Sussex, New

Brunswick, again by Nelson, because they were taking headstones down there and

they could put a box on, they put a box of our slab marble, and they brought it

down to Nova Tile, and Nova Tile polished it. Nova Tile shipped it back here. We

accepted Nova Tile's proposal for about $32,000 based on all of the above. No,

we did not go to public tender. We thought we got the best deal out of it.

On the cable, that was a cable that was damaged. It

was a tech cable, it is an underground cable. Do you want me to address that

question, sir? Do you want to address all of them or just one? What do you -

MR. J. BYRNE: I'm curious about all of them to

be honest with you.

MR. KENNEDY: I will scan down through all of

them.

MR. J. BYRNE: I know it has been addressed

somewhat in what has happened, (inaudible).

MR. KENNEDY: Yes, but nobody knows the

rationale. On face value no, there was no tender call, amen, but that is the

background. The cable was a damaged cable. It is underground cable, about an

inch in diameter, that carries all the power up to the chlorination building and

they run it through the hill everywhere. There was a lot of work on the hill and

the cable was broken up. To get a cable replacement, we had to go out and buy a

roll. I think Mr. Blackmore can comment on it. I will go through it, Mike, and

maybe you can give me a follow-up later.

To buy a roll, it would have cost, I do not know,

maybe $10,000, $20,000. We did not want a roll of cable, we wanted a piece of

cable, so one of the suppliers locally said: Look, I have so many feet left on a

roll and the price is so and so. So we said: You made a deal, $6,000 - you have

it. Public tender? No - discussion with two bidders, though. It may not be shown

but there was discussion. Print Advertising, Agency of Record, Target Marketing,

all the work - the Provincial Government at the time were doing the work for our

board before we came on - there was never any discussion, although we did, at

one of our annual board meetings say: We should look at our Agency of Record and

call tenders every three years.

At that point, and this was early in the game, we

did not, so any of the marketing, any of the work that they did, the print work

for our marketing program, was done by Target Marketing again because they were

with the board as an Agency of Record. Whether there was tender called before my

term there, I do not know; I do not know if there ever was. Snowboarding sander

- we looked around for prices of sanders, snowboards, they were $15,000, $20,000

new. One of the suppliers said: Look, I think I know somebody who has a

demonstrator, a used one, in Halifax and we can ship it down to you. It is about

$10,000, so we bought a used one and that is where that one came from. And the

rental equipment was equipment for the rental shop and we have a certain type of

equipment, a blizzard ski or whatever or a certain type of boot. We wanted to

stay with the standard so we were pretty much bound to go to the supplier of

that particular brand to keep a continuity of types of boots, types of poles,

types of skis and types of bindings, rather than have it mixed up. So we go at

these people, but generally, if it is any degree of comfort, these are

promotional items, and these guys, if they can get their skis on the hill,

whatever brand of ski it is, it is a big plus for them to have them on any ski

hill, like having the ski instructors dressed up in certain type of uniform or

whatever. So they give top prices to get their product in. That is the best

answer I can give. Mike, I do not know if you want any follow-up on them.

MR. BLACKMORE: Yes. We wanted standardized

equipment, I think it was boot (inaudible) time, and to stay with the same boot

style and so on, we decided to go with one supplier. At the time, we solicited

prices from all the suppliers and kind of browbeat them down to, you know, you

are not getting a walk here, and we traded the prices and that is what we ended

up with. Most of it was done through verbal discussions, some fax messages but,

as to a formal tender call, no.

CHAIR: If I can assume from your comments, just

again a clarification for my purpose, at no time since you became board members

up until now, has anybody from the government ever sat down with the board

members to outline, in terms of compliance for the purchase of anything the

Development Corporation may need, what would be required in terms of compliance

with the Public Tender Act, compliance with hiring consultants, compliance with

renting equipment, et cetera. Nobody, up until this point, has ever come out and

sat down and gone through that with anybody?

MR. KENNEDY: No question, absolutely not one,

single, solitary visit, not one. And even as the Auditor General's report says,

it is the first time in seven years that the Auditor General has come forward.

And, in coming forward, it was right in the middle of a $9 million construction

program finishing in that summer of 1995 and a $6 million one beginning and with

three new staff members about seven months on the job when they first came in

here on May 17, I think, of 1995. The only people, Mr. Chair, who gave us that

direction, that input, support and people, back-up people - and I call that

back-up because it is support from an auditing point of view - was ACOA. They

were constantly working with us and on the case, and I can pull out reports over

here that were submitted, great, detailed reports, every single month were sent

in to the SRDA and SIID committees as to what we were doing, that was Fred Way,

in those days, and Gordon - there was a whole bunch of people who set up change.

They were the only people who got (inaudible).

CHAIR: Okay. Mr. Whelan.

MR. WHELAN: Page 7, Dr. Sexton (inaudible).

Under Monitoring of Master Plan, it says here: The Master Plan also projects

that approximately $56 million in capital additions will be needed from

1995-1999, which will require funding from an outside source. Have you acquired

any of that funding, and if so, how much and where from?

DR. SEXTON: This is the update of Master Plan

to which you referred; we have not acquired any funding for any of the ongoing

work. The funding we have already referred to, was in two parcels, the $9.3

million for the Lodge and base area development; and that is where we tied in

with NLHC to do that base area development for the condominiums - it was all

laid out. If you look at the plan we were working on at the time - and you can

have a copy of this as you like, of the $9.3 million - $6.2 million of it went

into the Lodge and the rest went into the base area development, street, sewers

and all that kind of stuff.

The second phase was the $6.2 million or so that

went into the hill; a new lift, new trails, a new water system for the

snowmaking and things like that, and that is the end of it. We have not had any

more funding and it is all laid out here. The next phase of our development

would have been $1.3 million had things gone the way that we wanted them. In

fact, I already had written a letter -even though we knew that we were faced

with a fairly huge deficit for the operations end of it, we had written the

minister of the day, Minister Grimes, requesting the funding for the next phase

which was $1.3 million. I won't tell you in public what he said to me but,

needless to say, we did not get the $1.3 million. That would have gone into

night lighting about $800,000. We had a little bit of night lighting up there

this year. The Development Corporation did have a few dollars that came its way

from - I am not sure if it was a tax rebate; I can find out exactly where the

dollars came from. But we put that to the management corporation and they worked

a deal very much like the one Mr. Kennedy described on a couple of the items

that this gentleman asked about, where we got the lighting put in. So we have

$8,000 worth of lighting but we should have $800,000. That is the only thing

that has been done with any development money since September of 1996.

MR. WHELAN: Going back down through the years,

and I do not know if this is a fair question to ask you, but I am just wondering

if you could sort of give us a bird's-eye view of the funding you have received

so far.

The monies, profits that have been taken in

throughout the different season or the losses, whatever, just to give some idea

as to where you have come from and where you are expecting to go (inaudible)

million dollars.

DR. SEXTON: I will start your answer and I

think I will refer to Mr. Kennedy to get into some of the very specifics.

This chart starts in 1992. There was another chart

that would take us right back and you have to go right back to 1964 which is

when the ski club first moved up there. If you look in your public audience you

can see two or three of the people, (inaudible) tell them their ages but they

were there. And it was very much then, a situation again as Mr. Kennedy

described when we were out looking for our sander to sand those skis, we were

basically a beg, borrow, steal operation in those days.

I was there at the very beginning but I have not

been there for the last twenty-odd years and most of the stuff that we built,

like the old double chair, we did it with government help; but when it got to

the point where we realized as a ski club, there would be no more development

unless a corporation like this was formed, the government said to us: Okay, we

have to have full control of the hill.

The ski club members of the day had a meeting. We

had our assets evaluated and they were valued at $3 million - that was the chair

we had, even the buildings and everything we had. Most of it, as I said, was

procured on a basis like we described, which is probably one of the reasons why

you see some of that. A lot of the people on that board are still the ski club

members because they have a vested interest, and our attitude tended to be,

well, if we can get it here cheaper than we can get it there, let's take it

there. That is why we may not have always followed the code, as it were.

Anyway, to carry on with your answer, in 1987, the

ski club of the day made a decision to transfer its assets to the value of $3

million over to the Development Corporation for $1.00, and from that point on,

the Development Corporation in 1988 up to the present has put approximately $30

million into the hill. Mr. Kennedy will give you the details on it. That is

essentially how we got where we are. It started out as an old ski bump, a

venture that was taken over by the government with funds to carry on the

development based on that mandate.

MR. WHELAN: Now, that $30 million, that is

assets that you have attained from the Provincial Government and the Federal

Government?

DR. SEXTON: Everything.

MR. WHELAN: How about chartered banks?

DR. SEXTON: It is also the value of work grants

that we have had put in there (inaudible) paint buildings, or whatever. That is

the way the government wanted us to record it, so that is the way we recorded

it.

MR. WHELAN: Has there been any private money

gone into it?

DR. SEXTON: No, no private money.

MR. WHELAN: Maybe Bill would answer this. There

is a listing, and it is in a number of papers. It is in the February 1993

tourism paper to Cabinet showing from 1994, by item, by year, like in 1964 the

Big T was put in at a cost of $70,000, and that $70,000 came from the Provincial

Government. And, in 1983 item 15, there was a snow packer put in. There was

$16,400 came out of tourism and $147,000 came out of federal agreement.

I am just picking samples. In 1992, item 36, they

started on that relocation of the power line, $1,350,000 of it came from the

Provincial Government and $1.5 million came from the Federal Government for a

total of $2,850,000. Now, there is some subsequent spending, but all of these

spending dollar amounts from 1963 to 1964 culminated in $14 million, that is

including all the (inaudible) improvements (inaudible) the 1970s - it went back

to 1984. Total investment at 1989 was $2.3 million, including all (inaudible).

Total investment -

DR. SEXTON: It came from federal/provincial

sources, and not only from federal/provincial sources, some of it was local work

programs and make-work programs.

MR. WHELAN: Federal sources.

DR. SEXTON: One hundred thousand dollars would

give us ten people up there. So up until 1989 there was $2.2 million and from

1990 there was a double chair put in there and in 1992, there was the ski hill

phase, there was a lift put in at $3.1 million. So, in 1989-1990 it went up to

$5.7 million investment, 1991 to $6.9 million investment. Is that enough?

MR. WHELAN: No, go ahead.

DR. SEXTON: In 1994 there was $14 million in

the hill. (Inaudible) that went up about $10 million to make it $24 million. The

year before last there was another $6 million, which brought it up to $30

million. So year to year, that is about $15 million from there back to 1964,

another fifteen, say fourteen months, and all those funds came from

federal/provincial agreements, ACOA and so on.

MR. WHELAN: So, down through those years we are

looking at the cost of developing the hill, that type of thing. What has been

the income?

DR. SEXTON: The income has been quite steady

and one of the selling points that we made in trying to (inaudible) with

government (inaudible) the chair sales, to continue with this development as per

the master plan dated September 1994 (inaudible) spend this $15 million here.

Figures show that the revenue is about $14 million and that is revenue

associated with the hill in this February 1993 tourism paper.

There is a reference made, and a copy there. There

is about $400-and-some-odd thousand provincial sales tax there included and also

they recognize there is some spin-off (inaudible) by skis and there are people

coming in to stay at the hotels. So they have no way of estimating that,

although they did estimate it based on the Enterprise Newfoundland and Labrador

figure as was done for Clarenville some years ago. That was a figure of $110,000

per skier visit for out-of-town skiers. The local skiers and the local

(inaudible) go up there. They say, on average people spend about $10 a ski

visit. They use those figures to make projections as to what the spin-off is in

the area. But this figure, $14 million, doesn't include that spin-off. This is

actual revenue from the ski club and the Corporation up to 1994. So the revenue

was about a break even, and it was at this point the decision was made: Maybe

this thing can work, so we will drive this up, a big expenditure put in - there

was a lot of money (inaudible) last three years - hoping that that would follow.

In 1997, when we hit the 500th Anniversary, which

is where we are now, we should have 100,000 skier visits. I think, last year

because of the bad weather, as I pointed out, we hit forty-three. So that

dropped to this line right there. Where it is going to go this year, I would say

probably I would guess it may get up to 70,000 skier visits. So we will be

somewhere back about here, but we are not going to get up in this area. Does

that take care of your questions?

MR. WHELAN: Yes. There were a few other

questions, but I think probably under -

CHAIR: We are going to take a quick coffee

break and when we get back, Mr. Whelan will continue the questioning.

MR. WHELAN: Or you can go with somebody else

and I can come around later on, if you wish.

CHAIR: No, that's fine.

Now it's coffee break. I think there is coffee and

muffins outside. We will come back in about fifteen minutes.

Recess

CHAIR: Order, please!

We will call the meeting back to order. Mr. Whelan was

asking some questions related to monetary over the long term. Don, I will turn

it back to you so that you can finish your line of questioning.

MR. WHELAN: Thank you, Mr. Chairman.

Mr. Kennedy, before we went for a break, I was trying

to ascertain the amount of money put into the ski hill by government. I also

wanted to try to get a handle on the income of the ski hill through the monies

that you have earned as a ski hill. I would like for you to differentiate

between the grants and the income from the ski hill. I want to get a handle on

the viability or the feasibility of the ski hill itself. You know, the

possibility of its ever standing on its own feet, and I suppose, whether or not

it is a liability or an asset to the community as a whole. You could probably

pick up from where you left off before we went.

MR. KENNEDY: Just for clarification. Not a great

deal of difficulty, because they are all listed here - you would like for me to

pull out of the total of up to 1992-1993, $13,939,000 of investment money put

into the hill from various sources. You would like for me to give you some range

or some indication of how much of that would have been for operating grants and

marketing and that sort of thing?

MR. WHELAN: Yes, sort of a breakdown.

MR. KENNEDY: Other than by bricks and mortar and

cable, what was put into it for administrative and so forth.

CHAIR: I will say to you, Mr. Kennedy, as well,

that in answering the question, if there is other information you don't have at

your fingertips, it is perfectly legitimate that you can forward that to the

Committee or members. In terms of answering the member's question, in providing

the overview, be as specific as you can, but don't be tied to the fact that -

alright? So if there is information you don't have at your fingertips this

morning, that is quite legitimate. You can forward that to the Committee and

members at your earliest discretion.

MR. KENNEDY: No, I think I can, but somebody will

have to maybe jot down a running total here. Starting in 1991 there was a

$55,000 operating grant, and in 1991 there was a $160,000 marketing grant. That

is about $200,000. That was, I'm sorry, 1990-1991, there was $159,000 marketing.

In 1991-1992 there was $115,000. So we are somewhere up around now

$300,000-plus. That was marketing again. Then there was an operating grant in

that same year, an additional $55,000. So you are getting up around $360,000,

$370,000, and an additional $20,000 marketing in 1992 of $20,000, so approaching

maybe $380,000, $390,000. Capital, capital. Then in 1992-1993 the operating

grants generally ran in the range of $135,000, so in 1992-1993, which was the

last year before this $14 million cut off there, there was $135,000 in operating

grant, which now brings it up to about $440,000, somewhere in that range? Let me

just see if there are any others here because it is at my fingertips. Land

purchase, social services (inaudible) -

CHAIR: Mr. Kennedy, if I could just interrupt for

a second.

MR. KENNEDY: Yes.

CHAIR: I think the Auditor General has some

information that might be helpful.

MR. KENNEDY: Okay.

MS MARSHALL: (Inaudible) -

MR. KENNEDY: Oh, thank you.

MS MARSHALL: You will just have to look at it to

see if it looks to be accurate (inaudible) financial statements. I think you can

tell by looking at it, the trend. It seems to be in order. This is what your

reported net income would have been - right? on your financial statements, and

these are the grants.

MR. KENNEDY: That is it, you have it. I think the

document that the Auditor General has presented here for 1993-1994 - now you are

gone 1993, 1994, 1995, 1996. What I was looking at here is going back to 1964,

which is the $14 million from 1964 up to 1992-1993. What I have in front of me

here now picks it up from 1993 and carries it to 1996. The operating grant in

1993 was $135,000, the operating grant in 1994 was $135,000. The operating grant

in 1995 was increased to $236,000 because we received money to hire core

directors: a marketing direction, an operations director, and a finance

director. That is operating.

Then marketing for 1993 was $86,000, marketing for

1994 was $98,000, marketing for 1995 was $190,000. I will say to the Auditor

General, I am not sure about the $59,496. Would that be combined to give us a

total of $225,000, that was approved on January 10, 1995? It may be, but anyway,

it is close enough to say that I buy those figures.

MS MARSHALL: It is in the ball park.

MR. KENNEDY: Yes, it is certainly in the ball

park.

MR. WHELAN: Okay, for 1993, 1994, 1995, 1996 I

have here operating grant $135,000, master something grant -

MR. KENNEDY: Master plan.

MR. WHELAN: Master plan.

MR. KENNEDY: That was money put forward by

government to pay for the 1994 master plan.

DR. SEXTON: (Inaudible) upgrade that we have here.

MR. WHELAN: Okay. So total grants - in 1993 we

have a total of $265,632 - is that right?

MR. KENNEDY: Yes.

MR. WHELAN: In 1994 it was $307,400.

MR. KENNEDY: Yes.

MR. WHELAN: In 1995 it was $550,431. In 1996 it

was $1,087,089.

MR. KENNEDY: Yes it was.

MR. WHELAN: Now, revenue from the hill itself,

other than the grants that you have received from government. I don't know if

that is here, I don't think it is here.

WITNESSES: No.

MR. WHELAN: Do you have the figure for that?

MR. KENNEDY: No, not from these here. I could give

you a range of revenues, though. Unfortunately, the period we looked at would be

from 1995 backward. What we are into now has gone 1995-1996, and 1996 was the

lost year of $900,000. Prior to that they are listed on that chart there, the

revenue for each year. Would that be of any benefit, if I were to touch on that?

MR. WHELAN: The revenue there, does that include

the grants?

MR. KENNEDY: Yes, that would include grants I just

read in this document here.

MR. WHELAN: I'm trying to get an idea as to the

genuine income of business transacted during that year.

MR. KENNEDY: The revenue from 1991 to 1992 was

$1.3 million. I'm taking the revenue from these two figures here. The total

revenue in 1991 was $10.2 million and the total revenue in 1992 was $11.5

million. Now, in the 1991-92 period there are $115,000 marketing grants to be

deducted a $55,000 operating grant and another $20,000, so that is a total of

$75,000 operating grant. So there is about $225,000 taken out of that in that

year. They say $1.3 million so taking $200,000 it is probably $1.1 million. So

there is about $1.1 million without the grant, an average, not including 1996.

CHAIR: If I could just ask for a point of

clarification? That is directly in the hill, that does not include any indirect

benefits, that is direct revenue generated from hill side, $1.1 million.

DR. SEXTON: Oh, yes, and I can speak to that

indirect if you want me, the multiplier effects, that is according to this

document here.

CHAIR: Yes, that is certainly a valid aspect of

the entire thing. If you want to elaborate on that.

DR. SEXTON: In the 1993 report the

summary of

direct and indirect impacts with wages in this 1992-93 report, paid out in

salaries and wages was $576,000 in that year, and the

summary of direct food and

services, the service sector up there was $1.3 - now, I need to give you a

definition - anyway, the

summary of direct and indirect impact, the direct

impact on the hill on food, service and salary was $1.9 million. The indirect

spin off in the area, there was a multiplier used, and it was based on an

Enterprise Newfoundland and Labrador study of Clarenville where they said there

is $110,000 spent on an average per skier visit. That was applied to the out of

town skiers at Marble which -

Could you say that again? There is $110,000 -

DR. SEXTON: There is $110 per skier visit.

MR. WHELAN: An out of town skier.

DR. SEXTON: Yes, for an out of towner, and for

local skiers about $10, and the multiplier effect - thanks for that

clarification - for Marble in 1992-93 would be $2.2 million in the area. Now, in

wages and so forth, for food and whatever, we paid $1.9 million which is direct

money, and indirect is about $2.2, for a total of $4.1 million, direct and

indirect, and indirect is the multiplier.

Now, this does not include what we call public sector

impact, and the estimate there is that there was a liquor tax of about $4500,

licenses and fees of $2100, income tax on those salaries I mentioned of $28,000,

so retail sales tax on goods and services, skis and so forth, $478,000, fuel tax

$5600, payroll tax $9500, worker's compensation $11,000, for a total of $540,000

in taxes that the government would collection in addition to this $4,174,000. Am

I clear? Let me say it one more time.

The direct benefit for wages, foods, and services paid

by the facility, for that $1.3 million, was $1.9 million. The indirect, which is

this multiplier effect developed by Enterprise Newfoundland and Labrador, is

$2.2 million for a total of $4.1 million, direct and indirect. Taxes are

estimated to be annually about $540,000, so the total of that is about $4.6

million, direct, indirect, and taxes. And these, as a report, these are best

estimate figures, not ours, others.

MR. WHELAN: That s a very good point. Now, with

the government monies deducted from your overall revenue which should have been

about $1.3 million you have $1.1 million. Now, your expenses for that year?

MR. KENNEDY: Now, that (inaudible)

MR. WHELAN: Which one?

MR. KENNEDY: In 1995 -

DR. SEXTON: No, I was talking about 1993, because

it depends on what year, 1992-93 because that is the only one this report is

based on.

MR. WHELAN: I am trying to get down to basically,

I suppose, the bottom-line and whether there was a loss or a profit that year

and if so how much?

MR. KENNEDY: Without the grants, in a good year of

1992-93, without the grants we generally showed, in that particular year, about

$150,000 or $100,000 profit. Without the grants there would probably be a

$100,000 or $150,000 loss. Because the grants are always included in our bottom

line. If you pull that out, yes, the thing is very borderline without grants. It

needs some assistance.

CHAIR: If I could just interrupt again,

(inaudible) Auditor General (inaudible).

MS MARSHALL: We have (inaudible) the numbers, and

I'm just going back to my schedule, right. I'm just talking about your operating

expenditures and your operating revenues. It doesn't include capital, so it

doesn't include depreciation. There is a type of expenditure missing, okay? But

when you back out the grants, your reported net income in 1993 was $43,882. If

you back out the grants, really you had a loss of $221,000.

MR. KENNEDY: Yes, and that is the range. I would

have to agree with that.

MS MARSHALL: In 1993-1994, if you back out the

government assistance you have an operating loss of $216,000. The next year it

is the loss of $361,000. In 1995-1996, which was the year of the bad weather,

the loss was $997,000. The only point I would like to make is that that loss

does not include depreciation expense. If you were in the private sector that

loss would have been larger, right.

WITNESSES: (Inaudible).

MR. WHELAN: Okay, Mr. Chairman.

AN HON. MEMBER: Is there any other point you

wanted to make, Mr. Kennedy, with regard to the questions?

MR. KENNEDY: Let me make a sales pitch. I'm taking

liberties here, I'm sorry. In that, maybe this should be viewed as a government

policy as it relates to national parks or historic sites or points of interest.

These are tough economic times and it may not warrant the kind of expenditures

that we are talking about, $200,000 or $300,000 or $400,000 a year. But

somewhere in that range. Is that a lot of money - I'm not the financier, I'm

throwing the question - for government to invest in that sort of facility that

has the potential, barring, as the Auditor General rightly points out, the

disastrous year that we had the year before last? This year it is going to be

so-so. To say that you put $300,000 or $400,000 into a facility that has such

potential, and could be an all-season tourism area in the Humber Valley, which

is the most beautiful valley. Again, there has been much talk of - and the land

has been locked in, I will say, for a golf course on the other side. Whether it

goes there or not, golf courses are not big moneymakers, although there is one

in Newfoundland that isn't doing too badly. All the other potential associated

with that area, is that a big investment of $300,000 or $400,000 or $500,000 a

year?

I don't know the answer, but from where I sit - in

tough times it probably isn't. But in the long run I think we would all be very

short-sighted, and I would be short-sighted as a citizen, if I didn't strongly

recommend that government view this in the long run. It has a tremendous

potential on the West Coast of Newfoundland, and it is no distance from Gros

Morne, it is no distance from the Lewis Hill, it is no distance from a great

expanse and a great harbour of salt water facilities and so forth.

So, from the point of view when one looks at the kind

of dollars that the federal government put in the Gros Morne National Park

(inaudible), is this not a bad investment? I don't know what the answer is. I

hope that somebody will bring back the message and say: Don't lose faith in this

thing. Thank you.

CHAIR: Mr. Oldford.

MR. OLDFORD: Thank you, Mr. Chairman. Dr. Sexton,

I have a concern and it is to do with marketing. I haven't see that daredevil

who falls 1,600 feet this year, and I'm wondering what your marketing plan is.

DR. SEXTON: As has come out several times, we have

mentioned that to do it properly, if you are running either just a ski hill or a

world-class facility, you have to start your marketing, you have to be thinking

about it, certainly in the summer and get your funds in place and everything and

get it going, and we did that in all the years up to this year. There has been

very little money put into marketing this year because they simply didn't have

the money. As I mentioned earlier to somebody else's question, the government

decided to make a total separation between operations and development. I truly

don't know what they are doing this year in the sense of marketing. I know they

aren't spending very much money and you don't see the ads on television.

Let me put it another way too, just to put it in the

proper context. If things hadn't changed, if the Development Corporation had

stayed on doing the operations end of it, with the loss we had last year you

would have seen certainly a change.

You would have also seen a change because the ads we

have are now three years old and as catchy as they were, they actually won

international awards. I have a letter half-drafted to Target Marketing to

congratulate them because they are the people who sort of come up with it. We

would probably have changed them to something else but I guess the simplest

answer to your question is, there isn't any money really there to do any

marketing.

MR. OLDFORD: Well, you know, of course, I am the

Member for the Clarenville area and you are advertising impacts on the White

Hills, so what you are telling me is that, it is the government's problem that

they had not put the money into the marketing end of it, therefore you could not

carry on with your marketing plans.

DR. SEXTON: That is right. Yes, we couldn't

either.

MR. OLDFORD: Thank you, Mr. Chairman.

CHAIR: Mr. Lush.

MR. LUSH: I was listening to both participants

before and they apologized for their lengthy answers and you need not have,

because you are talking to a group of people when we talk about scales of the

economy financially, we never apply them when we talk about language. Some of us

think we are Mark Twain and we get paid per word uttered as opposed to per word

written.

The question I want to ask, the Auditor General

mentions that you did not abide by the Public Tender Act. You yourselves have

indicated that the Province in particular was not as vigilant maybe in

explaining to you governmental procedures as was ACOA, as an example. I can only

conclude that the Province had great confidence in your ability to run things in

a businesslike manner.

Having said that, I am wondering whether or not the

Province's lack of guidance in the direction in this matter was a benefit or a

detriment because, many times the Province or any government - that is an

example of how business, good business practices ought to be applied and

sometimes we are just the opposite and people from the private industry can do

things much more effectively and much more efficiently than what the government

can do; and I guess, after that long

preamble, the question I want to ask is:

Was the government's confidence in your autonomy a blessing or otherwise, and,

because the government did not direct you does not at all indicate that you

didn't always apply sound business principles, that what you did with the public

dollars given you, was indeed prudent and resulted in the efficient spending of

the tax dollars, if this is what this exercise is all about?

CHAIR: Yes, go ahead, Bill.

MR. KENNEDY: I know I am verbose but nevertheless

thank you because that is a good question too. The quick answer and the humble

answer is, they were better out of it but standing the lighter scrutiny as to

whether or not we had three prices or whatever, we did not do things according

to various acts or whatever but we had no direction. If I were to sit here and

answer that question about: Did you follow so and so? I would say no, I

disregarded them but there was no intent to disregard it in any way. We did

everything we were asked that we understood should be done.

The performance of the team of a construction manager,

Tekcon out of St. John's, an architect, a (inaudible) architect, a project

engineer that ACOA put in there and paid us for, in addition, by the way, to the

money for the capital works. They realized and came out and said: You don't have

the people to do this job, you don't have anyone here. You have one man. How are

you going to do this? They gave us money to hire a project engineer.

So we had a construction manager, a project engineer,

an architect. We had an executive director who was out of the private sector and

in the construction business. I guess we had an old retired fogey like myself

who also knew the construction business. I think, Sir, that the answer is: They

got great value for money spent. They got a job well done for a very minimal

infrastructure and cost to the Provincial Government - the capital cost is there

but, I mean, the facilities and running and the backup and procedures.

One example, I think, of what I am saying is how it

was done better this way - but again, not conforming to all the things that we

should have conformed to, now that we find out, or when the Auditor General came

in. There is no denying that. When the first $3.5 million came out of SIID we

were asked to put together a budget, say: How are you going to spend this money,

what are you going to do here? In the Fall of 1993, approval was given, and

approval was given based on a budget. The budget contained, and I have a copy

here, ten or twelve items totalling $3.5 million. There is $100,000 for this,

$1.5 million for that. There was a block of money and a name for each thing.

They wrote us an agreement which I have copies of

here, signed by Fred Way and Gordon Slade at that time, since they were chair of

the committee, saying: We still approve and it was great news. But you must

spend the money according to the budget submission you made. So if there is $1.5

million in that block you spend that $1.5 million and only that, and you can't

take $10 from there and move it somewhere else to do it more efficiently or

effectively. At that point we threw up our hands and said: That is absolute b.s.

You can't run an efficient operation that way. We must be able to prioritize and

do what we think is the most economical way of doing it. But we can't do it. You

are bucking the system. The system says: We approved $3.5 million.

Incidentally, that was approved in late December-early

January 1993-1994. The fiscal year ended March 31. We had to have the $3.5

million spent, according to those blocks, within three months. We said: We can't

do that, that is unrealistic. We can pump the money out and throw it - but

that's no good. We need time to get our tenders out and make sure we get the

best tender. If we save on this tender or can negotiate something down we'll do

so-and-so.

I don't know if that would have happened if we were

all out of the system. But I think where we were volunteers and citizens coming

in here to do the best job, the lack of government - and by the way, government

did give in, ACOA did give in, and finally said: You do what you think is best.

We did, and they came back and said it did work out extremely well.

So, again, the long answer to your question is I think

it was done much more effectively and efficiently the way it was done. But it is

difficult standing under these bright lights and saying: We failed on this count

and that count when it comes to the Public Tender Act. But overall, I think the

thing was done in the most efficient, effective manner possible, and the product

shows it.

MR. LUSH: I think the next question is redundant

in view of what you have just said, but I wanted you to at least say for the

public record what your assessment is of the board, of the work that it has done

in the period under question.

MR. KENNEDY: The assessment of the board?

MR. LUSH: Yes, in terms of its performance.

MR. KENNEDY: Oh, boy. That is a tough one, and I

guess, you know, I would have to be honest. I think that initially when I joined

the board it was a terrific board. It was a development corporation. Everybody

had one goal and focus and that was to get money and get this thing developed.

Four or five months after I was there, actually it was May 17, 1993 - down in

the lower room here there is a signature put to a document where we took over

the operation of the hill. When that happened, the kind of people we had around

the board were tourism development people to get on with the development we were

now operating, and you had the human resources and (inaudible) organization

charts, and now the unions and all sorts of other things.

I think that tore the board apart. There was strong

representation made by the chair and myself to the various ministers that a

review should be made of the board and the board structure such that it was more

oriented now towards an operations development. I think the push-pull that came

into effect from the takeover of the ski facility in May 1993 through 1994,

which shows a very active, busy time here - there was a lot of push-pull on the

board. It wasn't as smooth a running operation or as professionally - I

shouldn't use the word run. I served on better boards, and I'm still serving on

much better boards, put it that way. Unfortunately, things didn't work out in

the final analysis.

By the way, you have to diversification of opinions,

or you have to have discussion and dialogue and disagreement. That isn't what

I'm talking about. It was more than that. Despite that, I think in the final

analysis we all worked well and made the thing work, despite the lack of

support, involvement and help. I think personally it worked out extremely well

and that things could have done better from a board point of view overall, yes.

MR. LUSH: You mentioned earlier, I think, about

your confidence and optimism with respect to Marble Mountain. We have come

through a rough period, and I think you again referred to the fact that

everybody does not support, obviously, the project. When we are spending public

dollars, we would like to believe that we have a high level of public acceptance

of what we are doing as politicians. What do you say now, to the public? Do you

think that what government is doing, both levels, in terms of contributing to

Marble Mountain - is it a wise venture that we are into and, should we continue

to ensure with respect to Marble Mountain, that your objectives and your vision

are continued and enlarged upon? Will it be a net contributor to the economy of

this Province?

MR. KENNEDY: Mr. Lush, you are really digging

here. I am a taxpayer and a retired one. I don't want to see money wasted and I

don't think any citizen does. We had meetings through 1994 with the Economic

Recovery Commission who came out and said: Well, gee whiz, why? When is this

going to stop? And, of course, we all know that P&P issued a directive on

December 13, 1994 saying: We have to privatize this thing; we want to get out of

the business. I think if we had discussions, probably at the coffee-break

period, we were all, as shareholders sitting around, and you wanted me to put my

retirement fund here, today, into this facility, I guess I would have second

thoughts, because I know the risks associated with the ski industry and I think

the taxpayers are aware of that as well. And when you see, as the Auditor

General points out, taking this ahead now from 1995 to 1996 and you see a $1

million loss, that is pretty difficult to swallow.

The only way to answer that I think, is government

have to look at it from the point of view of a policy, as I said, historic

sites, parks or tourism, as a business venture. And I refer to an earlier

statement I made that the ERNST & YOUNG report - ERNST & YOUNG were hired as

consultants by Industry, Trade and Technology, through 1994 to look at

privatization. They came in and made a report to the ad hoc committee and I

happened to be one of the members on that committee representing Marble

Mountain.

It was a magnificent report of the ski industry in

North America, and most of the hills have, in New England, out in Banff,

Whistler, Mont Ste. Anne, started with government support. The ones that are

making it entirely on their own are - like IntraWest - Well, IntraWest took over

because that was originally, an investment by the B.C. government, a great

example, and it is in the report that I just put back right there, the kind of

money that the federal and provincial governments in Quebec have put into Mont

Ste. Anne, $300-and-some-odd million - it is a matter of record, it is public

record, the figures are there, how much they put into base, how much they put

into hill. Mont Tremblant - did I say Mont Ste. Anne?

DR. SEXTON: Mont Ste. Anne, too.

MR. KENNEDY: - Mont Tremblant I heard in the last

few years. IntraWest have now gone in there but IntraWest only went in there

because of the huge block of money that the Quebec government, through the feds,

put in there; there was an enormous amount of money. The short answer now is,

you know, to think that it can work on its own with a private sector group

there, and we know that there were proposals received and we know they were

viewed very seriously by the privatization committee and by Industry, Trade and

Technology, Tourism, Municipal and Provincial Affairs, these ministers, and they

weren't found satisfactory.

I would not want to say, `no', don't put any more

money in it because I believe that you cannot give up on this dream. There has

to be a way of making this thing work. It looks pretty dismal on paper, and that

is probably the best answer I can give you. I do not know if it is satisfactory.

MR. LUSH: I will stop now if somebody else wants

to get in.

DR. SEXTON: Mr. Chairman, could I, through you to

Mr. Lush, just add a little. There are two of your questions, and the first one

you have to go back - I keep referring to the history of this Development

Corporation - you have to go back to 1988 when the government of the day put

this board in place to carry on with what the skiers of the day visioned was to

be the ultimate thing here at Marble Mountain, and see the composition of the

board from that point. There was a representative from Corner Brook, from Steady

Book, one from the ski club itself, one from the government, and then four more

members at large.

From my time on that board, and I have served on many

boards, initially, much like Mr. Kennedy indicated, it worked pretty well, but

then when we get into the operations end of it, it seemed like the people who

were there representing the various constituencies that they had to represent

tended to sort of favour the constituency more than the product, which to me

wasn't right. I felt that it was time this board was changed so that we had

people there whose sole interest - not to forget the community of Steady Brook,

for instance, we always had their best interests at heart, but I really felt

that the board needed change.

That was in 1994 when we sought from the government,

through the Department of Tourism - as I indicated earlier we always had

difficulty with it because the ministers kept changing on us. If there is any

lesson to be learned from this. when the government gets into this kind of a

project, is to have some kind of a central agency perhaps there so that the

volunteers or whoever is there running the boards do not have to answer to some

department where the ministers and the deputies, and so on, keep changing and

you have to keep re-educating them. It takes you six to eight months to get them

up to speed as to what you are doing if you are doing a thing that government is

not familiar with. That, I felt, was part of the problem that we ran into on the

board. We were looking to change that but, of course, we never got an

opportunity.

Your second question, Mr. Lush, was, where do we see

this going. I think you have to look beyond just the ski part of it and come

back to what the updated master plan and the original one spoke for, the

all-season. It used to be called the four-season but we do not have four useable

seasons in Newfoundland so we changed it to an all-season, an all-season resort.

Our focus around here this morning has primarily been

Marble Mountain itself, but I think if you look at this map, which is the one we

use at the P&P Committee, the blue line, which I think you can probably see from

there, here is Corner Brook right here, and this area here outlines the actual

area that the Development Corporation has responsibility for now. Our plan was

to put a process in place that would see all sorts of Winter activity, not just

skiing - and Summer or at least whatever seasons we can work up there.

I just wanted to get that comment in, that we tend to

get narrowed down too much to skiing, as dear as it is to my heart, but skiing

isn't everything. And I think government has to look at it from the point of

view that if they follow this master plan and utilize that area - and this does

not, by the way, take you down into the Blow Me Downs, which ideally it should;

if it were redone, I think that is what people would say, let us expand this

right down into the White Hills area and all that protective zone we have down

there.

When you start looking at it in that context as a

taxpayer I would not have any problem with government taking some of my money to

support a project that was able to draw people in for that total complex. It is

a total thing that I think we have to keep in mind here, not just skiing.

Thank you.

CHAIR: Do any of the board members have any more

questions?

MS THISTLE: I guess I will direct this to the

Chairman, Dr. Sexton. I know from listening to you this morning and reading the

material that has been prepared by the Auditor General that you have been so

busy in the growing pains of developing the Marble Mountain ski facility that

there has been many administration details that have been kind of left undone or

scattered, or there have been some weak spots identified. The Auditor General

identified an issue about the conflict of interest.

WITNESS: What page are you on?

MS THISTLE: I'm on page 13. The fact that the

Corporation does not have conflict of interest guidelines. There was an instance

that happened in March 1995 when the Corporation accepted proposals for the

rental of a space at the day lodge. The unsuccessful bidder lodged a complaint

at that time but the end ruling was that you made the right decision. I'm

wondering now has the board addressed that issue and do you now have conflict of

interest guidelines in place?

DR. SEXTON: No. My answer to you is the same as it

was to the other gentleman who asked the question in a different context. It is

no, we do not, we have not actually performed any of those functions at the

board level since September. Actually, going back to the period in the spring

when we realized - if I could just give you a little

preamble.

We cranked up in 1995-1996, we started our

advertising, as I indicated earlier, and our snow making in November and so on,

in 1995, heading into 1996, looking for a very favourable year. Because we had

just finished putting the $6 million or so into the hill with the new lifts and

all that stuff I mentioned. We had the lodge built and the lodge was starting to

function really nicely. This was our come-out year. It was going to be a real

showcase, a real banner year.

By I think about January 20 or so, using out budgetary

figures that we had produced before we went into it, we quickly realized we were

heading for a major problem if the weather didn't turn around, to go back to

your first question. I can remember Mr. Kennedy coming to the table scratching

his head and wondering if we don't soon get a good weekend here, where are we

going. Based on that we had a good inkling of what was happening to us early in

the season, and then we used that information to inform the government - at the

time, the Department of Tourism, Culture and Recreation that we were under -

that here is where we were heading and we had better start doing something about

it.

One of the things that happened during that period of

time is that we lost - I'm referring specifically to the item you mention in

there - the bidder went bankrupt, actually, that was going to take over the

retail space, and then we quickly had to pull somebody out to, you know, make

the season even less worse than it was. The Corporation spent all of its time

from that point late or early January 1996 up to September just trying to, you

know, do the best we could with the loss we had. We never spent any time

updating our bylaws, our corporate structure, or the conflict of interest. It

just fell into that pot, along with everything else, of things that we didn't

have in place originally and we couldn't put in place with the time we had to

spend looking out for the particular problems we had of the day. So no, there

isn't anything in place now any different than it was before.

MR. KENNEDY: (Inaudible).

MS THISTLE: So - go ahead.

MR. KENNEDY: Yes, I just want to add one word. It

is that conflict of interest has come up a number of times around the board

table. Board members are well aware of that. We may not be well aware of all the

details of the Public Tender Act but people are aware of conflict of interest.

There have been three, four, or five declarations made by board members on this

particular one. The board member (inaudible) said was on committee declared and

was not involved in reviewing, receiving, any of the documentation.

Without mentioning names, there are a number of other

instances where declarations were made and board members left the room or did

not participate. Generally those declarations were made by the individuals

involved. If not, there was never any hesitation around the board table to say:

Wait now, should I be here? I'm not sure - this complaint was made, but the

particular member on the committee made a declaration and did not receive. I'm

quite familiar with that. There was nothing (inaudible).

MS THISTLE: Dr. Sexton, based on some of the items

that have come forward here this morning on administration matters.

I know your board is made up primarily of volunteers

and you are so involved with the day-to-day operation and development of the

facility that a lot of these things have gone astray. What do you see as

government's role in assisting you to get on target in having your paperwork in

order in other words, before you apply for any future funding?

DR. SEXTON: Well, I think it is going to be tricky

now because we have switched from tourism to finance as I mentioned earlier

because of the operation's separation. I would like for instance, to have the

government set forth a policy not just for us but for everybody that says: Okay,

if you are going to do this particular job, here is the way you do it, and give

us a copy of the Public Tender Act and the Conflict of Interest Guidelines and

all of the things that we need to go and do it. They never did it up front. I

mean, they put us in the position and asked us to go and look for the money,

which we did; we got the money and as you said, we were just so busy spending

the money properly, we never took time to cross the Ts and dot the I's, and if I

had to do it all over again, I would do it exactly the same way because to me,

if you have bureaucrats or, if you will pardon the expression, `politicians out

there ready to give you money', in my experience you better take it and go with

it and spend it before they change their minds and give it to somebody else; and

that was essentially the way we approached it because if we dallied to try to

cross the Ts and dot the I's, I figure the money would have ended up somewhere

else.

So that is what I think the government needs to put in

place as I said a little earlier, some kind of an agency, a central agency or

use one that maybe, already exists I don't know, I mean, that is up to the

government to decide, but some group we can go to as a bunch of volunteers, to

ask the questions and get the direction, and a group that does not change

because that to me, is still one of the biggest, single problems that we had in

this whole four-year operation, was trying to educate the people whom we had to

go to for answers on all these things because they kept changing it -

WITNESS: (Inaudible).

DR. SEXTON: Yes. - because politics kept changing.

So I hope that answers your question.

MS THISTLE: It does, and what has come through

clearly and loudly this morning is that, government needs to take a more active

role in the actual administration and setting forth guidelines -

DR. SEXTON: Oh yes.

MS THISTLE: - and these are the kind of things

that we will be looking at. Thank you.

CHAIR: I have just a couple of comments or

questions and it goes back to something that Mr. Kennedy said in terms of his

saying that: looking at the bottom line, it looks pretty miserable. I don't

necessarily concur with that.

As a citizen, to use your own description and

taxpayer, there are, you know, in terms of paying taxes which we pay more than

anyone else in the country, we have to question why we pay our taxes, what

services are they gone into and for what purpose? There are many instances where

tax dollars I have spent I have never (inaudible) where they have been spent but

in terms of promoting something, I would like to ask the board that, when it

reaches the point where, capital expenditures of significant money was made, it

was made upon the premise that you were very close to a break-even sort of point

and that a decision was made that this thing could fly and that this thing being

the overall development of the region and this natural resource that we have on

the West Coast of the Province.

During the break, I spoke to a skier who for some

twenty years - and I had a good conversation with him - brought up some points

that I think are worth noting here and may be open for debate. In 1999 for

example, the Summer Games are coming here -

DR. SEXTON: The Winter Games.

CHAIR: - Winter Games is probably the single,

biggest opportunity to showcase what we have. Does the board have any plans over

the next couple of years? Has it asked for assistance in being able to promote

the region and the facility in terms of Marble Mountain being associated with

the Winter Games? The impact of those games and the impact that it could have

directly in terms of revenue and on the economy could end up positive for the

provincial economy, could be tremendous, so I leave the question open-ended but,

where do you see the development of it going? Had representations been made to

government to take advantage of that opportunity that we will only have one

chance to take advantage of and, if not, why not, and if so, where are we headed

with it?

DR. SEXTON: That is a very broad question and I

will certainly try to answer it.

As a development corporation, let me go back to 1993,

1994. I guess I also have to throw in here the fact that I've been involved at

Marble Mountain not only as a skier but as a race official for years. It is also

very dear to my heart. So I, I guess, have put a lot of effort into convincing

the board over the years that I was there that racing was a way of certainly

getting very good advertising efforts out of a place like Marble Mountain. If we

put our money into developing the hill as a good racing site and into developing

the kids who are up there and we get a Nancy Green type of racer - Nancy Green

is from Marble Mountain - that is the type of thing we need. That was my way of

looking at it.

I must confess I did tend on times to push the board

towards that way, despite the objections of some of the board members. But

overall the Corporation supported the development of competition at the hill. Of

course, we always added on at the end, leading to 1999 Games. We had to do that.

You don't just sort of host the 1999 Games without proper officials and without

a proper venue. I also wore another hat in that I was involved, at least at the

beginning, with the process of getting the Winter Games here in Corner Brook and

the civic centre. We had a bunch of people come down and assess us. They went

and looked at all of the possible venues to hold the twenty-one sports that they

are going to hold here over the two-week period. Marble Mountain came out on top

as a venue that was practically ready to go right then and there. The only thing

we didn't have was a press centre which, in the schematics and stuff that we had

put together, we would have built out of some of the money that came from Winter

Games, not directly from our own funds.

I'm trying to set the motion here of how this whole

thing came through the board. Every time we did something at Marble - like we

have a race there we just finished this week called the Marble Cup, which is our

club race. We also, through the good graces of the board, had enough money put

into the racing facility in terms of timing equipment and labour from the

Corporation which is now managing to get us to the point where we hosted two

national events in 1994: the CADS, the Canadian Association of Disabled Skiers,

and the juvenile races, both in the same year. It was quite a heavy toll on our

volunteers, but it was a good idea of what we would have to face during the 1999

Games. Actually, we went out and used the fact that we were going to have the

1999 Games as ammunition to get people to support us to run these races.

We did the same thing last year in 1996, despite the

weather, with the Cavendish finals. The Cavendish is a national event that is

about three levels down from the top, just to put it in context for you. They

have an east and a west. We bid on and got the east. The board did - now when I

say "we," every time I'm referring to the board. Also, of course, with the help

of the local ski club which did the technical work. We sort of were the front

people. We got that race. They came down and we ran a very successful race for

them. Again we emphasized to everybody who was involved how important it was for

this Cavendish cup - for instance, we had 130 racers, and about seventy of them

were from Quebec east, (inaudible) that is the way the thing is structured. It

gave us quite a good showing and was representative of what the Canada Games

would be like. This year we have the bid in now - the Development Corporation,

through the ski club, put the bid in last year for the finals this year, which -

in 1998 we will have the finals, if we get the bid.

I've given you all that background to just emphasize

how we took the bull by the horns as a development corporation and realized that

if we fostered racing we would be in good position for the Games, knowing how

important the Games was to this whole general area. Even more so than that, we

had involvement with Cabot 500 early on in their - in the first Cabot 500, if

you want to call it that, before it got changed.

CHAIR: Yes, there have been a few.

DR. SEXTON: Yes. We used that particular venue, as

it were, to get money in place to have a major event this year. We would have

had it and we would probably be having it right now, actually, but the funding

dried up for that and we couldn't get that one. But every time we did it based

on what we could do in 1999 with the Winter Games. Because it would certainly

put Marble Mountain right on the spot.

Of course, you can talk forever on the economic

benefits of it all, because it is a two-week affair here in Corner Brook, but

skiing would certainly be a big part of it. The board, through all those years,

did everything it could dollar-wise within its budget to support the whole

thing. I hope that answers your question.

CHAIR: Yes it does.

MR. KENNEDY: Can I have a follow-up on that?

CHAIR: Yes.

MR. KENNEDY: I don't want to leave the impression

that I was talking about a retired person with a retired income. I'm not talking

politicians with big incomes. A quarter of a million dollars a year, as the

Auditor General points out, not including depreciation, again going back to the

question of policy, is not a big deal. Forget the disaster. There is one in

every ten years. But you can never lose sight of what 1997 can do for us and

what the 1999 Winter Games.

We are real optimistic of 100,000 to 150,000 skier

visits. You say that is impossible, but we have hit 80,000 and 90,000. The

weather can't stay bad. I don't know if it can stay. In one ten years I say

(inaudible) ski industry. If things improve - we get MuchMusic here come the end

of March. If we can get through the end of March and get on the national map

with this thing and hit this 1999 Games, the skier visits are easily going to

hit $100,000. What does that do for the Province? What does it do for tourism?

What does it do for our image? What does it do to that hill? (Inaudible) this

thing has a tremendous potential for winter tourism in Newfoundland, for this

hotel and for all the other hotels, for the taxis, for the restaurants in this

town. Again, that is the spin-off (inaudible) we were talking, about trying to

get the multiplier affect here.

I'm a firm believer. I didn't want to leave that

impression. The point that I was making, the bottom line, excluding

depreciation, say at an average, excluding the disaster year of $1 million,

$250,000 a year, to get what we are looking for here? What we will get if the

snow is there in March month with this MuchMusic and also bringing in

(inaudible), I mean (inaudible) -

WITNESS: (Inaudible).

MR. KENNEDY: - you can't put a dollar on that.

CHAIR: Not a bad return.

MR. KENNEDY: No sir. (Inaudible).

MR. LUSH: Mr. Kennedy, a point that impressed me

during the break, and you alluded to it then, and I think it is probably

important that somebody elaborate upon it in a public sense, although people

might have been informed more than I was of it. You mentioned that this disaster

happens only once in ten years. It is a cyclical thing. (Inaudible) the point of

what the statistics are for other areas close by us, ones that we are in

competition with.

MR. KENNEDY: This is the national average. For

example, Whistler has had them, they have all had them. The last bad one in New

England was the year before last. They had a bad one last year - was it last

year? I think it was last year.

WITNESS: New England (inaudible) five years.

MR. KENNEDY: Yes, and it has had a bad one. This

year it had terrific skiing all through Christmas time and has taken off. In

this part of the world the last bad year without snow was in 1981-1982. I

remember skiing up there and it was only open ten times. That is an average in

Newfoundland of about ten years with no snow. In other areas it is very

difficult to say. New England is probably worse. (Inaudible) gets about a

ten-year shot. (Inaudible), Quebec area, is probably about ten. The national

average is about ten (inaudible).

WITNESSES: (Inaudible).

MR. KENNEDY: Well, Ontario is a little

(inaudible). So it can't continue. We have to be optimistic. The potential is

there. Our public image, Newfoundland with this 1997 and 1999 and what this

national show is going to do for us now at the end of this coming month, you

can't put a dollar on it. I mean, it is a tremendous investment. Therefore when

I say $250,000 may look miserable, but that is no big deal, and that is a matter

of policy. Government has to ask: Is it worth it to put that kind of money in

this facility to have the winter showpiece that they are going to have here in

1999? I think it is a terrific investment. I just wanted to make that point.

CHAIR: Fair enough.

MR. LUSH: I just wanted to ask a couple of more

questions. I wanted to carry on from my friend, Mr. Byrne, when he talked

specifically about the public tendering with respect - I don't have it in front

of me but (inaudible) Marble. I was intrigued with what you were doing in that

situation.

Very often, when in government, we talk about somebody

breaking the Public Tender Act, people think that, just quite apart from

breaking the rules, there was some skulduggery going on. We have the Public

Tender Act for many reasons, one is to ensure fair treatment to everybody

involved in that particular business; it does not always result in, I suppose,

the best price, although we hope that happens, too; but it is done for many,

many reasons and I just wondered if you would elucidate upon that point again.

I think the point I was getting from that, is that you

are suggesting maybe we got that much more cheaply than if we had to go the

public tendering route. I mean, it is something that a lot of Newfoundland - I

think Dr. Sexton mentioned that you were in the position of begging, borrowing

and stealing, this is certainly an indication of it to me, so if you could just

elucidate upon that.

MR. KENNEDY: I would. I think it would be an

impossible situation for somebody in Works, Services and Transportation in the

Confederation Building to clarify that (inaudible), they would never do, but

being private citizens and business people, we could find ways to talk about it

with about five different players who got involved. The guy who owns the marble

and has the marble rights out here: How is going to get a loader? How is he

going to get the boulders out of the loader? Who is going to pick them up and

what truck are they going to be put into?

Why would Nelson Monuments take a truck back when they

brought all these beautiful headstones in? So, a whole lot of things came into

play here and if you were tied by some kind of bureaucratic structure that said

you are not allowed to make this deal unless - if you don't have it in your

budget; and we did not have it in our budget. But, in the final analysis, it

probably cost us $4,000 or $5,000 because the plaques on the tables and the

contributions, the people saw the advantage again, I have to say. Mines and

Energy knew that this was a great sell for local marble, they were intrigued.

But they were like ourselves, they said: We can't help you. `But what a great

deal!' the Deputy Minister told us. `What a great deal!'

He worked the system to find a way. The feds came

forward and said: Great thing, we will put it up, we will put 50 per cent. So we

worked around and the story is that, that would never happen without that kind

of intuition and ability and an entrepreneurship that would not be available if

we were to go totally by the Act, and we got the best possible deal - you will

never get it, never get -

MR. LUSH: I hate to put in a disclaimer here, but

I can't condone breaking the Public Tender Act.

MR. KENNEDY: No, no, and we were wrong in not

following the Act but again, we did not disregard anything and blatantly say: We

are not going to do it. The Auditor General's Department pointed out in 1994, in

a great report to government - they did a survey of thirty-four or

forty-some-odd boards and the feedback was, from most of the boards: We don't

know what the heck we are doing. Government, why don't you tell these agencies,

boards and corporations who are in development, health care and anything else

they are involved in - there are three different segments - why don't you

provide them?

Some of the things that came out of these reports, the

lack of clarity over board governance points to a need for legislation to create

an enduring accountability regime over the Province's Crown corporations - okay?

the lack of clarity.

Another: `Therefore,' - this is on the roles of

responsibility - `there appears to be some uncertainty ' - some uncertainty -

`as to whom on the boards they are specifically accountable and what their

accountabilities are.' Another: `Several boards indicated they were not

receiving relevant directions and guidelines from government on a timely basis.'

Now, when I heard that I was going to get the greeting call to appear, signed by

the Chair, I said: Oh, boy, we are going to be crucified and so forth. Then I

started reading through reams of files that I have home. I got this thing out,

from way back, and it was - and I said: Look, we aren't the only board that says

there are problems. `There should be included in legislation' - this is a

recommendation - `and bylaws that something in the form of a manual or

guidelines be given to boards.'

I just want to make a couple of these points, because

I think they are very valid and this is a very valid document. Since it is going

to back to 1994, I ask the question: Why in heaven's name didn't somebody act on

this?

`The board should report to government', and so forth.

`The appropriate government departments or central controlling agency should

provide relevant guidelines and directives to the board on a timely basis to

ensure it operates in compliance with such guidelines and directives.' I mean, I

rest the case. That was 1994. That is comment on public sector accountability.

That kind of thing is what we are saying to you as a

board. We did our damnedest. There was no skulduggery. There were great deals

made and this thing was brought in, and ACOA's records and reports, which I

throw open to the Public Accounts Committee, just get in touch with any of them

- Robin Kieley's a contact, Ken Powell, any of the guys in ACOA - and ask: How

did they handle it, what did they do?

There were guidelines there. This kind of thing is

what we need as a board, as volunteers. Then you could come in and whip us with

wet noodles and say: You broke the Act, you are a bunch of clowns, get your

backsides out of here. You can't do that now. I'm sorry for what we did. We

didn't follow what we should have done. But somebody - an example I gave, and I

will give just one example.

It is like sending your kid to school in Kindergarten,

or any grade, and saying: Now, go to school. He goes to school, he meets the

teacher, the teacher asks: `How are you?' and the kid plays around in September

and October. Come December, the teacher says: `I'm going to have an exam now.'

The kid says: `But teacher, I didn't have any books,' or `I don't know what I'm

supposed to do.' `That doesn't matter, I'm now going to have an exam.' So you

write the exam and you fail. `You didn't do this, this and this.' It is like a

kid going to school without any books, any teacher, allowed to do just what he

wants to do, and then coming in and being criticized, being told: `You failed,

because of...' whatever.

We didn't fail. We acted in the best interests of this

Province and the record will show it. We got the best buys we possibly could.

That is what should be done. These recommendations should be taken back to the

House of Assembly, and as politicians, somebody should say: Look, here are - and

the figures are here. The Auditor General knows it better than I do. There are

$1.7 billion of assets in this Province controlled by Crown corporations and

agencies. As of March 31 there were 1,400 directors serving on 170 boards in

Newfoundland. If this is representative and all of these 170 boards have the

same problem as we have, the thing is a mess!

What is going on? Why does this have to be?

Document details

Collection	Newfoundland and Labrador — Committees
Citation	1997-03-04
Type	committee
Volume / chapter	committees_standingcommittees_publicaccounts_ga43session1_1997-03-04_pac_.htm
Language	en
Format	html
Source	PROVINCIAL
Identifier	317831ab4a995f502a5558ab0b68ebd779094bf6

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