City wrote off $1M in multiplex pledges after deeming them uncollectable

The City of Moose Jaw wrote off nearly $1 million in multiplex pledges as bad debt after it deemed it impossible to collect the money that community groups promised to pay.

Residents, businesses and community groups promised to give $10.3 million to support the construction of the $61.2-million Mosaic Place project. A group of interested residents established the Multiplex Builders Inc. as the designated group that would collect the funds, according to a city council report.

The Multiplex Builders group eventually received commitments of $10.1 million, of which it provided $8.7 million to the municipality, leaving $1.3 million in outstanding pledges.

In 2015 the municipality’s auditors reviewed the situation and determined that only the amount of pledges due from the Moose Jaw Warriors was collectable. So, the city wrote off $1.07 million as a bad debt expense that year, the report continued. Since then, the Multiplex Builders Inc. provided another $149,050 in pledges, leaving $930,355.90 as uncollectable. Meanwhile, the Warriors owe $400,000 — $200,000 per year in 2021 and 2022 — as a receivable for money pledged.

“The bulk of the outstanding amount due relates to Moose Jaw Soccer ($585,950), which they were unable to contribute due to significant drops in their membership,” the council report said.

The soccer organization’s initial pledge was $750,000, of which it provided $164,050. Moose Jaw Soccer later told city council it had to reduce its pledge to $25 per player, or $5,625 per year at current player levels. However, the organization has not provided any funds.

The City of Moose Jaw is unable to take any collection actions for three reasons, the report said, including:

• The pledges were to the Multiplex Builders Inc. and not to the City of Moose Jaw, which is what the Canada Revenue Agency (CRA) requires;

• The details on the pledges such as amount, name and address, and amount paid so far all reside with the Multiplex Builders Inc. as is normal practice;

• The Multiplex Builders Inc. has ceased to exist. The pledges that Moose Jaw Soccer has made are the subject of discussions with the sports organization and could be recoverable in the lowered pledge amount in the future, the report added.

“I found (the report) concerning that we don’t have any recourse on any of those uncollectable amounts … ,” Coun. Scott McMann said on May 11. “Certainly the council of the day made decisions based on those pledge amounts, and it’s unfortunate they’re not all going to be fulfilled.”

McMann wondered if future fundraising agreements could be structured differently so council or the municipality had some way to collect those outstanding pledges. Big fundraising projects such as the multiplex are challenging since it’s common for some pledges to drop off, explained city manager Jim Puffalt. It was a separate, non-municipal committee that looked after collecting the pledges and not the municipality itself. Sometimes setting up such committees can lead to these types of problems.

The CRA is stringent on the structure of how pledges are collected and it has to be upon the organization to do the collecting, echoed finance director Brian Acker. That means there is no legal recourse that city council could take to collect the remaining outstanding pledges. The next regular council meeting is Monday, May 25.