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Bluesfest: the numbers still don't add up

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On Friday, OC announced a five-year deal with Bluesfest to charge $100,000 in return for providing free transit to ticket-holders, sponsorship recognition, the ability to leverage a further charge for line items such as supervisory staff, and revenue-sharing in any future transit sponsor deal.

Though glad the debate is behind us, and the larger public interest has been served by focusing on transit to get to the venue, I’m left wondering whether we've blown a hole in our transit event policy just a few weeks after it was published. If so, it's time to re-write it.

In 2015, the cost of adding additional buses to serve festival-goers was $285,000 according to numbers provided to me last winter by OC Transpo staff. New fare revenue was determined to be $87,000.

The original proposal floated last winter was for a flat $200,000 fee, charged under the special events by-law, to cover that shortfall. I didn’t like it, but it was coherent. It would have allowed the City to recover the costs of extra buses. Given how tight our budget is, hard choices have to be made sometimes.

But, under this new proposal negotiated between OC and Bluesfest, the benefit to the taxpayer is negligible:

OLD: $285,000 cost less $87,000 in new fares = $198,000 subsidy

NEW: $285,000 cost less $100,000 fee = $185,000 subsidy

Now, written into the deal is the ability to charge Bluesfest an additional line item to recover the cost of supervisory staff and similar administration, so that subsidy will likely be smaller. But, this has clearly ceased to be a discussion about cost recovery. And, OC will benefit from some great new advertising. But this year, the taxpayer will only be ahead by a relatively negligible sum.

And, we face a new challenge: free transit to the venue will likely create new demand. We have to assume there is some portion of festival-goers who are using ride-sharing or taxis, or driving, currently. Making transit free should be a powerful inducement to change that behaviour for some number of those. Even a 5% increase in the cost of providing the service to meet higher demand would boost expenses to $299,250 – wiping out the offsetting fee revenue compared to 2015.

Simply, the taxpayer will still be on the hook for over half the cost of the buses, and possibly more if demand is significantly higher - unless service is drastically reduced. The festival, however, will be saddled with a new $100,000 expense to be borne either by festival-goers or, hopefully, a transit sponsor.

To be fair, providing free transit to the venue could boost Bluesfest’s attendance, and has obvious other benefits for the larger community. Spreading $100,000 over a larger festival-goer denominator is better than spreading $200,000 over a static one, for sure. The risk to the not-for-profit festival of not recovering the additional expense is reduced community programming, but I tend to believe that there’s enough price elasticity on the part of festival-goers that this relatively small sum should be easily absorbed in the ticket price even if a transit sponsor can’t be found.

But OC Transpo's policy, as outlined to the Commission this month in response to my budget inquiry (see attachment below) is clear: "Staff have interpreted the Council direction to seek cost recovery to mean that event organizers should pay all costs that OC Transpo will incur over and above the cost to provide regular everyday service".

The City is proposing to use its by-laws to force festivals and events to cover the cost of providing extra transit. In this case, it hasn't done so. I'm glad Bluesfest attendees will get free transit this year, but it seems our special events policy still needs a lot of consideration. Given that festivals such as Bluesfest generate millions in economic activity for the city, I believe it should simply be re-written if it can't be implemented in more coherent fashion than this. Festivals in Ottawa rock. Everyone should know the ground rules.

Posted May 21, 2016
Bluesfest: The numbers still don’t add up