Editorial: Ottawa Pride Bankruptcy

Sebastien

In a detailed editorial piece the Velvet Studio’s Sebastien Plante writes why bankruptcy might not be Pride’s best idea. What do you think?  Drop us a message through our Facebook. This article is intended to offer arguments against Pride’s bankruptcy taking into account a small business perspective, and is not meant to report the known facts thereof. We would refer our readers to this article, for the consolidated information available to the public. Certain numbers have been drawn from other media articles for demonstration purposes. 

Capital Pride’s Bankruptcy;

Lets not Rupt Pride’s Bank Just Yet

Although the future of Capital Pride has become murky, in light of the recent declaration of intent to file for bankruptcy, the community is beginning to show a highly fractured state of opinions over whether or not Capital Pride is even worth saving.  There are many sentimental and historical reasons for fighting to maintain the continuity of this organization, and these may or may not be convincing to the various individuals and organizations in the community.  In light of the highly dramatic events of the Bankruptcy Postmortem cum Emergency Meeting on November the 5th, there are differing opinions on what to do next, and one question keeps arising; Why not let Capital Pride go bankrupt, then simply rebuild?  Answering this question is more complicated than it may seem at first, and here I hope to address this surprisingly complicated question in relative detail.

The quickest and simplest approach to answering this question is to realize that Capital Pride is, fundamentally, a community fair aimed to unify a once-persecuted community into a slightly less chaotic herd of cats, allowing us to better address the legal and systemic injustices against us, to create a sense of unity within the community, and finally to also serve as a sort of massive family picnic.  So long as these core goals are met by some group, if not specifically the Ottawa-Hull Pride Committee, there are questions on whether there would even be any loss to the community.  Let us call this, for the sake of simplicity, the “rose by any other name” argument – that any Ottawa-based GLBTQ community festival with the same or similar goals, by any other name and with any other structure, would serve just as well.  From an outsider’s perspective – for example some same-sex couple with a dog and a house in the suburbs who attends Pride but doesn’t really participate in any aspect of its execution – the assured continuity of service is really all that matters, but to get at why this is not the full truth we would need to look closely at the dollars and cents of the matter.

 

Bankruptcy Is Not Always The End

The first step in examining the rose by any other name argument is to acknowledge its validity.  Indeed, to a certain degree bankruptcy can be a good thing, if anything else because bankrupted corporations very rarely simply “go away”.  Often, when a corporation bankrupts, the institute is liquidated.  To put a positive spin on it, the failed (or simply mismanaged) institution is bought out by a more successful organization where it is either fully absorbed or else is kept as a separate-but-owned branch.  One famous Canadian example is the Canwest Global Communications Corporation, which filed for bankruptcy in 2009.  When Canwest went under bankruptcy protection, what occurred afterwards was CanWest was liquidated, ending with a division of assets bought by other interested parties on the market; the print division of Canwest was bought out by the National Post, and the broadcasting division of Canwest was bought by Shaw Media.  Ultimately the apparatus was more or less maintained – surely a few jobs were lost and more than a few people were replaced, but the various studios and offices continue to produce media, albeit under new owners and with new mandates.

Similarly, if the Ottawa-Hull Pride Committee were to declare bankruptcy, the fair itself wouldn’t simply cease to exist.  In the long run, the corporation it represents, the events they run, their name, their contacts and contracts, and their archives would all eventually end up run by another organization – presumably a brand new one with a new staff, new mandate, new bylaws, and new structure, all of which are run with a higher standard of professionalism and which ultimately is less dysfunctional, ideally.  It would be, in its essence, the “punk politics” argument; grab your pitchforks, run the people who have failed you out of town, burn to the ground that which does not work, then from its ashes rebuild a better system.  It is for these reasons that “too big to fail” is (almost) a myth – these things don’t disappear, they just get reborn under better management.

The only people who truly suffer from insolvency where bankrupted organizations are liquidated are the board of directors and the upper management – presumably those whose incompetence, lack of business acumen, ignorance over the facts, or corruption is what led to their company failing in the first place; so good riddance.  In fact, it would be entirely possible that if Pride were to bankrupt, dissolve, be sold, then reform under a new banner, it would not only be possible (but also to a small degree encouraged) to prevent anyone who participated in the collapse of its previous incarnation to participate in its management.  In other words; those currently sitting on the Board of Directors may very well end up banned from holding any position with the new Pride other than “volunteer” – presuming future iterations of Pride don’t even ban them from that much.  The end result would be that not only would the organization be able to completely dump and replace its dysfunctional internal structuring, but anyone with a reputation for being toxic would be equally be banned from ruining the new one as well.  This would be a surefire win for the community, surely.

Looking at the history of bankruptcy, there certainly is enough precedent to hold such an opinion over the Capital Pride festival, but there are complications which make this a festival worth fighting for – or more realistically, which makes it a bankruptcy worth fighting against.

 

The State of Capital Pride

First and foremost is the reality of the possible future sale itself.  Liquidated companies often benefit from being sold and reformatted so long as there is a larger, wealthier, better run company to acquire it.  Unlike, say, Tri-Star or Columbia Pictures, it’s safe to say that a bidding war between Sony, Disney, and Time-Warner is unlikely to break out over a small municipal community fair.  In fact there are no interested corporations or holdings in the Ottawa region of equal or greater value who are willing to acquire and reform Capital Pride – Pride in Ottawa has no valid angel investors.  As a result, without a bigger and “better” group around to absorb Capital Pride, there is no valid  punk politics argument here; once the locally-grown, amateur-but-hard-working, independent volunteers who “ruined” Pride are driven out, they will only inevitably be replaced by other locally-grown, amateur-but-hard-work independent volunteers, with no guarantees of them being better than the first round.  Given the benefit of the doubt, it’s likely that Pride could improve under liquidation and reformation, but there are no guarantees.  In fact, a new Pride would not be the existing Pride but under new management, it would both be a new Pride and under new management.  Put simply: the old regime is dead; long live the new regime.

This may not seem like a relevant point, but it goes a long way when it comes to donations and other funds.  A new festival with new management would be more than a fresh start, it would be a start-up.  A new Pride hitting Ottawa would be no different, financially-speaking, from a new restaurant or boutique and as a result the same realities would apply – namely that there is a significant chance that it would fail and go under within the first five years.  A Pride on the brink of bankruptcy, on the other hand, would be a pre-existing entity established within the community – albeit one with a shaky chequebook.  Pride as-is is the devil we know, the “new Pride”, whatever it would end up being, would be the devil we don’t.

That said, Capital Pride and the Ottawa-Hull Pride Committee have shown their ability to deliver already – from our assessments of publicly available financial summaries of the 2014 year, they indicate that if the various accounting irregularities and lawsuits had not happened, Capital Pride 2014 would have walked away with a profit of at least $15 thousand, likely more, and this is after paying off, in completeness, all debts remaining from the previous time Capital Pride almost went bankrupt.  In other words, the Ottawa-Hull Pride Committee can concretely show its capacity to overcome major financial hardship, and the irregularities of the 2014 will amount, in the long run, to no more than a bump in the road.  This history of financial stability, over the long term, of the current Pride committee could be used as a form of leverage in negotiations and fund raising, and any future committee members can convincingly show that Ottawa Pride always pays its debts… eventually.  No new organization, without external backing, can make such guarantees.  The rose by any other name argument is beaten by the better the devil you know that the devil you don’t argument.

 

Bankruptcy’s Impact on the Community

One final argument in favour of maintaining the current Pride comes from the perspective of the creditors to whom Ottawa Pride currently owes.  From the perspective of those contractors and organizations who are owed money by Pride, saving Pride in its current state is the much greater option.  Should Capital Pride declare bankruptcy, the corporation will be liquidated and auctioned off, with all income from the sales to be divided among its creditors.  For the community; good riddance.

Now consider the perspective of a contractor; you are an individual within the community who provided services to Pride, most likely at a reduced rate.  Now let’s say you’re a contractor owed over $10 thousand (alas, with at least two known such claimants – The House of SAS and Guillaume Tasse).  The existing Pride corporation is liquidated; the name, the rights, the archives, and all other value is auctioned off.  If the sales go well, your awarded share by the courts will probably be anywhere from $100 to $800 – if the sales go well – as whatever profits earned are split among all of the creditors.  Now consider the following year, where a new Pride organization is formed with new management and a new internal structure.  The business, service, or firm which you run is now down $10 thousand relative to last year, and you’re approached by the new Pride organization who now has your contact information and list of donations from previous years – as they bought the right to access this information in the liquidation auction.  Whether or not you’re willing to donate is even aside the point; are you even capable?  Providing services at reduced rates to new community organizations with no history is a highly risky move, a risk which few business owners and service providers would be willing to entertain if they’re already struggling with an uncollectable loss of several thousand.

In addition to Pride’s ability to garner donations, these various local small businesses may become destabilized by their inability to regain funds.  As it currently stands, The House of SAS appears to have already closed its doors due to its inability to reclaim lost money.  Most other contractors and sub-contractors are unlikely to be hit quite as hard, but it does mean that others owed money, such as DJ Grondin or Gauillaume Tasse, may not have enough capital behind them to safely take the kind of day-to-day risks that small business owners need to take as a matter of course.  Capital Pride going bankrupt would likely begin a financial ripple effect felt throughout the Ottawa valley.  Realistically, it’s unlikely that jobs will be lost – other than those at the house of SAS – though small businesses in the Ottawa region, especially by queer-owned businesses involved in Pride, would at least risk having their financial growth stunted.

Should Pride not declare bankruptcy, on the other hand, it could enter a debt management agreement through various means.  In this case, Capital Pride’s debt is now spread out throughout an agreed period.  The various firms owed money are now assured, under court supervision, that they will definitely be repaid their outstanding $10 thousand, albeit now over a period of several years instead of all at once.  There would certainly be a chunk taken out of their bottom line for their 2014 financial year, but their long-term ability to grow would not be hindered half as much.

The individuals and organizations that Pride owes stand to gain much more in the long term under a debt management program than they ever could under a bankruptcy claim – in the first year alone they could very well collect that same $100, if not more, than they could have from Pride’s liquidation.  What’s more, if the reformed Ottawa-Hull Pride Committee can restructure and concretely demonstrate a new and more effective internal management system, not to mention its established ability to run a good festival and pay off its debts, these individuals and organizations owed may, in an act of good faith, forgive portions of the debt (i.e. write them off as a donation/tax credit instead).  This is not merely hypothetical, it’s common practice, and depending on the creativity of their accountants and the state and organization of their finances, tax credits can be almost as good as profits.

More importantly, the various organizations who have worked with Pride in the past are far more likely to continue doing so in the future, meaning the five-year rule of new businesses is bypassed.  Though a new Pride is more likely to be a fresh start with little if any “contamination” from the previous incarnation, it is also a far less stable investment, from the perspective of local small businesses, than a Pride on the brink of bankruptcy but which is under tight scrutiny of the courts and its auditors.

Overall, in the long run, not only would the festival itself benefit from being saved, but the community as a whole would as well – perhaps not in a dramatic way, but certainly to a relevant degree.  Additionally, without an angel investor to swoop in and save the day the debts and money owing from Pride would, in this case,  simply disappear – leaving many small businesses in the Ottawa valley in a less financially stable position, and far less likely to invest in the newer, possibly (probably?) better Pride committee.

 

Using the Momentum of the Bankruptcy for Improvement a.k.a. Polishing the Turd

The benefits of keeping the existing Pride committee afloat rest quite squarely on a short list of very important factors; should Pride seek externally-monitored debt management, and should Pride completely restructure itself internally, its ability to assure continued existence will outweigh the risk of dissolving the festival and reforming it under a new name.  This doesn’t even include the notion of expansion; an often overlooked point (not by various disenfranchised members of the community, but by past Boards of Directors of Capital Pride) is that they are (were?) the “Ottawa-Hull Pride Committee”, and not the “Centretown-and-Maybe-Hintonburg-and-I-Guess-Vanier-Sometimes Pride Committee”.  Given a thorough expansion outside of Centretown and into Hull-Gatineau, not to mention the rest of the Ottawa region, even if only for individual events during Pride Week if not for the weekend of the festival itself, there is a massive untapped market of potential investors, neglected demographics, and potential-but-unactualized future events.  Reformatting Pride’s structure and gaining debt management is only half of the equation, the other half being expansion.

For Pride to survive the bankruptcy, it may need to stop looking at itself as a mere festival, and it may need to look at its future not as same-as-before-but-a-bit-better, but as a small business under new management.  The new management side is simply a matter of debt management and restructuring.  What’s key here is the business side, which is more an issue of pure entrepreneurship; increasing stability through spreading into untapped markets, bringing in new customers and investors, and appealing to new audiences – the Quebec side in its entirety, not to mention the various international communities with a strong presence (but history of neglect) in the Ottawa GLBTQ community (the Afro-Caribbean and Latin American communities, for example).   Over the past year there has been a dramatic increase in the community organizing its own events to coincide with Pride, even if not directly or officially affiliated.  Pride Guide 2014 saw over 75 events added by groups outside of Capital Pride – what can only be the tip possible new markets.

Whether Pride has it in itself to take these essential steps is yet to be seen, but given that the interim board of directors for the month of November is largely made of small business owners (or directors of organizations which operate not unlike small businesses do), the possibility of a proper reboot is more likely than not to be successful, and is way more likely to succeed than a burn-and-regrow approach.  In fact, taking into account the advantages of not declaring bankruptcy, in terms of the financial impact on the community, debt management finds itself clearly being the better option, especially considering that externally-monitored debt management is usually accompanied by an internal reconstructing of the organization anyway.  If a brand new punk politics-driven organization has the advantage of having a totally different structure, but comes with great financial risk, the advantage is dissolved away given the relative financial stability of debt management, on the condition that the current Pride dramatically restructure itself.

Either way, if a fresh start – from a structure and policy perspective – is inevitable.  why not take the option with the least financial risk to the community?

Nov 17, 2014 | Posted by in Archive, Editorials, Pride | 0 comments

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