Report to/Rapport au :
Corporate
Services and Economic Development Committee
Comité des services organisationnels et du développement économique
and / et
Health, Recreation and
Social Services Committee
Comité de la santé, des loisirs et des services sociaux
and Council / et au Conseil
September 2003 / le
septembre 2003
Submitted by/Soumis par : Steve Kanellakos, Acting
City Manager/
Intérimaire directeur général des services municipaux,
City Manager's Office/Bureau du directeur des services municipaux
and / et
Jocelyne St Jean, General Manager/Directrice générale,
People Services/Services aux citoyens
Contacts/Personnes ressource : Réjean Chartrand,
Director
Strategic
Delivery Unit/ Directeur, Unité d’exécution stratégique
(613)
580-2424 ext./ poste 21696, Rejean.Chartrand@ottawa.ca
and
Colleen Hendrick, Director, Innovation, Development and Partnerships/
Directrice de l’Innovation, development et partenariat
(613)
724-4122 ext./ poste 24366, Colleen.Hendrick@ottawa.ca
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SUBJECT: |
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OBJET
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PARTENARIATS
ENTRE LES SECTEURS PUBLIC ET PRIVÉ – NOUVELLES SURFACES DE GLACE POUR LE
DISTRICT OUEST |
REPORT RECOMMENDATIONS
That the
Corporate Services and Economic Development Committee and the Health,
Recreation and Social Services Committee recommend Council:
1. Authorize the General Manager of People Services to finalize the
negotiations and conclude and execute all necessary agreements with Ottawa
Community Ice Partners (OCIP) for the provision of new ice surfaces at 1565
Maple Grove Rd. in accordance with the revised proposal submitted by OCIP as
amended through negotiations, the terms and conditions in the Request for
Proposal, and the framework contained in this report.
2. Designate 1565 Maple Grove Rd. as a Municipal Capital Facility as
permitted under section 110 of the Municipal Act and Ontario Regulation 46/49
and that this designation be implemented by way of an Agreement between the
City and OCIP, and by presenting to Council for enactment a by-law in
accordance with the requirements of the Municipal Act and this report.
3. Declare that the Municipal Capital Facility at 1565 Maple Grove
Rd. is for the purposes of the municipality and is for public use.
RECOMMENDATIONS DU RAPPORT
Que
le Comité des services organisationnels et du développement économique et le
Comité de la santé, des loisirs et des services sociaux recommandent au Conseil
municipal de :
1. Autoriser le directeur général des Services aux citoyens à achever
les négociations et à conclure et signer tous les accords jugés pertinents avec
la Ottawa Community Ice Partners (OCIP) en vue de la création de nouvelles
surfaces de glace au 1565 du chemin Maple Grove conformément à la proposition
revisée soumise par l’OCIP et aux modifications qui y ont été apportées dans le
cours des négociations, aux modalités et conditions énoncées dans la demande de
propositions et au cadre de travail défini dans le présent rapport.
2. Désigner le 1565 du chemin Maple Grove à titre d’immobilisation
municipale à usage public de la Ville en vertu de l’article 110 de la Loi sur les municipalités et le
règlement 46/94 de l’Ontario, et veiller à ce que cette désignation soit
établie, dans le cadre d’un accord entre la Ville et l’OCIP, et par
l’intermédiaire d’un règlement soumis pour promulgation au Conseil municipal
conformément aux dispositions de la Loi
sur les municipalités et aux exigences énoncées dans le présent rapport.
3. Déclarer que le 1565 du chemin Maple Grove constitue une immobilisation municipale à usage
public de la Ville.
BACKGROUND
In October 2002 City Council approved that a number
of projects be implemented on a priority basis under public-private
partnerships (P3s), including the provision of ice surfaces in the west
district of the City.
A Request for Qualifications (RFQ) for Indoor Ice
Surfaces was issued by the Supply Management Division on 18 November 2002 and
was advertised on MERX. The RFQ closed
on 18 December 2002 and ten qualification submissions were received.
In February 2003, City Council approved three
respondents for the west district to be on the short list to receive the
Request for Proposal (RFP) in the next stage of the partnering process. The RFP
was issued by the Supply Management Division and distributed directly to these
three firms on 25 February 2003. The
RFP closed on 8 April 2003 and proposals were received from each of the short
listed respondents.
In order to assess the proposals, an evaluation team
was established including representatives from the People Services Department,
RPAM, the Strategic Delivery Unit, and an external representative. Based on established evaluation criteria, as
detailed in the RFP, the evaluation team recommended that Ottawa Community Ice
Partners (OCIP) be selected as the preferred respondent in the west district
and that staff be authorized to initiate negotiations with OCIP to develop a
partnership agreement for the provision of new ice surfaces. This was approved by City Council on 11 June
2003.
The proposal advanced by OCIP was based on the
conversion of a vacant building leased by Nortel at 500 Palladium Drive, and
was therefore contingent on parallel successful negotiations with Nortel to
make the property available to OCIP. On
July 25 Nortel announced that it had sold its leasehold interest in the
property to an alternative party, removing that site as a potential site for
the provision of new ice surfaces.
Because the sale of Nortel’s leasehold interest at
500 Palladium Drive substantially affected the original proposal from OCIP, and
the proposals from the other two respondents were deemed not to meet the City’s
technical and budgetary requirements, the City exercised the right to not
proceed with the original RFP, but to issue a new RFP to the three
pre-qualified respondents. The
pre-qualified respondents were each provided the opportunity to improve their
proposals conditional on the revised proposal meeting all existing requirements
of the original RFP.
Each of the three pre-qualified respondents were
fully debriefed with regard to the shortcomings within their proposals through
individual briefing sessions with staff, and were given two weeks to improve
upon their original proposal.
All three of the pre-qualified respondents
resubmitted revised proposals on 13 August 2003. The evaluation team reconvened and, based on the original
evaluation criteria detailed in the RFP, deemed the revised proposal from OCIP
as best value to the City having achieved the highest score and most closely
matching the City’s objectives.
This report forms the next step in the P3 process in
that it outlines the negotiated framework for an agreement between the City and
OCIP. This report recommends the
partnership agreement with OCIP be finalized and executed based on this
framework.
DISCUSSION
The proposal submitted by OCIP is for the
construction of a 4-Plex to include 4 ice surfaces, a multi-court field house,
food and beverage concessions, and complementary retail space. The development
will be located on a 10 acre site of undeveloped land at 1565 Maple Grove Rd.,
immediately across from Walter Baker Park.
The project will be owned and operated by a not for
profit organization, OCIP, made up of four founding partners, namely, the
Morley-Hoppner Group, the Ottawa Senators Hockey Club, CB Richard Ellis Ltd.,
and the Ottawa Senators Alumni.
Construction of the new facility is expected to cost
in the order of $27M and will be built through private sector financing, with
payments under the 30-year project lease to service the long-term debt
financing to be guaranteed by the City under a Municipal Capital Facilities
Agreement. OCIP will subcontract with the Ottawa Senators Hockey Club for the day-today
operations and management of the facility for the 30 year duration of the
Municipal Capital Facilities Agreement.
At the end of the term, the facility will be purchased by the City for
one dollar.
OCIP will be responsible for all of the programming
and marketing of its activities.
Financial Framework:
The City and OCIP will enter into a Municipal
Capital Facilities Agreement to provide a guarantee for the project lease, and
to waive the payment of property taxes for the duration of the agreement.
The City’s rate for the purchase of 2400 hours of
prime ice time will be $143/hr, to be escalated at 1.75% annually for the first
five years of the partnering agreement. Escalation rates will be reviewed and
renegotiated every five years. This rate of $143/hr compares very favourably to
the City’s public sector comparator of $250/hr and represents an implied annual
savings to the City of approximately $257K.
In order to mitigate the risk to the City of
providing a guarantee of the project lease, OCIP will establish an Operating
Reserve and a Lifecycle Renewal Reserve. The Operating Reserve will be funded
over time to a level sufficient to meet the obligations under the project lease
for one full year. Initially, the targeted balance in the Operating Reserve
will be approximately $1.6M, increasing over time in step with the increasing
lease obligations.
This initial reserve balance will be funded as
follows:
· $800K contribution by OCIP
· $250K annual contribution by
the City; this represents the difference between the city’s public sector
comparator hourly cost ($250/hr) and the purchase cost from OCIP ($143/hr) for
the 2400 hours of ice time being purchased
· 50% of the annual net cash
flow after all expenses and lease obligations
Based on the business pro-forma submitted, it is
anticipated that the annual contribution from the City would only be required
in the first four years of the partnering agreement. After that point in time,
the annual contribution from operations is sufficient to sustain the Operating
Reserve to the agreed upon level.
Funds will be released from the Operating Reserve in
the following order of priority:
The Lifecycle Renewal Reserve will be established by
OCIP to ensure that all lifecycle renewal requirements over the 30-year lease
period are fully funded. This will not only benefit OCIP and the users of the
facility during the initial 30 year term, but it will result in the City taking
ownership of a properly maintained, fully functional facility at the end of the
30 years. Any funds remaining in this reserve at the end of the term will
transfer to the City with the facility.
The Lifecycle Renewal Reserve will be funded through
contributions of 50% of annual net cash flow after all expenses and lease
obligations. In addition, any surplus from the Operating Reserve will be
transferred to the Lifecycle Renewal Reserve.
OCIP will provide audited financial statements
annually to ensure the flow of funds respects the terms of the agreement.
Risk Distribution:
This public-private partnership requires the private
sector partner to assume all risks related to the design and construction of
the new facility and to assume part of the performance and revenue risk related
to the management and operation of the new facility. The operator will be paid
a base management fee of $135K per year, which could escalate to $350K based on
performance, if all conditions of the project lease are met and the capital
reserves are kept current. Any shortfall in meeting these financial commitments
will result in the payment of the base management fee only.
In addition, as detailed above, OCIP will contribute
$800K at the start of the lease period to the Operating Reserve, and this fund
is first at risk should there be any default in meeting OCIP’s financial
commitments.
The City will guarantee the project lease through a
Municipal Capital Facilities Agreement and will also waive the payment of
applicable property taxes through the same agreement. The City’s guarantee is
tied with the start of operations of the new facility and results in the City
becoming liable for any shortfall in the project lease payments. This risk is
mitigated through the Operating Reserve, the strength of the demand for the
programming and services to be offered in the facility, the business case
submitted, and the experience and competence of the operator of the facility.
The location of this new facility immediately across
from Walter Baker Park also reinforces the business case for the project.
Walter Baker Park houses 5 baseball diamonds, 6 soccer fields, 1 toboggan hill
and 1 skate park and the synergy between these current uses and the new 4-Plex
will be positive. It should be noted
that the twin pad Kanata Recreation Centre, located in near proximity, is not
anticipated to be negatively affected by the addition to the inventory, as the
demand for ice far outweighs the present supply.
The creation of a Lifecycle Renewal Reserve also
mitigates any risk to the City and will ensure the timely completion of
lifecycle renewal work. As additional guarantee, the facility reverts to the
City for one dollar at the end of the 30-year agreement.
P3 Benefits to the Community:
This new 4-Plex, including an indoor soccer field,
will go a long ways towards meeting the demand for additional ice time in the
west district of the City and will also add to the supply of indoor soccer
fields.
The implementation of this public-private
partnership also advances the delivery of this much needed infrastructure and
provides more than twice the playing surfaces that the City would have
considered under its traditional approach to service delivery.
Finally, the construction of a modern recreational
facility will result in much increased programming and services being offered
and delivered to the community and will be a source of pride for the community.
ENVIRONMENTAL IMPLICATIONS
There are no environmental implications related to
this project. Standard development conditions will apply.
RURAL IMPLICATIONS
The facility will be available to users from across
the City, including rural residents who will have access to the new facility.
CONSULTATION
In
developing their proposal, OCIP carried out extensive consultation and
discussion with user groups in the west district and all have indicated strong
support for this new facility. A formal public meeting on this public-private
partnership will be held on 15 September 2003 and feedback on comments received
will be presented verbally at the Committee meeting.
FINANCIAL
IMPLICATIONS
The
construction of this new facility is expected to cost $27M and will be
designed, built, financed, and operated by the private sector. The City will
guarantee the project lease through a Municipal Capital Facilities Agreement.
The
purchase of 2400 hours of ice time at $143/hr by the City will result in a new
and expanded program at the City and will place an additional annual pressure
of $343,200 on operating budgets. This will be offset through the sale of this
ice time to local organizations, anticipated to generate a revenue of
approximately $228,000, leaving an annual net new and expanded cost to the City
of $115,200.
The
City’s annual contribution of $250K into an Operating Reserve, anticipated for
the first four years of the agreement, will also increase the pressure on
operating budgets.
The
approval of this partnership agreement will result in a long-term commitment to
this new and expanded program in the west district of the City, and base
operating budgets will need to be adjusted accordingly starting in 2004.
SUPPORTING
DOCUMENTATION
No
supporting documentation attached.
DISPOSITION
The Strategic Delivery Unit and the People Services
Department, in consultation with the Legal Services Branch, will finalize and
arrange for the execution of the necessary agreements to implement this
public-private partnership with OCIP. Implementation of the project will
proceed immediately after agreements are executed, with an anticipated
completion date of Fall 2004.