MAP Document 1
Report
to/Rapport au :
Corporate Services and Economic Development Committee
Comité des services organisationnels et du
développement économique
and Council / et au Conseil
05 October 2004 / le 05 octobre 2004
Submitted by/Soumis par : Ned Lathrop, Deputy City Manager / Directeur
municipal adjoint
Planning and Growth Management / Urbanisme et Gestion de la croissance
and / et
Steve Kanellakos, Deputy City Manager / Directeur municipal adjoint
Community and Protective Services /
Services communautaires et de protection
Contact Person/Personne
ressource : Rob Mackay, Manager / Gestionnaire
Strategic Projects / Projets stratégiques
(613) 580-2424 x 22632, rob.mackay@ottawa.ca
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SUBJECT: |
Implementation strategy FOR |
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OBJET : |
STRATÉGIE
DE MISE EN PLACE CONCERNANT |
That Corporate Services and Economic
Development Committee approve and recommend to Council:
1. The
implementation strategy detailed in this report for the development and
construction of the Orleans Arts Centre under a public-private partnership;
2. That
staff be directed to negotiate an option to secure or purchase the 0.35 ha
Hydro One property in the Orleans Town Centre to complete the land assembly for
the partnership;
3. That
staff be directed to undertake consultation with the community on the core set
of program functions and spaces, and corresponding costs, proposed for the
Orleans Arts Centre and report back to the Health Recreation and Social
Services Committee and Council on these needs and costs by January 2005;
4. That
staff report back to Corporate Services and Economic Development Committee and
Council on the results of the covenants secured for this project and on the
recommendations for the issuance of the Request for Proposal in Spring 2005;
and
5. That Council pre-commit the 2005 capital budget in the amount of $0.35M for the Orleans Art Centre (formerly the East End Cultural Centre).
Que le Comité des services
organisationnels et du développement économique approuve et recommande au
Conseil :
1.
la stratégie de mise en place
décrite dans le présent rapport concernant la construction et l’aménagement du
Centre des arts d’Orléans en vertu d’un partenariat public-privé;
2.
l’injonction au personnel de
négocier une option afin d’obtenir ou d’acheter la propriété d’Hydro One d’une
superficie de 0,35 ha dans le centre-ville d’Orléans afin d’achever le
remembrement des parcelles en vue du partenariat;
3.
l’injonction au personnel
d’entreprendre des séances de consultation avec la communauté portant sur les fonctions
et les espaces principaux du projet, ainsi que les coûts afférents, proposés
pour le Centre des arts d’Orléans et de faire rapport au Comité de la santé,
des loisirs et des services sociaux sur lesdits besoins et coûts d’ici janvier
2005;
4.
l’injonction au personnel de faire
rapport au Comité des services organisationnels et du développement économique
ainsi qu’au Conseil sur les résultats des conventions négociées pour ledit
projet et sur les recommandations concernant l’émission d’une demande de
propositions au printemps 2005;
5.
le préengagement d’une somme de 0,35
M$ provenant du budget des immobilisations de 2005 pour le Centre des arts
d’Orléans (anciennement le Centre culturel de l’est).
BACKGROUND
On June 15th 2004, City Council while reviewing the
Morguard Corporation proposal for 150 Elgin Street approved the following
motion:
That Committee’s and
Council’s decisions regarding 150 Elgin Street not preclude or pre-empt any of
the other priority projects such as the Orléans (East End) Arts Facility; and
That staff be redirected to transfer the
responsibility for the East End Cultural Facility to the Special Projects Group
under the Deputy City Manager of Planning and Growth Management to develop
opportunities including City-owned lands around the Orléans Client Service
Centre with the objective of advancing the construction of this Council
priority and that the Deputy City Manager provide an interim report on this
initiative in September.
It has been approximately 15 years
since the first report identified the need for an east end arts facility. In
1989, the City of Gloucester commissioned a report entitled the Cultural
Facilities Needs Assessment study which spoke of the growing arts community in
the east end and the requirement for a new arts facility. Subsequent reports and initiatives anchored
the strong demand and importance of such a facility. In February 2003, the East District Arts Needs Assessment study
(a.k.a. Lussier Report) evaluated existing service and concluded that a single
modern arts facility was still required in the east district of Ottawa.
In May 2003, the City of Ottawa
commissioned Izso Consulting Associates to develop a detailed building program
and business plan for the Arts facility.
Representatives from the Arts Ottawa East (formerly the Gloucester Arts
Council) and Mouvement d’implications francophone d’Orléans (MIFO) (the two
major stakeholders in the arts community) along with staff formed a steering
committee to oversee this work. As part of the business plan, six capital cost
scenarios were developed and prioritized between May and October 2003. From these scenarios, emerged a list of
essential services and programs for the Arts Centre.
In August of 2003, Council agreed
that this facility would be developed on the vacant land in the Orleans Town
Centre. Previous to this point in the
process, City Council, in January 2003, had passed a motion supporting a $9.1
million capital budget for the Centre, and advanced the budget forecast for the
project from 2008 to 2005.
The report, which highlighted the
need for these funds, also identified a net operating budget investment of
between $350,000 to $500,000 per year for this proposed municipally owned
facility. In March 2004, the final
draft Business Plan and Building Program and Schematic Design was completed and
presented to staff.
Due to the June 15th,
2004 City Council motion, staff have not yet presented the final draft Business
Plan and Building Program to the broad community and a report to the HRSS
Committee and Council resulting from this consultation and confirming a core
set of program functions and spaces and corresponding costs, still needs to be produced.
DISCUSSION
Orleans Arts Centre
The Orleans Arts Centre will be a
strong cultural anchor for the Orleans Town Centre and the east urban
community. The East District is currently home to approximately 50 performing
and visual arts organizations (Lussier Report) many of which have been in
existence for more than 10 years. Close
to 15,000 people participate in the activities of these organizations who
deliver the programs with the assistance of over 1,300 volunteers. In 2003, these organizations offered over
200 performances with a paid attendance in excess of 26,000 patrons; a testimonial
to the sustainability, viability and strength of the arts community in the east
end of Ottawa.
More recently, the Orleans Arts
Centre has been identified as a priority in the Ottawa 20/20 Arts and Heritage
Plan. The Centre will support the development and presentation of the arts in
the City of Ottawa, particularly in the eastern part of the City. The
initiative has strong community, political, and business support in the east
end as evidenced by several articles in community newspapers.
The inclusion on the 2003-04
Steering Committee of key stakeholders, Arts Ottawa East (former Gloucester
Arts Council) and the Mouvement d’implication francophone d’Orléans (MIFO), has
led to a strong collaborative relationship that should be continued throughout
the development of the project. The Centre will be a source of pride for the
people of the east end and will be an important catalyst in attracting
investment into the development.
Ottawa’s local cultural sector is
also an economic force, generating an economic impact of $800 million annually,
with direct employment totaling 20,000 jobs (Statistics Canada). The Orleans Arts Centre will help keep local
audiences in the east end of the city for dance, music, theatre and visual arts
activities and special events. In
addition, the centre will attract audiences and participants from eastern
Ontario, particularly francophone audiences, according to MIFO.
This will help the area’s
restaurants and shops as arts activities are proven “magnets” for visitors and
residents alike. According to
Statistics Canada, participants in the arts have higher disposable incomes and
do in fact spend more on restaurants, live arts performances and shopping.
Orleans Town Centre
The Orleans Town Centre is
strategically located within the east urban community of Ottawa. Positioned
next to Highway 174 and the Place d’Orleans Shopping Centre, this area
currently has a strong mix of apartments, office, recreation and retail
services. These lands are also very accessible to the growing Orleans
community, which has a current population of 97,000 residents and is expected
to reach a planned capacity of 111,000 residents within the next decade.
The Orleans Town Centre is
approximately 92 hectares in size and is now about 73 % developed (see Document
1). Currently there remains
approximately 3 hectares of vacant city-owned land around the existing
municipal satellite office as well as an additional 4 hectares that are vacant
and owned by the City next to Highway 174 and the 10th Line Road interchange
exit. The lands around the satellite office are zoned to permit a variety of
uses including hotel, office, retail, etc. Additional vacant land that is
privately controlled is also available in this area with similar zoning.
The City’s Official Plan encourages
mixed-use development for this area with buildings that may have ground floor
retail with upper stories consisting of office and/or residential land uses.
Employment and residential uses are planned to be kept close together so as to lower
the use of the automobile and encourage workers and residents to walk and
support the nearby retail and commercial services. This area enjoys excellent
transit services and access to the existing established highway and road
infrastructure in the east end of Ottawa.
Development Constraints
While the east urban community has
experienced consistent residential and retail growth including a regional scale
shopping Centre (Place d’Orleans) over the last few decades, employment
opportunities have not kept pace. The growth in the high tech industry has
primarily occurred west of the Rideau Canal and the federal government has kept
to their pattern of developing in and around nodes such as Tunney’s Pasture,
Terrace de la Chaudière and downtown Ottawa.
Although many federal workers live
in the east end of the City, the federal government currently has no policy
that encourages new office space to be positioned in the east urban community
of Ottawa. The same holds true for the west end of Ottawa where in Kanata there
currently exists attractive investment opportunities in the form of vacant
Class A office space due to the downturn of the telecommunication sector in
2000.
Sources within Public Works Canada
have indicated that without a federal department specifically requesting an
east end location for a new office, staff will automatically recommend the
above mentioned nodes arguing that the net effective lease rates in east end of
the City for office development preclude their ability to protect the government’s
investment should the office space need to be returned to the market.
Staff are of the opinion that the
private sector will be interested in advancing the development of the Orleans
Town Centre and the Orleans Arts Centre through a strategic partnership with
the City if various incentives can be provided to off-set the market challenges
which where previously discussed. Some of these incentives will take the form
of initiatives that have already been started while others may involve financial
and/or land use related changes. Examples include:
1.
Current Economic Development Initiatives
Initiatives that are currently
underway include a joint effort to develop an economic strategy for the east
end of Ottawa with the Mayor’s office, the Federal Member of Parliament and the
Provincial Member of the legislature for the Orleans community. Specific
actions that have been discussed with these political representatives include
advancing the Orleans Town Centre, the Orleans Arts Centre and encouraging the
federal and provincial governments to consider Ottawa’s suburban communities as
a location for new investment.
Other initiatives include the
“Ottawa Counters Project” which is summarized in a separate information report
before the CSEDC members today. This
report makes reference to the province's strategy of developing a joint service
counter in the west, east and central locations of Ottawa.
This counter will deliver a defined
set of federal, provincial, and municipal services that have obvious
inter-relationships and are focused on information delivery and the submission
of necessary forms related to some key life-event transactions, such as the
birth of a child or the loss of a wallet. The central counter is currently
on-track to be opened in mid-June 2005 at City Hall, with the east and west
locations to follow thereafter.
2.
Securing Strong Covenants for the Orleans Town Centre
Most office, retail and other
development space is built for a tenant or client that has the financial ability
to maintain either a lease payment or mortgage payment over a term which can be
up to 25 years. In the real estate world having an agreement or “covenant” with
these types of tenants and clients is a key requirement before a development
proposal can advance.
Banks and other lending institutions
insist on these covenants before they loan money and as well want to ensure
that a reasonable “exit strategy” is in place should the client walk away from
their financial obligations. To ensure that their loans are not stranded in an
investment that cannot be marketed to another tenant or client, lenders require
that the lease or loan payment be on par with other rates being paid elsewhere
within a particular market area. In the real estate world these rates are
defined as the “net effective rates”.
The main challenge for locating new
office/other space in the east urban community is the lack of a suitable exit
strategy in that the net effective rates are insufficient to adequately finance
most new office/other development projects. Finding a client that can therefore
maintain a long term lease or loan payment that is somewhat above the net
effective rates and is willing to locate in the east end of the City becomes
the challenge.
To this end, staff are of the
opinion that the various levels of government can address this challenge by
considering the east end as a location for new government investment. Should
Council support this strategy, staff will undertake a full assessment to
determine if there are municipal or other government services that could be
located in the Orleans Town Centre. One area of focus will be to assess the
potential of relocating existing municipal leases and provincial back office
support for the Ottawa Counters Project.
Recent interviews with the
development industry confirm their support and strong interest in this
strategy.
3.
Financial and Other Incentives
The City has recently executed five
P3 agreements where risk was shared between the municipality and the private
sector. In some of these agreements the City was granted a fixed amount of
community time within the new facility in exchange for the municipality
guaranteeing the long-term loan on the property. In other instances Municipal
Capital Facilities Agreements were entered into to reduce or eliminate the tax
burden on the facility, which is providing a community benefit.
Initial capital outlay from the City
was usually avoided and in some of these agreements the City entered into a
long-term lease arrangement to ensure the project received the necessary
financing. Finally, as there are strong community expectations that the arts
centre be a municipal facility, similar to Centrepointe Theatre, Arts Court or
the City’s art galleries, the City could hold title in strata of that portion
of a new development on the site that is dedicated as an arts facility.
Financial incentives are a useful
tool to gain the interest of investors in advancing the development of the
Orleans Arts Centre and the Orleans Town Centre. However, other incentives that
can be leveraged include the City’s vacant land holdings in this area as well
as the existing municipal satellite office which could be sold and leased back
to the City.
The benefit of including the
municipal satellite office in the partnership would be to give the developer
the ability to build upon or expand the existing building to incorporate any
additional space required, whether it be additional office or retail space, or
the arts centre. Any benefit to the developer under this option would translate
into a greater contribution towards the construction of the arts centre.
Implementation Strategy
To advance the Orleans Arts Centre,
staff are proposing that a Request for Proposal (RFP) be prepared and released
once the research is completed on the above referenced incentives. The RFP
could include all of the City lands illustrated in Document 1 to the report,
the municipal satellite office, and possible covenants from all three levels of
government for office space. In return the City would request that the Arts
Centre form part of the development as per conditions that would be included in
the RFP and further negotiated in a partnership agreement.
With respect to the 0.35 acre hydro
property identified on Document 1, this report is recommending that Council
grant staff the authority to negotiate an option agreement or purchase these
lands to complete the land assembly and include them in the RFP. Despite its
relatively small size this land is important for the strategy, due to its
location and ability to be integrated into a master plan development.
In summary, the proposed development
strategy will optimize the funding for the Orleans Arts Centre by creating
critical mass and synergy for a larger, more viable development. This
development will incorporate the existing client service centre and adjoining
lands, the proposed Arts Centre, and other potential development, which will
share the overall infrastructure, and planning costs and therefore lower the
development expenses attributable to the Arts Centre. Key steps in this strategy include:
1. Present the final draft Building Program to the general public and prepare a report to the HRSS Committee and Council on the program functions and spaces and corresponding costs by January 2005;
2. Position the Orleans Town Centre as the location for the east end Ottawa Counters Project with the Ministry of Consumer and Business Services, including any back office space requirements;
3. Undertake a full scan of municipal and other government services to determine if there are office requirements that can be addressed in the Orleans Town Centre, and secure covenants for these requirements;
4. Continue to anchor the importance of developing the Orleans Town Centre and Orleans Arts Centre as a catalyst for triggering more economic development with the East Ottawa Development Initiative;
5. Assemble
the vacant land including the Hydro One property for the RFP process;
6. Secure
the necessary funding to initiate this strategy immediately;
7. Report back to CSEDC Committee and Council on the results of the covenants secured for this project and on the recommendations for the issuance of the RFP.
Timing
Staff anticipate that the biggest
challenge within this strategy will be to secure covenants for long term office
space. This will take some time but staff intends to report back to Committee
and Council on this progress and on the recommendations for proceeding with the
RFP in the April 2005 timeframe. Under a best case scenario, this would allow
the RFP to be initiated in the summer and a partnership agreement executed in
the Spring 2006.
Funding
The 2003 capital budget as adopted
by Council shows $9.1M coming on stream for the project in 2005. Based on the
implementation strategy contained in this report the majority of these funds
will not be required until 2006 when Council should be in a position to approve
the partnership related to the construction of the Orleans Arts Centre.
Immediately following the approval
of this report, however, some funding will be required to initiate the
implementation strategy specifically as it relates to securing covenants for
office space, developing an appraisal for the land assembly that will form part
of the RFP, and any other specific expertise that may be required in advancing
this project. Once Council confirms the RFP strategy in Spring 2005, funds will
also be required to finalize the terms of reference, and evaluate the business
propositions received.
As a result it is recommended that
$350K be pre-committed from the 2005 Capital budget to initiate the
implementation strategy contained in this report immediately.
CONSULTATION
Prior to finalizing this strategy, staff met with the
ward Councillor and representatives of Arts Ottawa East and Mouvement
d’implication francophone d’Orléans (MIFO) and discussed the approach presented
in this report. These representatives were to consult with their members and
ensure they are made aware of the recommended approach and timing of the Corporate Services and
Economic Development Committee meeting.
Issues were raised which related to
the governance of the facility and community access. Assurance that the arts
facility would be fully bilingual, would remain a municipal asset, would meet
documented community needs and that the proposal call would try to optimize the
City’s investment in the Arts Centre as previously discussed, was sought and is
being recommended by these two groups.
Staff will consider these matters as the project proceeds.
FINANCIAL IMPLICATIONS
Subject to Council Approval, this report will constitute a pre-commitment, in the amount of $0.35M from the 2005 Capital budget.
SUPPORTING DOCUMENTATION
DISPOSITION
Staff will initiate the strategy identified above and report back to Council as indicated.