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 $0.35M for the Orleans Art Centre (formerly the East End Cultural Centre).
1. la stratégie de mise en place décrite dans le présent rapport concernant la construction et l’aménagement du Centre des arts d’Orléans en vertu d’un partenariat public-privé;
2. l’injonction au personnel de négocier une option afin d’obtenir ou d’acheter la propriété d’Hydro One d’une superficie de 0,35 ha dans le centre-ville d’Orléans afin d’achever le remembrement des parcelles en vue du partenariat;
3. l’injonction au personnel d’entreprendre des séances de consultation avec la communauté portant sur les fonctions et les espaces principaux du projet, ainsi que les coûts afférents, proposés pour le Centre des arts d’Orléans et de faire rapport au Comité de la santé, des loisirs et des services sociaux sur lesdits besoins et coûts d’ici janvier 2005;
4. l’injonction au personnel de faire rapport au Comité des services organisationnels et du développement économique ainsi qu’au Conseil sur les résultats des conventions négociées pour ledit projet et sur les recommandations concernant l’émission d’une demande de propositions au printemps 2005;
5. le préengagement d’une somme de 0,35 M$ provenant du budget des immobilisations de 2005 pour le Centre des arts d’Orléans (anciennement le Centre culturel de l’est).
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.
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.
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.
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.
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.
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.
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.