Report
to/Rapport au :
Corporate Services and Economic Development Committee
Comité des services organisationnels et du
développement économique
and Council / et au Conseil
28 February 2005 / le 28 février 2005
Submitted by/Soumis par : Ned Lathrop, Deputy City Manager/Directeur municipal adjoint
Planning and Growth Management/Service de l'urbanisme et de la gestion
de la croissance
Contact
Person/Personne ressource : Réjean Chartrand, Director, Economic Development
and Strategic Projects
Economic Development and Strategic Projects
Branch
(613) 580-2424 x21696, Rejean.Chartrand@ottawa.ca
and
Rob Mackay, Manager, Strategic Projects,
Economic Development and Strategic Projects Branch, (613) 580-2424 ext 22632, Rob.Mackay@ottawa.ca
REPORT RECOMMENDATION
That Corporate Services and Economic
Development Committee recommend Council:
1.
Approve
the proposed public-private partnership framework; and
2.
Authorize
staff to initiate a Request for Qualification process for:
§
The
phased design and construction of a twin pad arena with a compatible outdoor
recreational facility; and
§
The
operation and maintenance of the proposed arena and the existing Kinburn
District Service Centre and proposed ancillary services.
RECOMMANDATION DU RAPPORT
Que le Comité des services organisationnels et du
développement économique recommande au Conseil :
1.
D’approuver le cadre proposé pour le
partenariat entre le secteur public et le secteur privé; et
2.
D’autoriser le personnel à amorcer le
processus pour la demande de qualification pour :
n
La conception et la construction par étapes d’un
aréna à deux patinoires avec une installation de loisirs en plein air
compatible; et
n
L’exploitation et l’entretien de l’aréna proposé
et du Centre du service à la clientèle actuel de Kinburn ainsi que des services
auxiliaires proposés.
BACKGROUND
On 15 December 2004, Council directed staff to
proceed with development of the P3 framework for the construction and operation
of an arena facility at the Kinburn District Service Centre site.
An Expression of Interest (EOI) was posted on
MERX on 8 January 2005 with a closing date of 27 January 2005.
This report provides the results of that EOI,
addresses issues that must be resolved in order to advance a successful
partnership, and proposes a framework for proceeding.
DISCUSSION
Public-Private Partnership Process
The selection of a private sector partner to
assist in the delivery of a public service is one of the key elements in a P3
process. Over the past two years, the
City has developed a partnering process that led to the successful execution of
five P3 agreements. This process builds
on the creativity and strengths of the private partner to assist in defining
the solution and sharing the risks of each project between the City and the
private sector partner.
Inherent in the creation of a partnership is
the goal of a long-term relationship, and therefore, the selection of a partner
needs to be conducted in a rigorous and prudent manner.
For this project, an Expression of Interest was
issued for the purpose of gauging the level of interest and ability of the
private sector to leverage the existing client service building and vacant land
to advance an arena complex.
Participation at this stage did not pre-qualify or shortlist respondents
for further stages of the process. Any
and all interested parties will have the opportunity to participate in future
stages. To ensure wide distribution and
awareness of the project, ads were placed in the Citizen, Le Droit, Ottawa
Business Journal newspapers as well as the Ottawa Construction Association
website.
At the same time, staff continued in their due
diligence activities with further research into demand for ice surfaces and
potential uses for the vacant space at the Kinburn District Service
Centre. As indicated in the previous
report to Council, an amendment is required at this site to add an arena as a
permitted use. This re-zoning process
has been initiated.
Results of the EOI and Due Diligence Research
The City’s Supply Management Division led the
EOI process. Eight submissions were received and reviewed by a team of five
internal staff from Parks and Recreation, Comprehensive Asset Management,
Planning and Growth Management and Strategic Projects. While there were no formal evaluation
criteria, since this was an expression of interest, the responses to the
questions were analyzed and discussed.
The consistent challenge identified by
respondents was the lack of market demand to support a twin pad. The relatively remote location of the site
also presents a challenge to develop a business plan that provides a realistic
revenue stream from the operation of the arena and ancillary services in the
existing building. Ideas were presented
to provide year round use of both facilities with the acknowledgment that the
City would have to contribute financially to the project.
During the same time period, staff in the Parks
and Recreation Branch held a meeting with ice user groups in West Carleton and
distributed a survey requesting information on the projected demand for hours
and willingness to pay various rates for ice time. A community forum was also held with community groups to solicit
ideas for programs and services they would like to see offered at the Kinburn
District Service Centre.
Through these various activities, two key
messages emerged:
1)
At
this time there does not appear to be a strong enough demand for prime and
non-prime ice time to support 2 ice pads;
2)
There
is a need to sustain and enhance a variety of community services including
recreation, social support, public health and primary health care.
Given this information, staff recommends that
the project focus on developing the Kinburn District Service Centre site as an
all-season community hub, with the first phase of the development, being the
construction of a single ice pad with compatible other uses, such as a soccer
field. The design of the arena facility
would take into account the future addition of a second ice pad when demand has
been established.
The City has identified the need for soccer
playing surfaces. The recently approved
Sports Fields Strategy concluded that the City needed to develop 124 new soccer
fields across the City, including 14 new fields in the west district, to meet
current and future demand. A full-sized
soccer field developed at the Kinburn site, while not a strong revenue generator,
would attract users to the site and offer cross-programming opportunities with
the arena and the district service centre.
The existing district service center building
is currently under-utilized. The client service counter, ward councillor
offices and administration space for various City programs and staff use
approximately 13,000 of the 20,425 gross square feet. The remaining space is vacant.
The City will continue to require office space
and the district service counter for the delivery of municipal services to the
community of West Carleton. Preliminary
work indicates that the space can be consolidated from the current occupancy of
13,000 gross sq. ft. to 6,500 sq. ft. for office space and an additional 2,000
sq. ft. for programming space.
This creates opportunities for the private
sector partner to utilize the surplus space for revenue generation. The proposed zoning by-law amendment will
not only permit the arena use on this site but as well other potential uses
such as, but not limited to, food service, sports services, office space,
meeting rooms and banquet facilities.
Anticipated Partnership Framework
A P3
partnership holds the potential to move financial risk to the private sector
partner when a strong ability to generate revenue exists. In this project, the ability to generate
revenue is more limited. As such, the
preferred approach is that:
- the
City maintain ownership of all land and buildings;
- the
private sector partner be responsible for the:
- design
and construction of the arena and compatible recreational facility such
as a soccer field, district service centre retrofits, and all site
services at a fixed price and within a specific time frame;
- operation
and maintenance of the arena, district service center and site, including
the compatible recreational facility such as a soccer field;
- marketing
and programming of the surplus client services center space for revenue
generation; and
- marketing
and sale of ice time in excess of the City’s requirements.
Municipalities have a long history of
subsidizing ice rental in their communities.
However, with continual growth and demand for ice time from all age
groups, it is becoming more and more difficult to meet the demand at the
subsidized rates. The gap, between the
costs of constructing, operating and maintaining ice arenas and the cost of
service delivery, needs to be narrowed.
Municipalities typically incur a $250/hr. cost
to own and operate an arena. This
includes the cost of land, design and construction costs, life cycle costs,
operation costs, overhead and administration.
The private sector charges in the range of $195-$224 /hr. for prime ice
time compared to the subsidized rates of $94-$176/hr. charged by the City. Over time, the City will need to close this
gap to ensure the subsidized ice rental program is sustainable.
The operation of the arena, compatible
recreational facility and district service center space is anticipated to break
even or slightly better. Depending on
the uses proposed, there will be an ability for the private partner to contribute
towards the repayment of the capital financing, however, this project is not
expected to be fully self-supporting.
The
analysis of the expenses and potential revenue for this project, indicate the
following:
Capital
Expenses:
The
sources of funding for the capital portion of this project are:
|
Source |
Amount |
|
Balance
of capital reserve for arena development in West Carleton |
$1.1M |
|
2005
capital budget |
$1.0M |
|
Retrofit of former rural township halls |
$219,000 |
|
Community fundraising commitment in dollars and in kind services |
$500,000 |
|
Total |
$2.82M |
The City’s design and construction cost
estimate for a single pad arena with expansion capability, a full-sized soccer
field and required site development is in the range of $5.2M to $7.1M, leaving
a balance of approximately $2.4M to $4.3M to be funded. The private sector partner will be required
to contribute towards the cost to finance this amount but the exact amount will
not be known until the completion of the RFP stage of the procurement process.
At this time, the maximum exposure to the City is the repayment of the capital
costs, which translates into an annual contribution of approximately $190K to
$350K per year starting in 2007 over a 20-year period.
Partnering Process - Request for Qualifications
(RFQ)
The next step in the process is to proceed to
the Request for Qualifications (RFQ) or the Request for Proposals (RFP)
stage. Given the positive number of
respondents to the EOI, it is recommended to proceed with an RFQ. This allows the City to short-list and
pre-qualify respondents for the RFP stage.
The RFQ will have mandatory criteria requiring
proof of the respondent’s ability to arrange for financing, performance
security and insurance coverage. To be
considered for the short-list, the mandatory requirements must be met. Submissions not fully complying with any of
the mandatory requirements will be deemed non-responsive and will be given no
further consideration. The criteria
subject to point rating will request information on the experience and
qualification of the respondent as it relates to this project, how well they
understand and can meet the City’s objectives, their financial capacity to
design, construct and operate in the long term.
This stage pre-qualifies respondents who then are eligible to enter the next stage of Request for Proposals. Those short-listed are invited in the RFP stage to provide specific details on their business plan, approach and design.
As a best practice, an independent Fairness
Commissioner will be appointed in the early stages to assist in both the RFQ
and RFP to ensure that the process is open, fair and transparent.
Next Steps and Timelines
The Strategic Projects division has initiated
the RFQ process and subject to Council’s approval of this report, the RFQ will
be released on MERX. This is anticipated
to take place in early April 2005.
As directed by Council, the results of the RFQ
will be reported in June 2005 prior to the next step of issuing the RFP.
ENVIRONMENTAL IMPLICATIONS
A preliminary site plan prepared for the Kinburn District Service Centre site indicates that the facility and required parking can be accommodated without significant environmental impact. Any minor impacts will be identified and mitigated through the site plan control process. Modifications to the existing septic system and water supply may be required depending on the proposals received.
The development of an arena with a compatible recreational facility and improved use of the current under-utilized district service centre space will create an all-season community hub for the rural residents of West Carleton. The population growth in the surrounding areas and ever increasing demand for recreation services points to an increased market to support future expansion of the arena with a second ice pad.
CONSULTATION
A re-zoning application has been initiated to
add an arena with ancillary services as permitted uses. Public consultations will be held as part of
that process. In addition, follow-up
consultations will be held with the ice user groups who were invited to respond
to the survey.
FINANCIAL IMPLICATIONS
Staff’s analysis has concluded that there will be sufficient revenues to cover the operating costs for the arena and the ancillary services. Depending on the uses proposed to complement the arena, additional revenues will be generated to contribute towards the repayment of the capital financing. The financing is expected to be in the range of $2.4M to $4.3M and will cover the expected shortfall in the construction of this facility.
SUPPORTING DOCUMENTATION
DISPOSITION
Staff will initiate the RFQ process and report back to Council with the results before proceeding to the RFP stage.
