1. OTTAWA STADIUM (300 COVENTRY ROAD) – RESULTS OF THE REQUEST FOR OFFERS TO LEASE PROCESS

STADE D’OTTAWA (300, CHEMIN COVENTRY) – RÉSULTATS DU PROCESSUS DE DEMANDE D’OFFRES DE LOCATION

COMMITTEE RECOMMENDATIONS

That Council:

1. Receive the findings of the Request for Offers to lease the Ottawa Stadium;

2. Approve the selection of the proposal from Beacon Sports Capital Partners as the authorized representative for a stipulated professional baseball franchise that is a member of the AA Eastern League of Minor League Baseball to lease the Ottawa Stadium, subject to the prior approval of the Eastern League, Minor League Baseball and Major League Baseball regarding the relocation and affiliation of a franchise, as outlined in this report;

3. Delegate authority to the City Manager to finalize and execute:

a. A renovation plan for the Ottawa Stadium with Beacon Sports Capital Partners in accordance with the terms and conditions detailed in this report;

b. A lease agreement with the stipulated professional baseball franchise for the Ottawa Stadium in accordance with the terms and conditions detailed in this report and with standard lease provisions, subject to completion of the renovation plan; and

4. Approve debt authority in the amount of $5,700,000 for Lifecycle and Baseball Development Improvements at Ottawa Stadium as described in this report.

RECOMMANDATIONS DU COMITÉ

Que le Conseil:

1. reçoive les résultats du processus de demande d’offres de location du Stade d’Ottawa;

2. approuve la décision de retenir la proposition de Beacon Sports Capital Partners (Beacon Sports) comme représentant pour une franchise de baseball professionnel désignée qui est membre de la Eastern League of Minor League Baseball AA en vue de louer le Stade d’Ottawa, sujet à l’approbation de la Eastern League, Minor League Baseball and Major League Baseball en vue de la relocalisation et affiliation de la franchise comme l’énonce le présent rapport;

3. délègue au directeur municipal les pouvoirs de finaliser et signer:

a. un plan de rénovation avec Beacon Sports pour le Stade d’Ottawa conformément aux modalités décrites dans le présent rapport;

b. un contrat de location avec la franchise de baseball professionnel désignée pour le Stade d’Ottawa conformément aux modalités décrites dans le présent rapport et incluant les modalités standard d’un contrat de location et sujet à l’achèvement du plan de rénovation; et

4. approuve l’autorisation de dette d’un montant de 5 700 000 $ en vue des améliorations du cycle de vie et du perfectionnement et développement de baseball au Stade d’Ottawa, comme l’indique ce rapport.

DOCUMENTATION

1. City Manager’s report dated 9 February 2012 (ACS2012-CMR-REP-0012).

2. Extract of Finance and Economic Development Committee Minutes dated 16

February 2012.

Report to/Rapport au:

Finance and Economic Development Committee

Comité des finances et du développement économique

and Council / et au Council

9 February2012 / le 9 février 2012

Submitted by/Soumis par: Kent Kirkpatrick, City Manager / directeur municipal

Contact Person/Personne ressource : Peter Radke, Manager, Realty Initiatives and Development Branch, Real Estate Partnerships and Development Office/gestionnaire, Initiatives stratégiques en immobilier, Bureau des partenaires immobiliers et du développement

(613) 580-2424 x 12551, Peter.Radke@ottawa.ca

13 – Rideau-Rockcliffe

Ref N°: ACS2012-CMR-REP-0012

SUBJECT: OTTAWA STADIUM (300 COVENTRY ROAD) – RESULTS OF THE REQUEST FOR OFFERS TO LEASE PROCESS

OBJET : STADE D’OTTAWA (300, CHEMIN COVENTRY) – RÉSULTATS DU PROCESSUS DE DEMANDE D’OFFRES DE LOCATION

REPORT RECOMMENDATION(S)

That the Finance and Economic Development Committee recommend Council:

1. Receive the findings of the Request for Offers to lease the Ottawa Stadium;

3. Delegate authority to the City Manager to finalize and execute:

a. A renovation plan for the Ottawa Stadium with Beacon Sports Capital Partners in accordance with the terms and conditions detailed in this report;

4. Approve debt authority in the amount of $5,700,000 for Lifecycle and Baseball Development Improvements at Ottawa Stadium as described in this report.

RECOMMANDATION(S) DU RAPPORT

Que le Comité des finances et du développement économique recommande au Conseil :

1. de recevoir les résultats du processus de demande d’offres de location du Stade d’Ottawa;

2. d’approuver la décision de retenir la proposition de Beacon Sports Capital Partners (Beacon Sports) comme représentant pour une franchise de baseball professionnel désignée qui est membre de la Eastern League of Minor League Baseball AA en vue de louer le Stade d’Ottawa, sujet à l’approbation de la Eastern League, Minor League Baseball and Major League Baseball en vue de la relocalisation et affiliation de la franchise comme l’énonce le présent rapport;

3. de déléguer au directeur municipal les pouvoirs de finaliser et signer:

a. un plan de rénovation avec Beacon Sports pour le Stade d’Ottawa conformément aux modalités décrites dans le présent rapport;

4. d’approuver l’autorisation de dette d’un montant de 5 700 000 $ en vue des améliorations du cycle de vie et du perfectionnement et développement de baseball au Stade d’Ottawa, comme l’indique ce rapport.

EXECUTIVE SUMMARY

This report responds to Council direction to staff on 9 November 2011 to initiate a Request for Offers (RFO) process to lease the Ottawa Stadium for a long-term baseball use. Presented in this report are the results of the RFO, a description of the preferred offer, and a recommendation regarding that preferred offer.

From a comprehensive list of minor league baseball teams and leagues that received the RFO document, the City received two (2) submissions to lease the Ottawa Stadium facility. These offers were evaluated in a three stage process by an evaluation team comprised of City staff.

Based on the evaluation process, the preferred offer was determined to be an offer submitted by Beacon Sports Capital Partners, the authorized representative of a professional baseball franchise that is a member club of the AA Eastern League of Minor League Baseball. The governance rules of the Eastern League preclude the acknowledgement of a specific franchise and potential Major League affiliation until the relocation and designation has been approved. Since the preferred offer has been determined, City staff has been in negotiations with Beacon Sports to develop a Memorandum of Understanding that would enable staff to present the offer to Council and that would form the basis for the lease agreement for the Stadium.

The Beacon Sports’ offer proposes a ten (10) year lease term with two five (5) year extension options for a AA member club of the Eastern League to play at least seventy one (71) home games per year at the Ottawa Stadium. Prior to the spring of 2013, the City would need to invest approximately $2,700,000 for various lifecycle improvements to the stadium as well as $3,000,000 for various baseball development improvements (to meet Minor League Baseball Standards). The Franchise would invest approximately $2,000,000 into the facility for baseball enhanced improvements and would secure a lease for a new scoreboard that is estimated to cost an additional $1,000,000. In addition, both parties would invest $100,000 annually for on-going lifecycle improvements, which would create a lifecycle reserve for the facility. Finally, the Franchise would need to fund various start-up costs to have the stadium ready for the spring of 2013. To recover the funds invested into the Baseball Development Improvements, the City will receive a base rent of $257,000 per annum for the initial ten (10) year term and for the first five (5) year extension option.

In considering the Beacon Sports offer, staff analyzed four alternative scenarios for the stadium facility. Those scenarios included mothballing the facility, programming the facility with City recreation uses, retaining the current tenants, and implementing the Beacon Sports offer. All four scenarios were analyzed over a ten year period to show the annual net cost to the City. While mothballing the facility would have the lowest financial impact for the City, the Beacon Sports proposal would have the second lowest net cost but the Beacon Sports proposal would enable the City to get the best value out of the purpose built facility. Beacon Sports’ offer provides the City with an opportunity to maximize the use of the Stadium and provides an additional entertainment venue for residents and visitors of the City

RÉSUMÉ

Le présent rapport donne suite à la directive donnée au personnel le 9 novembre 2011 de lancer un processus de demande d’offres de location du Stade d’Ottawa pour en faire à long terme un stade de baseball. Il contient les résultats du processus de demande d’offres, une description de l’offre retenue et une recommandation visant ce choix.

Parmi une liste complète de ligues et d’équipes de ligues mineures de baseball ayant reçu la demande d’offres, la Ville a reçu deux (2) propositions de location du Stade d’Ottawa. Une équipe d’évaluation, composée de membres du personnel municipal, a examiné ces propositions en trois étapes.

En se fondant sur les résultats du processus d’évaluation, l’équipe a identifié l’offre privilégiée comme étant celle de Beacon Sports Capital Partners, représentant autorisé d’une franchise de baseball professionnelle qui se trouve être un club de baseball de la Ligue de l’Est mineure de baseball de niveau AA. Les règles de la Ligue de l’Est interdisent l’identification précise de la franchise et l’affiliation possible à la ligue majeure tant que le déménagement et la désignation n’ont pas été approuvés. Depuis que la décision de retenir cette proposition a été prise, le personnel municipal est en négociations avec Beacon Sports afin d’élaborer un protocole d’entente qui permettrait au personnel municipal de présenter l’offre de Beacon Sports au Conseil qui servirait de base pour la rédaction du contrat de location du stade.

L’offre de Beacon Sports propose un bail de dix (10) ans assorti de deux possibilités de prolongement de cinq (5) ans pour qu’un club de baseball AA de la Ligue de l’Est joue au moins 71 matchs à domicile par an au Stade d’Ottawa. Avant le printemps 2013, la Ville sera tenue d’investir environ 2 700 000 $ dans diverses améliorations du cycle de vie du stade, de même que 3 000 000 $ dans diverses améliorations du perfectionnement des joueurs (afin de satisfaire aux normes de baseball mineur). La franchise investira, quant à elle, environ 2 000 000 $ dans les installations pour y apporter des améliorations en vue d’accueillir des équipes de baseball et signera un bail pour un nouveau tableau d’affichage estimé à un coût additionnel de 1 000 000 $. En outre, les deux parties investiront chaque année 100 000 $ dans des améliorations continues du cycle de vie. Enfin, la franchise devra assumer divers coûts de démarrage pour que le stade devienne opérationnel au printemps 2013. Pour récupérer les fonds investis dans les améliorations du perfectionnement des joueurs, la Ville recevra un loyer annuel de base de 257 000 $ pendant le premier bail de dix (10) ans et le premier prolongement de cinq (5) ans.

En évaluant l’offre de Beacon Sports, le personnel a analysé quatre scénarios possibles pour les installations du stade. Ceux-ci comprenaient la mise hors service des installations, l’utilisation des installations aux fins récréatives des programmes municipaux, le maintien des locataires actuels, et la mise en œuvre de la proposition de Beacon Sports. Chacun des quatre scénarios a fait l’objet d’une étude sur dix ans pour montrer les coûts nets que la Ville devra assumer chaque année. Bien que la mise hors service du stade aurait le moins d’impact financier pour la Ville, la proposition de Beacon Sports avait le deuxième coût net le plus faible, en plus de permettre à la Ville d’exploiter au mieux de ses capacités les installations sportives. En conclusion, l’offre de Beacon Sports donne l’occasion à la Ville d’optimiser l’utilisation du stade et d’offrir un autre endroit de divertissement aux résidents et aux visiteurs de la Ville.

BACKGROUND

On 9 December 2009, Council considered a staff report (ACS2009-CMR-REP-0050) regarding both a long-term and short-term strategy for the Ottawa Stadium property at 300 Coventry Road. Based on that report, Council approved a methodology to produce a long-term strategy for the Ottawa Stadium. In addition, a short-term strategy for the interim use of the Ottawa Stadium was approved by Council at that meeting.

The short-term strategy resulted in a lease agreement being executed with the Ottawa Stadium Group Ltd. (OSG). A one-year (1) lease agreement was executed and OSG operated the stadium for the 2010 season primarily for the purposes of its Fat Cats baseball team, which played in the semi-professional Inter-County Baseball League. In March 2011, Council approved a renewal to that agreement (ACS2011-CMR-REP-0015) and OSG’s Fat Cats baseball team continued to play at the Ottawa Stadium during the 2011 season. While the existing lease agreement is set to expire in March 2012, the City has the option to extend the lease to October 2012 to permit OSG’s Fat Cats team to play its 2012 season at the Ottawa Stadium. On 26 October 2011, OSG submitted its request to the City for an extension of the current lease agreement.

In August 2011, the City was contacted by Beacon Sports Capital Partners (Beacon Sports) regarding the possibility of securing the Ottawa Stadium for use by a minor league team affiliated with professional baseball. To ensure an open and transparent process, staff secured the services of a Fairness Commissioner to be in attendance at the second meeting with Beacon Sports.

As a result of this interest in the Ottawa Stadium, staff presented a staff report (ACS2011-CMR-REP-0035) to Council on 9 November 2011 outlining a Request for Offers (RFO) process to lease the Ottawa Stadium for a long-term baseball use. An RFO document was prepared on the basis of that Council approval and the document was subsequently issued on 15 November 2011. The deadline to submit an offer was 12 December 2011 in accordance with the RFO documentation and addenda. The RFO document was structured to identify a preferred proponent with whom the City could negotiate if it decides, in its sole and absolute discretion, to proceed with a long-term lease for the Ottawa Stadium based upon the primary use of the facility being professional or semi-professional baseball.

DISCUSSION

RFO Process

Numerous minor league baseball teams and leagues in Canada and the United States were circulated the RFO upon its issuance on 15 November 2011. As part of the RFO process, recipients were informed of the opportunity to schedule commercially confidential meetings as well as the opportunity to schedule site visits. Also, as part of the RFO process, potential respondents had the opportunity to submit questions to the City seeking clarification on the RFO criteria or process. Responses to these questions were provided in the form of addenda to the original RFO documents and these addenda were circulated to all entities that received the original RFO documents.

Questions and requests for clarification concerning the RFO were submitted by two (2) separate entities that were part of the original circulation of the RFO documents. One entity met with City officials in two separate commercially confidential meetings. The purpose of these meetings was to anchor key elements of the RFO and provide an opportunity for respondents to ask any questions related to the process or any questions on the information contained in the RFO. From the submitted questions and the commercially confidential meetings, five (5) addendums were issued by the City in support of the RFO process.

To ensure an independent level of scrutiny, the City retained the services of The Public Sector Company Ltd. to act as a Fairness Commissioner throughout the entire RFO process. The Fairness Commissioner reviewed all documents related to the RFO, attended all commercially confidential meetings, and attended all meetings to evaluate the submitted offers. Based on such participation the Fairness Commissioner concluded that the City of Ottawa conducted a competitive process to attempt to lease the Ottawa Stadium.

RFO Evaluation and Results

Upon closing of the RFO on 12 December 2011, City staff was in receipt of two (2) submissions to lease the Ottawa Stadium facility. An evaluation team comprised of staff from Supply Branch, Real Estate Partnerships and Development Office, and Finance Department evaluated the submissions in accordance with the stated mandatory submission requirements in the RFO document. The Fairness Commissioner was also in attendance during the evaluations to ensure that staff followed the process stipulated in the RFO document.

As described in the RFO document, submitted offers were evaluated in a three stage process by the evaluation team. Stage one of the RFO evaluation required submitted offers to adhere to mandatory submission and project requirements. Based on a review by the evaluation team, all submitted proposals passed the stage one review process.

Stage two of the RFO evaluation process involved an analysis of the financial section of the submitted offers. A financial offer sheet was required by the respondents that listed the guaranteed revenue streams and the shared revenue streams being offered to the City over ten (10) years beginning in 2013.

Stage three of the RFO process consisted of the due diligence phase to review the certainty, reasonableness and comprehensiveness of each Respondent’s Financial Offer. As part of the process, the City reserved the right to seek clarification of any of the elements contained in the Offer and to contact the people named in the project references in order to confirm the information provided.

The Preferred Offer

The preferred offer, based on the evaluation completed by the City evaluation team, was submitted by Beacon Sports on behalf of a professional baseball franchise currently located in the United States. This offer proposes relocating that minor league baseball franchise to Ottawa. The governance rules of the Eastern League preclude the acknowledgement of a specific franchise and potential Major League affiliation until the relocation and designation has been approved.

Currently affiliated with a major league baseball franchise, the subject franchise is a member club of the AA Eastern League of Minor League Baseball. The Eastern League, which was formed in 1923, is composed of two six-team divisions with teams in such locations as Trenton, Pennsylvania, Manchester, New Hampshire, Portland, Maine, Erie, Pennsylvania, and New Britain, Connecticut.

While the original Beacon Sports offer submitted to the City was considered the preferred offer, the actual framework of the original offer needed further refinement through negotiations between City staff and Beacon Sports. These negotiations took place between 3 January 2012 and 3 February 2012 and resulted in a Memorandum of Understanding. This Memorandum of Understanding would be the basis for the lease agreement between both parties.

Table one provides a break-down of the negotiated preferred offer outlined in the executed Memorandum of Understanding compared to the guidelines presented to Council on 9 November 2011:

TABLE ONE: COMPARISON OF GUIDELINES
Guideline	City Preference	Proposed by Beacon Sports (MOU Guidelines)
Term of Lease	Ten (10) years, with two (2) five (5)-year options. Options to extend available for the City to exercise at its discretion.	Ten (10) years with two (2) five (5) year options. Options to extend will be based on mutual approval. The City’s agreement to the first five (5) year extension will be subject to, amongst other factors, the Franchise being in compliance with the terms of the lease and in good standing with the City and the Eastern League
Use of Facility	Semi-professional or professional baseball team playing in a professional or semi-professional baseball league	Double-A baseball team playing in the Eastern League. Baseball schedule to include at least 71 home games.
Lifecycle Renewal Program	City to maintain basic facility lifecycle program but would prefer financial assistance from baseball team.	City to maintain facility lifecycle program. Franchise to fund $100,000 annually for lifecycle costs.
Baseball Development Improvements (MiLB Standards)	Franchise to fund all improvements necessary for stadium to meet MiLB standards	City to fund all improvements necessary for stadium to meet MiLB standards
Enhanced Baseball Improvements	Franchise to fund all enhanced baseball improvements proposed for the stadium.	Franchise to fund enhanced baseball improvements proposed for the stadium.
Operating Costs	Franchise responsible all operating, repair and maintenance costs.	Franchise responsible all operating, minor repair and maintenance costs.
Utilities and Other Services	Franchise responsible for all utility costs.	Franchise responsible for all utility costs.
Payments	Franchise to pay a required minimum payment and to identify rights to other sources of revenue.	Franchise to pay base rent payment of $257,000 per year.
Financial Security	Some form of guarantee is required	Letter of Credit valued at $257,000 to guarantee annual lease payment to be renewed annually. Guarantee of up to 50% of the value of the enhanced baseball improvements.
Parking	On-site parking spaces totalling 850 to be made available for first 10-years of lease. Any off-site spaces will be responsibility of the Franchise.	On-site parking to be available during initial lease term (10 years) and during first 5-year option period.
Long-term Development Strategy	Any redevelopment activity will not occur during the first ten (10) years of the lease agreement.	Redevelopment activity will not occur during the initial lease term (ten years) or during the first option period (five years).
Business Plan	To be included in offer package.	Provided as part of proposal.

Financial Summary of Preferred Offer

Table two compares the level of investment that will be needed by both the Franchise and the City prior to the Franchise beginning play at the Stadium in 2013.

TABLE TWO: INITIAL INVESTMENTS
IMPROVEMENT CATEGORIES	CITY	FRANCHISE
Lifecycle Renewal Improvements	$2,700,000	$0
Baseball Development Improvements (MiLB Standards)	$3,000,000	$0
New Scoreboard Improvement	$0	$1,000,000
Other Stadium Improvements	$0	$2,000,000
Start-Up/Soft/Indirect Costs	$0	$2,500,000
TOTAL INVESTMENT PRIOR TO SPRING 2013	$5,700,000	$5,500,000

Below is a description of the investments to be undertaken by both parties.

Ø City Investments:

o Lifecycle Renewal Improvements

To complete the lifecycle improvements identified in the Beacon Sports proposal, the city will need to invest an estimated $2,700,000 into the Stadium before the 2013 baseball season. These improvements include both specific lifecycle improvements (i.e. repairing elements of the seating bowl, replacing the chain link fence, and refurbishing various elements of the stadium) and general lifecycle improvements (i.e. new netting and screens, replace/repair broken seats, caulk and weather-strip stadium elements). The City will need to fund $100,000 per year to address on-going lifecycle improvements as required at the stadium for the duration of the lease.

o Baseball Development Improvements (MiLB Standards)

Beacon Sports has identified improvements to the Stadium that are required to meet MiLB standards and are needed to establish an appropriate playing environment for an affiliation with Major League Baseball. These baseball development improvements relate more directly to the baseball product and include such items as a new artificial turf, a batting tunnel, and conversion of excess seating areas. Totalling $3,000,000, Beacon Sports has proposed that these estimated improvements be funded by the City and that these improvements are completed prior to the 2013 baseball season.

Ø Franchise Investments:

o New Scoreboard Lease

A new video scoreboard for the Stadium is estimated to cost approximately $1,200,000 and the Franchise will be responsible for the majority cost of this scoreboard. Beacon Sports has proposed that the Franchise will enter into a lease agreement with a third party to fund the scoreboard improvement and the estimated cost of this lease agreement will be $1,000,000. In return, the City will be responsible for the installation of the new scoreboard structure as well as wiring and other components that will be a permanent fixed attachment to the Stadium. These costs are estimated to total $200,000 and are captured in the Baseball Development Improvements described in the previous section of this report.

o Other Stadium Improvements

Beacon Sports is proposing that the Franchise will invest $2,000,000 toward stadium improvements to enhance various elements of the facility and these improvements will be completed prior to the spring of 2013. These improvements include various field maintenance equipment, furniture, fixtures, and equipment for the clubhouse, suites and offices, as well as concession equipment.

o Start-up Costs

Beacon Sports has proposed that the Franchise will spend approximately $2,500,000 on tasks to initiate operations and re-introduce affiliated minor league baseball to Ottawa. These tasks will include start-up for staffing, marketing, advertising and other pre-opening stadium expenses.

o On-Going Lifecycle Improvements

The Franchise will also fund $100,000 annually in on-going lifecycle improvements required at the Stadium commencing in April 2013 and, pursuant to the lease, will be obligated to continue to make that payment for the duration of the lease Term and any extensions thereof. The timing of the improvements made with these funds will be at the discretion of the Franchise and the City, acting reasonably. The parties will review and agree upon a lifecycle improvement plan (LCIP) prepared by the City.

Ø Revenue for the City:

o Lease Payment:

Beacon Sports is proposing a ten (10) year lease agreement with two (2) successive five (5) year options. Both options would be executed based on mutual agreement from both the City and the Franchise. The lease term is proposed to commence on 1 January 2013 at which point the Franchise will have exclusive use of the facility. The first five (5) year extension will be under the same financial terms as the initial Term and the City’s agreement to that first extension will be subject to, amongst other factors, the Franchise being in compliance with the terms of the lease and in good standing with the City of Ottawa and the Eastern League. On or about 1 April 2012, the Franchise will pay a base rent of $150,000 for the 2012 calendar year. During that year, both the Franchise and the City will be completing the required life cycle improvements and the player development improvements to the Stadium (“Fit-up period”).

The annual base rent of $257,000.00 (plus HST) will be due and payable in two (2) equal instalments of $128,500.00 (plus HST) on 1^st April and 1^st July in each year of the term, with the first payment commencing 1 April 2013.

The base rent amount of $257,000 is structured to provide the City the opportunity to fully recoup its upfront baseball development improvements over the initial ten (10) year term of the lease plus the first five (5) year option of the lease. Based on the City funding the proposed $3,000,000 in baseball development improvements and using a “carrying cost” for the City of 4% for those funds, an annual base rent of $257,000 over fifteen (15) years would ensure that the City recovers it entire investment in those player development improvements.

o Ongoing Lifecycle Costs:

In the November 2011 staff report that was presented to City Council, approximately $3,900,000 worth of basic lifecycle improvements were identified to be undertaken over the next ten (10) years to maintain the basic structure of the Ottawa Stadium. Beacon Sports is proposing that the City complete approximately 70% of those identified lifecycle improvements prior to the spring of 2013, leaving $1,700,000 in lifecycle improvements to be addressed.

With the annual funding of $100,000 by the City for lifecycle improvements and $100,000 by Beacon for the same purpose, over the term of the lease, which would equal $2,000,000 the City should be able to fund the remaining lifecycle improvements.

Alternative Uses for the Stadium

In considering the preferred offer submitted by Beacon Sports, staff did consider alternative uses for the Stadium under the premise that the Stadium is a facility, built in 1992 at a cost of approximately $17M, for the primary purpose of accommodating professional baseball and the proposal submitted by Beacon Sports is for just that purpose. For discussion purposes, Table three summarizes the financial impact that four alternative uses for the stadium facility may have on the City, including the proposal submitted by Beacon Sports.

TABLE THREE: COSTS OF ALTERNATIVE USES FOR THE STADIUM
	Option 1: Mothball	Option 2: City Programming	Option 3: Current Tenants	Option 4: Proposal from Beacon
Annual City Cost	$368,000	$530,000	$475,000	$452,000

Ø Option One: Mothball the Facility

From a facility condition standpoint, the Ottawa Baseball Stadium, which was built in 1992, has an expected useful lifespan of seventy (70) years and a retirement year estimated to be 2062. While the stadium facility was built for baseball, the base facility has potential, because of the facility’s bowl-like configuration, to be adapted or incorporated for other uses as part of a long-term re-development option for the property.

Any future uses of the site and possible alternative use of the stadium facility will be influenced by both the Light Rail Transit (LRT) project and the multi-use pathway project (connecting Train Station to Coventry Road). The future impact of these projects provides some value for the mothball option if the baseball option is not viable in the near future.

Mothballing the facility will cost the City, annually, approximately $368,000 over the next ten (10) years. A ten (10) year time frame is used since both the LRT project and multi-use pathway project will be completed and well integrated into the community within that time period. The average annual cost assumes that no events will take place at the facility and that the facility will be kept in “winterized” state year round. Even in such a state, the City will incur utility costs as well as some operational costs for various incidents (i.e. plumbing or vandalism) that may be realized at the facility. In addition, to ensure that the base facility may be used in any future redevelopment plans for the site, the City will need to fund and complete some lifecycle improvements during the mothballing state.

Ø Option Two: City Programming of the Facility

For the City to operate and program the facility annually during the period from May to October of each year, the average annual net cost to the City would be approximately $530,000. These costs include operating, utility and maintenance costs, annual lifecycle improvements to the basic facility, as well as annual lifecycle improvements to the baseball specific elements of the facility.

Utilizing a professional baseball stadium with a seating capacity of 10,000 for adult and youth baseball activities or other recreational activities is not an approach that will enable the City to capture an optimal value for the investment needed in this facility. Furthermore, utilizing this facility for City programs will most likely not generate new revenue for the City but will instead siphon revenue from other City recreation fields and facilities. Another potential source of revenue under this option would be through special events staged at the site; however, the amount of revenue which would be offset by additional costs, is unknown at this time and would require additional research by staff.

Ø Option Three: Retain Existing Tenant (Status Quo)

Under the current lease agreement with the Ottawa Stadium Group (OSG), the tenant is responsible for all operating and utility costs but any capital expenses, whether base building or baseball related, are the responsibility of the City. Given such an assignment of responsibilities, the City’s average annual net cost to maintain the facility is estimated to be $475,000. Such a cost represents the various lifecycle improvements needed for the base building and baseball elements that would be completed over the next ten (10) years to support a semi-professional baseball team competing in the Inter-County Baseball League.

Ø Option Four: Affiliated Baseball Use (Beacon Sports)

Option four represents the offer submitted by Beacon Sports to the City under the RFO process to seek a long-term user for the Stadium. In comparison to the other options identified in this report, the affiliated baseball option will be less costly over the next ten years compared to both the City programming option and the existing tenant option. While mothballing the facility will result in a lower net expenditure for the City over ten years compared to the affiliated baseball option, the latter option will enable the City to get the best value out of the purpose built facility for the next ten years and will enable the City to provide another entertainment venue for City residents and visitors.

Status of OSG Lease Agreement

Currently, OSG operates the Ottawa Stadium facility through a lease agreement with the City that was initially executed in February 2010 and then renewed in March 2011. The present lease agreement is valid through 14 March 2012; however, the lease may be extended to 31 October 2012 at the sole discretion of the City. As part of the existing lease agreement, the City has been receiving a base rent of $108,000 per year and OSG has been responsible for all operating, maintenance, and utility costs associated with the stadium use. In return, OSG is entitled to all facility revenues including advertising revenues. Under the existing lease, all lifecycle and capital costs remain the City’s responsibility.

In October 2011, OSG submitted a request to extend the current lease agreement to 31 October 2012. Given the anticipated scope of improvements to be undertaken and completed by the spring of 2013 suggests that having a baseball team operate in the stadium during this renovation period will be prohibitive. Furthermore, Beacon Sports as part of its offer has requested a Fit-up period of 1 April 2012 so that the Franchise can undertake its player development improvements and initiate its operation to be ready for the 2013 baseball season. Upon approval of the recommendations presented in this staff report, staff will inform OSG that the City will be unable to grant an extension to the current lease agreement.

Lease Agreement with Preferred Respondent

As noted in recommendation 3(b) of this staff report, upon approval, Council will delegate authority to the City Manager to finalize and execute a lease agreement with the Franchise for the Ottawa Stadium in accordance with the terms and conditions of this report. Execution of the lease agreement will be conditional on:

a) the affiliation of the Franchise with a stipulated major league baseball team;

b) the approval of the Eastern League, Minor League Baseball and Major League Baseball as to the relocation of the Franchise; and

c) the approval of the lease and the renovation plan by the City.

Operating Costs for the City

While the day-to-day operations of the stadium facility will be the responsibility of the Franchise, this facility will remain a City asset throughout the proposed lease term and beyond the lease term. Therefore, to ensure this facility is maintained in a condition acceptable to the City during the lease term and to ensure this facility is in an acceptable condition upon termination of the lease term, City staff anticipates the need for an additional 0.5 full time employee (FTE) position within the Parks, Building and Grounds Operations and Maintenance Branch to review and oversee the Franchise’s operating responsibilities.

Long-Term Strategy

The Beacon Sports offer does acknowledge the condition that the City will be undertaking a long-term redevelopment strategy for the Ottawa Stadium site; however, the Beacon Sports offer does request that any redevelopment activity that may impact the existing parking area be deferred to the timeframe of the second 5-year option to extend the lease. Therefore, the Franchise would have access to the existing parking area during the initial 10-year term of the proposed lease agreement as well as during the first 5-year extension option of the proposed lease agreement if both parties agree to the said extension.

Recommendation

The City’s desired outcome for this “best offers to lease” process was to secure a long-term user for the baseball field that has a valid business plan involving a professional or semi-professional baseball franchise and to minimize the City’s financial resources being directed at the stadium facility. Beacon Sports’ offer provides the City with an opportunity to maximize the use of an existing City asset, an additional entertainment venue for its residents and visitors, and attempts to minimize the City’s financial resources being directed at the facility over the long-term.

RURAL IMPLICATIONS

N/A

CONSULTATION

Staff consulted with Infrastructure Services staff regarding lifecycle improvements needed at the Stadium under each of the four alternative uses considered for the Stadium. Also, Public Works Department staff and Parks, Recreation & Cultural Service Department staff were consulted on the operating costs for some of the alternative uses considered for the Stadium. Finally, staff collaborated with Supply Branch, Finance and Legal Services regarding this report.

COMMENTS BY THE WARD COUNCILLOR(S)

The Councillor supports the staff recommendations regarding the results of the RFO process to secure a long-term baseball tenant for the Ottawa Stadium.

LEGAL IMPLICATIONS

There are no legal impediments to implementing the recommendations in this report.

RISK MANAGEMENT IMPLICATIONS

Cost Estimates

Until the renovation plan is finalized and the work has been tendered, the actual hard and soft costs will not be known by the City or the Franchise. If the City receives tender prices in excess of the estimates presented in this report, a potential budget pressure may be realized for the City and the Franchise.

Financial Security

Beacon Sports will provide a Letter of Credit valued at one year of the guaranteed lease payment to be renewed annually. Beacon Sports will also guarantee up to 50% of its enhanced baseball improvements and those improvements are estimated at $2,000,000. The nature of this guarantee will be negotiated into the lease agreement. As noted in the Discussion section of this report, the City will recover its investment in the baseball development improvements provided that the Franchise honour’s the ten (10) year lease agreement and agrees to the first five (5) year option in the agreement. Should the Franchise re-evaluate its business plan prior to the end of the lease term and choose to cease operations at the Stadium, the City will not recover its entire investment in the baseball development improvements.

Renovation Plan Costs

As a requirement of the Eastern League, Minor League Baseball, and Major League Baseball is that a renovation plan is prepared for the Stadium prior to any of these organizations approving the relocation of a franchise to Ottawa. To prepare this plan, the City will need to spend approximately $250,000 in pursuit costs and should any of the above noted organizations not approve the relocation request, the City will not recover those pursuit costs.

FINANCIAL IMPLICATIONS

In order to advance these works, it is recommended that debt be used as the source of funds for the lifecycle and player developments works. The yearly cost of servicing $5.7 million in debt for a twenty (20) year term at 3.52%, would be approximately $400,000. If issued, this cost would be added to the 2013 budget.

The report dealing with the disposition of 2011 tax supported surplus is anticipated for either the March or April 2012 Finance and Economic Development Committee meeting. Depending on the amount of surplus the report returns to the City-wide reserve it will be recommended that this project be refinanced to remove the debt and that funding from the City-wide reserve be used for the capital improvements.

The report identifies a requirement for maintenance oversight of the Ottawa Stadium to ensure the facility is maintained in a condition acceptable to the City during the lease term and to ensure this facility is in an acceptable condition upon termination of the lease term. City staff anticipates the need for an additional 0.5 FTE position within the Parks, Building and Grounds Operations and Maintenance Branch to review and oversee the Franchises operating responsibilities. This request will be included in the Draft 2013 Operating Estimates.

ACCESSIBLITY IMPACTS

N/A

TECHNOLOGY IMPLICATIONS

N/A

CITY STRATEGIC PLAN

The recommendations of this report support all three (3) Constituents (C) or stakeholders in City Council’s 2011-2014 City Strategic Plan: Residents, Enterprises, and Visitors; specifically C1: to contribute to the improvement of quality of life for residents, C2: to enable the achievement of short and long-term success for enterprises, and C3: to provide a compelling, vibrant destination. They also support City Council’s strategic priorities of: Economic Prosperity (EP) and its objective EP3 to support the growth of local economy; Healthy and Caring Communities (HC) and its objective HC2 to improve parks and recreation; and Financial Responsibility (FS) and its objective FS2 to maintain and enhance the City’s financial position.

SUPPORTING DOCUMENTATION

N/A

DISPOSITION

Upon approval of the recommendation of this report by Council, the following tasks will be undertaken by City staff:

Ø Real Estate Partnerships and Development Office (REPDO) and Legal Services Branch to negotiate final lease agreement based on the articles of the executed Memorandum of Understanding;

Ø REPDO to notify Ottawa Stadium Group that the City will not be approving its request to extend the term of the existing lease agreement;

Ø REPDO and Infrastructure Services Department will work with the selected respondent to prepare a renovation plan for the Ottawa Stadium;

Ø Parks, Building and Grounds Operations and Maintenance Branch to identify a staff position that will be responsible for overseeing the Franchise’s operations at the Ottawa Stadium.