ADMINISTRATIVE REPORT

Date: July 18, 2000
Author/Local: B.Pearce/6276
RTS No. 01603

CC File No. 3143

CS&B: July 27, 2000

TO:	Standing Committee on City Services and Budgets
FROM:	General Manager of Corporate Services
SUBJECT:	Vancouver Economic Development Commission - Relocation Proposal

CONSIDERATION

A. THAT Council approve an increase in the Vancouver Economic Development Commission’s 2000 budget by a total not to exceed $16,781; this funding to address increased rental costs of $6,281 at the proposed new location of 601 Cordova Street (for the months of October, November, and December, to commence only at such time the VEDC has relocated), and moving expenses (not to exceed $10,500), subject to signed agreement with landlord, source of funds to be the Contingency Reserve.

B. THAT Council approve a $10,000 increase in the Vancouver Economic Development Commission’s 2001 and 2002 budgets to address a portion of the increased rental costs, source of funds to be the 2001 and 2002 Operating Budgets.

GENERAL MANAGER’S COMMENTS

The General Manager of Corporate Services is supportive in principle of the relocation of the VEDC office. The space at 601 West Cordova would offer a number of benefits unavailable at the current site. The VEDC would strengthen their association with the Canada/BC Business Service Centre, and would have access to meeting and library facilities.

However, there are other considerations in regard to increasing the VEDC’s funding. In January of this year, Council approved a $20,000 increase in the VEDC’s budget primarily to address increased rental costs at their current location. The increase in rental costs occured because prior to 2000, the VEDC paid only the operating costs of the space; in 2000, the VEDC is required to pay rental costs in addition to operating costs. This situation was based on a temporary arrangement with the landlord to occupy untenanted office space. It is important to note that the rent in this location will increase annually; the additional rental costs quoted in this report are in addition to increases already anticipated for the VEDC’s current location. Over a five year period, an additional $92,406 would be necessary to cover the difference in rent between the old location and the proposed location.

Staff propose assisting the VEDC with a portion of these additional rental costs until 2002. The remaining costs will need to be addressed by the VEDC’s budget; the VEDC is confident they can fund the remaining portion of the additional rental costs through revenue generating activities such as workshops. The General Manager of Corporate Services notes that the VEDC’s ability to generate revenues did not meet targets outlined in their 1999 Business Plan. There are also concerns at this stage with the VEDC’s ability to meet their 2000 revenue targets.

The General Manager of Corporate Services puts forth A & B for Council’s CONSIDERATION.

POLICY
Council has adopted a policy of contracting with the Vancouver Economic Development Commission for the provision of economic development services.

Purpose

The purpose of this report is to seek Council’s approval of an increase to the Vancouver Economic Development Commission’s base contract with the City of Vancouver in 2000-2002 to address increased rental costs and costs related to the VEDC’s move to 601 West Cordova.

Summary

The Vancouver Economic Development Commission is currently located at 608 West Cordova Street. There is an opportunity to relocate to the heritage building at 601 West Cordova Street (CPR Station). The proposed site does offer benefits unavailable at the current site; the VEDC would share facilities with the BC/Canada Business Service Centre, including meeting space and library facilities.

The VEDC has approached the City for financial assistance to address the increased rental costs of the proposed site, as well as costs associated with the move. This report proposes providing partial funding to the VEDC to assist with these costs until 2002, at which time the VEDC will cover their full rental costs.

Background
The Vancouver Economic Development Commission is an independent, non-profit organization created by Council in 1997 as a focus for economic development in the City. Council established the Commission as an alternative to the City economic development office in order to take greater advantage of information external to the City. The primary purpose of the Commission is to provide the City with policy advice and commentary on major economic development issues.
Economic development services are provided to the City through a fee for service contract.
Renewal of the services provided by the Commission are subject to annual review by Council. This service contract currently provides $220,000 of direct funding to the Commission; the Commission also receives project specific funding from the City, as well as from other funding sources. The contract with the VEDC was increased from $200,000 in 1999 to $220,000 in 2000, for the reasons described below:
On January 20, 2000, Council approved the following:

RECOMMENDATION

A. THAT Council approve renewal of the annual contract with the Vancouver Economic Development Commission for the 2000 fiscal year at a cost of $202,000 (plus applicable net GST) reflecting an increase of 1% that isconsistent with the City’s guidelines for year 2000 general inflationary increases; source of funds to be the 2000 Operating Budget.
CONSIDERATION
C. THAT Council approve an increase of $18,000 (plus applicable net GST) to the annual contract with the Vancouver Economic Development Commission, bringing the total contract amount to $220,000 (plus applicable net GST), to offset primarily increased rental costs, source of funds to be the 2000 Operating Budget.
This increase was approved to primarily address the increased rental costs of the VEDC’s current location; the remainder of the increase addressed increased general operating costs. The rental increase stems from the requirement to pay commercial rates of rent in previously rent-free office space. Prior to 2000, the VEDC paid only the operating costs of the space; in 2000, the VEDC is required to pay rental costs in addition to operating costs. This situation was based on a temporary arrangement with the landlord to occupy untenanted office space.

DISCUSSION
The Vancouver Economic Development Commission is currently located at 608 West Cordova Street within a space of 2500 square feet. An opportunity has arisen to relocate the Commission to the heritage building at 601 West Cordova Street. This relocation would result in increased rental costs, as well as moving costs. There are a number of reasons the Commission wishes to relocate, and these are summarized below.

The Commission’s current space of 2500 square feet provides basic office space for Commission staff. Drawbacks of this location are: a lack of meeting space (the foyer of the office doubles as the meeting room), limited expansion capabilities, and the need for renovations. The Commission’s current landlord is seeking a 5 year lease commitment, and the rental rates are increasing each year; Appendix 1 details rental increases to 2005.

The Commission could address the issues of space and the quality of the space in the current location. Additional space (400 square feet) is available within the current structure; the inclusion of this space would provide a separate meeting room and one office. Renovations would be necessary if this space was integrated into the Commission’s current office, andrenovations to the entire office should be undertaken in the near future if the VEDC remains in this space. The cost of renovations to the entire Commission office and rental costs for the extra 400 square feet would be an additional $14,870 per year (details of costs set out in Appendix 1). This $14,870 increase is in addition to the scheduled annual increase in rent at the current location.

As an alternative to expanding and renovating their current space, the Commission has proposed relocating across the street. The location proposed is 601 West Cordova Street (CPR Station). This is a heritage building which currently houses the Canada/BC Business Service Centre, SkyTrain Station, and many retailers. The VEDC has the opportunity to rent 2,000 square feet; the additional cost of rent in this location is $16,381 annually (to 2005). This increase is in addition to the scheduled annual increase in rent at the current location. The rental rate for this location would not change over the period of a five year lease. The relocation would also result in additional one time costs associated with the move. These costs are estimated at $10,500. This includes moving costs and telephone/computer hookups. The total annual increase (including additional rental costs and moving costs) would be $18,481. Appendix 1 provides an annual breakdown of the additional costs.

The CPR Station site offers a number of operational efficiencies unavailable at the current site. The available space would share facilities with the Canada/BC Business Service Centre. These facilities would include access and sharing (at no additional cost) of the research library, computer terminals (for on-line business registrations), common meeting rooms, and special function space which could be used for visiting delegations. The space would also offer a separate entrance in order to maintain the Commission’s distinct identity.

The access to meeting space would provide the Commission with limited revenue generating capacity. The Commission would be able to offer courses on a fee for service basis and would be better able to secure sponsorships for business-to-business and other industry-led events and for incoming trade missions. The VEDC estimates revenues between $10,000 to $20,000 annually from these activities.

It has been put forward for Council’s consideration that the contract with the VEDC be increased to cover the additional rental costs in 2000 for the months of October, November and December (a total of $6,281), to commence only at such time the VEDC has relocated, and to provide a maximum of $10,500 for moving expenses. A second consideration seeksapproval for providing partial funding in the amount of $10,000 in 2001 and in 2002 to assist the VEDC in the additional rental costs. The City of Vancouver contribution is based upon the VEDC’s capacity to partially fund the costs associated with their relocation.

By 2003, the VEDC has agreed to cover their entire rental costs through their core contract with the City of Vancouver and through other revenue generating activities. The VEDC will provide details in their annual Business Plans as to how rental costs will be addressed.

Negotiations as to the shared facilities with the Canada/BC Business Service Centre are ongoing. The VEDC has agreed to ensure the benefits as outlined in this report will be formally documented in an agreement between the VEDC and the BC/Canada Business Service Centre.

CONCLUSION
The Vancouver Economic Development Commission has approached the City for increased funding to address additional rental and moving costs for relocation to 601 West Cordova. The new location does offer a number of benefits over the existing space. It has been put forward for Council’s consideration that the City provide financial assistance to the VEDC for a portion of the additional rental costs in the years 2000-2002, and to provide a maximum of $10,500 for moving costs.

* * * * *

Appendix 1: VEDC Relocation Proposal, Summary of Rental Costs

										2000-05
				2000	2001	2002	2003	2004	2005	TOTAL	Annual cost
608 West Cordova - Current Location				(3 months)
	Rent (2000)			11,219	44,875	44,875	44,875	44,875	44,875	235,594	47,119
	Annual rental increases				5,000	7,500	10,000	12,500	15,000	50,000	10,000
Total Status Quo Rental Costs				11,219	49,875	52,375	54,875	57,375	59,875	285,594	57,119
608 West Cordova - Incl. an additional 400 square feet				11,219	57,855	60,755	63,655	66,555	69,455	329,494	65,899
	Renovation Cost				30,450	-	-	-	-	30,450	6,090
Total Costs				11,219	88,305	60,755	63,655	66,555	69,455	359,944	71,989
Difference from Status Quo				-	38,430	8,380	8,780	9,180	9,580	74,350	14,870
601 West Cordova - Proposed New Location
	2000sqft@$35per square foot			17,500	70,000	70,000	70,000	70,000	70,000	367,500	73,500
	Moving Costs			10,500	-	-	-	-	-	10,500	2,100
Total Costs				28,000	70,000	70,000	70,000	70,000	70,000	378,000	75,600
Difference from Status Quo, Rent Only				6,281	20,125	17,625	15,125	12,625	10,125	81,906	16,381
Difference from Status Quo				16,781	20,125	17,625	15,125	12,625	10,125	92,406	18,481
Proposed Funding Model for Relocation to 601 West Cordova
		City Contribution		16,781	10,000	10,000	-	-	-	36,781
		VEDC Contribution		-	10,125	7,625	15,125	12,625	10,125	55,625
				16,781	20,125	17,625	15,125	12,625	10,125	92,406

 

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Last updated: July 21, 2000
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