ADMINISTRATIVE REPORT

                                                       Date:  June 21, 1995


   TO:       Vancouver City Council

   FROM:     General Manager, Park Board

   SUBJECT:  Reserve  Fund  for Andy  Livingstone  Artificial Turf  Playing
             Fields



   RECOMMENDATION


        A.   THAT  City Council approve that the revenue from the user fees
             from the  Andy Livingstone  Artificial Turf Playing  Fields be
             placed in a  reserve account  to be used  for improvements  or
             replacement of artificial fields.

        B.   THAT  City  Council approve  that  interest  be added  to  the
             reserve account each year to offset the effect of inflation.

   GENERAL MANAGER'S COMMENTS

        The General Manager of Parks and  Recreation RECOMMENDS approval of
        A and B.

        The  General Manager  of Corporate  Services does  not  support the
        payment of interest  to the Artificial Turf  Reserve and RECOMMENDS
        that Council NOT approve Recommendation B for  the reasons outlined
        in the body of this report.

   COUNCIL POLICY

   City Council approval  is required  for the establishment  of a  funding
   reserve.

   BACKGROUND

   On  January  5, 1987,  Council approved  the  establishment of  the Eric
   Hamber   Artificial  Turf  Reserve.    This  approval  was  based  on  a
   recommendation  from the  Park  Board indicating  that  a new  user  fee
   schedule  had been approved for  this field and  recommending that these
   user fees be put aside and be placed in a reserve account for the future
   replacement  or repair of this expensive field.On the same date, Council
   also considered the Park Board's request that  interest be added to this
   reserve each year.  This request was not approved.  The motion passed as
   follows:

   -    That revenue from  the user fees be placed in  a reserve account to
        be  used for  future improvements  to the  artificial turf  playing
        field at Eric Hamber School.

   -    That no interest be added to the reserve account.

   Subsequent to  the above, in early  May of 1995, Concord  Pacific turned
   over Andy  Livingstone Park to  the City.   As part  of the  development
   agreement, the construction of this park was completed prior to turnover
   and was fully paid for by the developer.

   The  park contains two artificial turf fields  and a ball diamond of the
   same calibre as the Eric Hamber  field.  In anticipation of assuming and
   operating  these fields, the Board approved the following resolutions at

   its May 1, 1995, meeting:

   -    That the Andy  Livingstone Turf Playing Field user fees be the same
        rates  as  those established  at  the Eric  Hamber  Artificial Turf
        Playing Field as outlined in Appendix I. 

   -    That the Board  request that the revenue and  the interest from the
        user fees from the  Andy Livingstone Turf Playing fields  be placed
        in a reserve account  to be used for improvements or replacement of
        artificial turf fields.

   DISCUSSION

   The original logic  for the establishment of the Eric Hamber Reserve was
   based on the fact that the field provided a higher level of service than
   regular fields and  that the users  should contribute by  way of a  user
   fee.   Also, it was estimated that within  10 to 12 years the Park Board
   could  be faced with costs estimated at $550,000 allowing for inflation,
   to  replace the  synthetic turf.   The  accumulation of  user fees  in a
   reserve  together  with  interest  would  provide  most  of the  funding
   required at replacement time (10-12 years).

   This same logic  applies to  the Andy Livingstone  Park Artificial  Turf
   Fields  and the Board is  again requesting Council  approval to transfer
   these user  fees into a reserve  account.  The Board  is also requesting
   that the City add annual interest to this account in order to offset the
   annual inflation.  The interest rate would be the average rate earned by
   the City on  its investments of  surplus funds.   This request is  being
   made in  spite of the  fact that  interest was not  allowed on the  Eric
   Hamber Reserve.   The reason being that the circumstances related to the
   Livingstone Park Reserve are different than Eric Hamber.  In the case of
   the Hamber  fields, the City  incurred additional annual  debt servicing
   costs on the $900,000  debt incurred to pay for this field.  However, in
   the case  of the Andy Livingstone Fields,  this rationale does not apply
   as  the  construction  costs were  paid  for  by  the developer  and  no
   additional debt was  incurred by the City.   Therefore, the  Board feels
   justified  in requesting  the addition  of interest  to the  new reserve
   being requested.

   The established user  fees are  expected to produce  annual revenues  of
   approximately $80,000.   In  1995, this  will amount to  $40,000 as  the
   fields will be open for a half of  the year.  It is estimated that in 10
   to 12 years the turf  will have to be replaced at a current  cost in the
   area of $1.0 to 1.5 million.  At an inflation rate of 3% per annum, this
   would  amount to $1.3  to 2.0 million  in 10 years.   Assuming that user
   fees  are inflated by 3% per year and that these are placed in a reserve
   earning 6% interest per year, at  the end of a 10-year period  the funds
   available would be around  $1,350,000.  At the end of 11  years it would
   amount to $1.53 million which would provide most of the funding required
   for replacement.

   COMMENTS OF THE DIRECTOR OF FINANCE

   The  new  facility at  Andy Livingstone  Park  will add  significant new
   operating costs to the Operating  Budget.  The Park Board has  requested
   additional funding of $160,000  annually for the park, of  which $85,000
   was added  in 1995.   The decision  to direct user  fees to  the reserve
   means that these additional maintenance costs would increase the Board's
   Global  Budget.   Alternatively,  these fees  could  be used  to  offset
   operating  costs, as  is  the case  with  other Park  Board  operations.
   Payment of interest  to the  reserve would further  increase the  City s
   operating costs, and possibly at the expense of other city operations. 

   The  City has generally limited the establishment of reserves to provide
   for  the  replacement of  trucks and  equipment.   Replacement  of other
   capital assets is provided through capital funding allocations which are

   determined during the course of developing the City's three-year capital
   plans.   Since a precedent  has already been  established with the  Eric
   Hamber field, it  seems reasonable to continue with the practice for the
   Andy Livingstone facility. 

   The  Director of  Finance  does object  to  the payment  of interest  on
   reserve balances, and recommends that Council NOT approve Recommendation
   B of this report. Council should note that the  Park Board budget is not
   charged for the debt  servicing costs that arise from  capital borrowing
   for  park and  recreation purposes,  and to  allow interest  on reserved
   funds which  are derived from  capital expenditures on  park facilities,
   whether those funds are provided  by the City or not, is  not consistent
   with that debt policy. CONCLUSION

   The establishment  of this reserve will  ensure that the users  of these
   high cost high  quality playing  fields pay for  the future  replacement
   costs.   This will ensure  that the necessary  funding is  available and
   will not have to be included in future debenture capital borrowing which
   would be repayable by a levy against all property owners.



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