POLICY REPORT
PROPERTIES
Date: July 24, 2000
Author/Local: L. Beasley/7698
RTS No. 01634
CC File No. 8009Council: July 25, 2000
TO:
Vancouver City Council
FROM:
Director of Current Planning and Director of Real Estate, in consultation with the General Manager of Parks & Recreation and Director of Legal Services
SUBJECT:
Revised Commitment for Use of the Pacific Coliseum at Hastings Park for Hockey
RECOMMENDATIONS
A. THAT Council approve the Western Hockey League-Shato Holdings Hockey Team to play in the Coliseum.
B. THAT Council approve general terms for the agreement between the City, PNE and the Shato Holdings Hockey Team as approved on November 30, 1999, and as amended and with new terms as outlined in this report regarding:
- a 5-year term with the right to renew for a second 5-year term;
- operating fee adjustments; and
- suspension provisions for the Olympic Games;AND THAT the final agreement be to the satisfaction of the Director of Legal Services and signed by the City Manager (it being noted that no legal rights or obligations shall arise or be created until execution of the legal agreement).
CITY MANAGER'S COMMENTS
The City Manager RECOMMENDS approval of A and B above.
COUNCIL POLICY
In January 1990, City Council approved that Hastings Park be restored to predominantly park use. In March 1997, both City Council and Park Board approved the Hastings Park Restoration Plan, which includes continued use of the Pacific Coliseum for the foreseeable future as part of the restored park.
In June 1999, City Council approved terms for an Operating Agreement for the Pacific National Exhibition (PNE) to use most of Hastings Park for the 2000-2002 time period, including the Pacific Coliseum building. This agreement is still being finalized for signature as soon as possible.
In November 1999, City Council approved, with terms, a 5-year commitment, in conjunction with the PNE, for a West Coast Hockey League team to play in the Pacific Coliseum; and City Council approved a loan of up to $1 million from the Property Endowment Fund for roof and boiler repairs, with repayment from the revenues from the hockey rental. This West Coast Hockey League proposal has not proceeded.
PURPOSE
The purpose of this report is to recommend an alternative hockey league and team and an amendment to the timeframe of the City/PNE/hockey team agreement for use of the Coliseum.
BACKGROUND
In November 1999, City Council considered five proposals for a major use of the Coliseum, as brought forward by the PNE. All proposals, including the approved proposal, were for rental of a selected programme of days with building control and management remaining with the PNE and, ultimately, the City. The City agreed to what was then the PNE's preferred user, the West Coast Hockey League team, for five years. The agreement was contingent upon:
- the PNE renting to the team during the PNE's tenure (2000, 2001, 2002), taking all revenues and covering all maintenance and capital costs (including any costs associated with hot water lines, cooling tower, ice plant, portable bleachers, rink boards, etc.), except as noted below;
- the City renting to the team after the PNE's tenure (2003, 2004), for an overall 5-year period, taking all revenues and covering all maintenance and capital costs for that period;
- the City to be responsible for roof replacement and boiler replacement (estimated at $1 million), to be completed as soon as necessary; and
- the PNE to contribute $100,000/year, during their tenure, to the City to cover City risk of early capital expenditures for the roof and/or boiler.The financial analysis showed that the initial PNE contributions and the net revenues in the last two years of the 5-year period would enable the City to pay off a loan of $1 million in 4 years.
NEW PROPOSAL
For various reasons, the West Coast Hockey League proposal has not proceeded and has been abandoned by the PNE. Instead, the PNE has negotiated and now has an agreeable proposal from Mr. Ron Toigo, Shato Holdings Ltd., for a hockey team with the Western Hockey League. This was one of the proponents previously considered.
The Western Hockey League is a Major Junior A hockey league comprised of eighteen teams located in Western Canada and the United States. The league is the counterpart of the Ontario Hockey League and the Quebec Hockey League which all compete for the Memorial Cup. Shato Holdings currently owns the TriCities Americans, a member team of the Western Hockey League.
Financial evaluation: The Western Hockey League - Shato Hockey Team proposal with a 36-game season and estimated attendance of 3,500 per game is estimated to net over 5 years $648,000. This is $322,000 less over the 5 years than the West Coast Hockey League proposal previously approved by Council, which was estimated to yield $970,000. However, this proposal still provides a positive cash flow to the Coliseum and as the Western Hockey League is the major junior hockey league in North America, attendance of 5,000 fans per game is very probable, although detailed research on this has not been undertaken. At this level of support, all or most of the $322,000 difference would be recovered through City participation in ticket sales, parking and concessions. It should be noted that, based on therevenue guarantees in the proposal, if attendance were to average below 1,700 per game then the costs to the City as operator of the Coliseum may exceed revenues.
In summary, the financial deal approved by Council on November 30, 1999 for the West Coast Hockey League remains the same for this proposal, except for the estimated difference in net revenue over the five years and that the City will now only receive $150,000 from the PNE (as this reflects the time remaining in their Operating Agreement). The previously approved proposal was for a 5-year period with no option to renew. This allowed the City to make a decision after five years whether it was still economic to continue operating or mothball the Coliseum.
As outlined below, the current Shato Hockey Team proposal has a 5-year renewal option in favour of Shato Holdings Ltd. This 5-year option does carry a financial risk to the City if the overall operation of the Coliseum, including the hockey team, is operating at a net loss. In order to minimize this risk, the City is requiring the minimum guarantees per game to be increased by CPI and the portion of the fee related to labour costs to be increased by the actual union wage settlements. If, in the opinion of the City, the Coliseum is still not economic to operate after the increases in guarantees from the hockey team, the City can mothball the building and the Western Hockey League - Shato Hockey Team will be responsible for all arrangements and costs for opening and staffing the building for their games.
NEW TERMS FOR THE PROPOSAL
It is proposed that all the terms previously approved by City Council for hockey use of the Coliseum, between the PNE, the hockey team and the City, would remain the same except in regard to the length of time of the commitment; and because of a longer timeframe being proposed, provisions related to the possible use of the facility for the 2010 Olympics.
Timeframe: A timeframe is proposed for the Operating Agreement of five years with the Hockey Team having the right to renew for a second 5-year term, subject to the provisions outlined in this report. Commencement would be in approximately May 2001, instead of January 2000 as previously approved.
The Hockey Team indicates that security of their use for this period is essential in regard to the investment they must make in the operations for it to happen. Staff support this timeframe.
Olympic use: If the Vancouver/Whistler Olympic bid for the 2010 Games is successful, the City will need absolute security of controlling the building for the purpose of upgrading or renovating the premises, for preparing for and holding Olympic events, and for any follow-up activities necessary after the Games. The Operating Agreement will secure this after the initial 5-year term by way of the City's right to suspend the hockey team's use with a 1-year notice. After all the Olympic commitments are completed, the hockey team would come back to the building for the length of time that remained on the renewal term prior to the suspension (on the same terms and conditions). Shato Holdings supports these provisions.
CONCLUSION
Council has previously approved a hockey league and team using the Coliseum beyond the tenure of the PNE. The change in the league and team now proposed is supportable from a financial perspective. The proposed longer term is supportable, based on provisions that will reduce financial risk to the City and ensure the facility can be used, if need be, for the Olympic Games. With Council support, the hockey team will confirm arrangements with their league immediately and the Director of Legal Services can complete the detailed use agreement to her satisfaction and for signature by the City Manager.
* * * * *
(c) 1998 City of Vancouver