POLICY REPORT

PROPERTIES

Date: September 19, 2000
Author/Local: L. Beasley/7698
RTS No. 01633
CC File No.
CS&B: October 3, 2000

TO:	Vancouver City Council
FROM:	Director of Current Planning in consultation with the General Manager of Parks and Recreation, Director of Real Estate Services, Director of Legal Services and Director of Social Planning
SUBJECT:	Revised Arrangements for the Pacific Racing Association for the Racetrack at Hastings Park
Click here to download memo sent by Larry Beasley on October 5th, 2000 (Acrobat PDF format). RECOMMENDATION A. THAT Council confirm the general terms of an Operating Agreement for the Pacific Racing Association for the Racetrack operations at Hastings Park as approved by Council on December 2, 1999 but with the following amendments as outlined in this report: - change the time frame to three years and delete references to the PRA’s obligations for capital expenditures and the City’s rights for future park expansion for the period beyond three years; - change the fee requirements to a fixed fee of $500,000 per year for the three-year term; - change the use and gaming allowances; - change the childcare provisions and requirements;and, - do not pursue a separate building lease for the Grandstand building; All to be finalized to the satisfaction of the City Manager and the Director of Legal Services in consultation with the Director of Current Planning and the General Manager of Parks and Recreation, 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 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 upgrading and continuation of the Racetrack for the foreseeable future as part of the restored park. In January 1994, the city leased the Racetrack on Hastings Park to the Pacific Racing Association (PRA) for a 5-year term with an option to renew for a term of 20 years. In December 1998, the terms of renewal could not be agreed upon and the lease expired. Accordingly, the PRA is currently on a month-to-month tenancy at the Racetrack. In June 1999, City Council approved terms for an Operating Agreement for the Pacific National Exhibition (PNE) to use Hastings Park, except the Racetrack area. In December 1999, City Council approved terms for an Operating Agreement and a related building lease of the Grandstand building for the PRA to use the Racetrack. Both the agreement and lease are in the process of being negotiated by the Director of Legal Services.   PURPOSE The purpose of this report is to consider proposed amendments requested by the PRA to the general terms of the PRA Operating Agreement and lease for the Racetrack. These proposals come as a result of the PRA appointing a new General Manager and his review of the previously agreed- upon terms in light of the changing financial circumstances of the PRA. The terms previously agreed upon in December 1999, as abstracted from the report of that time, are attached as Appendix A. BACKGROUND Park Restoration and Principles: Hastings Park restoration is well underway and will continue in phases as funding is available, encompassing most of the south half of the park through 2005. Some time after 2005, the park restoration area will be extended on a north/south axis across the Racetrack site to tie in with New Brighton Park and the waterfront to the north. The Racetrack is maintained in this final park configuration with reconfiguration of its facilities, especially the stables complex. To reconcile the park restoration plan with continued use of the park by the PNE and PRA, a set of basic principles was framed in 1999, as listed in Appendix B. These principles remain fully relevant. PRA’s Current Circumstances: The PRA’s income from the Racetrack has been decreasing significantly over the last several years and a significant further decrease has been projected by the PRA for this year. The Provincial Government recently announced it will rebate back to the horse industry, standardbred and thoroughbred, the 7% mutual tax. The ultimate effect on the bottom line of the PRA is unclear. At this time the only known additional direct contribution to the PRA is $700,000 per annum to pay a Provincial Government loan that was not being paid by the PRA. Increased purses and a million-dollar advertising campaign should, over time, increase patronage, betting and the financial picture of the PRA. The racing industry is changing, both in terms of consolidation and integration with other forms of gaming and entertainment. For a variety of reasons, the PRA has not changed its format at the Racetrack, in some measure because of the limitations in their previous lease and the current terms for their new Operating Agreement. In response to its current difficulties, the PRA recently brought on a new General Manager and is reviewing all aspects of its operations. The new General Manager, Mr. Phil Heard, has indicated to staff that he is generating a strategy to turn the Racetrack situation around over the next three years. If successful, the revitalized Racetrack operation will continue for the foreseeable future, as envisaged in the Hastings Park Restoration Plan; if not successful, the PRA will, at that time, have to make fundamental decisions about their future with the Racetrack. As part of a revitalization strategy, an initiative appears underway that could see close links or an amalgam between the PRA and the Ontario Jockey Club (OJC). This OJC initiative under the most desirable scenario, as explained to staff by the PRA, would see the OJC buying both the thoroughbred operation at Hastings Park and the standardbred operation at Cloverdale. The OJC would then build a new multi-track facility in a slot friendly municipality in the Lower Mainland. It should be noted any involvement of the OJC in B.C. racing, even at levels below the scenario outlined above, would be linked to slot machine gaming at the track.   PROPOSED REVISED TERMS FOR A PRA OPERATING AGREEMENT FOR THE RACETRACK By letters of June 30, July 12 and September 7, 2000, Mr. Heard has requested the following changes to the previously approved terms of the proposed PRA Operating Agreement and building lease for the Racetrack. It is understood that all other terms and agreements for the Operating Agreement as approved by City Council in December 1999 do not change. In each case, the PRA’s proposed revised term will be outlined along with their rationale, the previously agreed-upon term will be outlined, and a staff commentary and recommendation will be provided. Time Frame: The PRA’s proposed revised time frame for the Operating Agreement and building lease would be three years. The previously agreed-upon time term was 20 years starting when the documents are signed, with no rights of renewal thereafter. The PRA’s proposal acknowledges that the PRA is not in a position to make long-term commitments of either rent or capital expenditures in their current circumstances. The idea is to give them a reasonable but short period of time to turn their circumstances around, without any long-term commitments, after which, if the industry is again strong and vibrant, a long-term agreement and related building lease with the necessary capital commitments and appropriate fee/rent would be negotiated. Staff support this revised three year time frame with it clearly understood that there will be no automatic renewal options in the new Operating Agreement. If the Racetrack cannot be financially sustained by the PRA, the previously agreed-upon arrangements would become moribund in any event and it is better to have a clear timeframe for events so that the City can look at alternative futures for the land and facilities if need be. With this staff recommendation, the previously agreed-upon terms regarding "capital expenditures" and "future park expansion" will no longer be a part of the Agreement. As the new Agreement will be very short-term, staff advise that there is no longer any real benefit for the PRA for there to be a separate Grandstand building lease. Indeed, this lease simply complicates the transaction. Of course, the new Operating Agreement will include the right for the PRA to exclusively use the Grandstand building. Fee: The PRA proposes that a revised fee and lease rent be fixed at $250,000 per year for the three-year term of the Operating Agreement. The PRA also proposes that no further fee/rent be paid this year pending reconsideration of this term. The previously agreed-upon fee was to be the same as the rent formula in the 1994 lease between the City and PRA, namely: - 1% of total money wagered on live racing; - 10% of net revenue from simulcast wagering; - 4.5% of food and beverage gross sales; and, - 55% of net profits from food and beverage sales. For the building lease, the rent was to be $1.00 per year. The month-to-month operating fee until the new Operating Agreement is signed has also been assessed to date as per the rental formula in the 1994 lease. The rent paid in 1999 was $854,000 and the PRA is estimating (based on the above formula) that the fee for 2000 will be approximately $750,000. The Director of Financial Services and the Director of Real Estate Services metwith the PRA Director of Finance to analyse and discuss the PRAs financial situation. It was agreed by all parties that if the present trend continues as expected and no other sources of revenue are found, the PRA will be broke in a minimum of two years. The fixing of rent at $250,000 per year for the three years will only give the PRA another year or two at most before it will still go broke, all other things being equal. Even the OJC interest in owning or partnering with the PRA and the standardbred operation in Cloverdale will probably not keep racing at Hasting Park as the OJC interest is predicated on slot machines at the Racetrack. The cost to the City over the three years of the PRA request to fix rent at $250,000 instead of the estimated $750,000 per annum by the present formula is estimated to be $1,500,000. If the City were to stick to the present formula and the PRA went broke after the second year the loss to the City would be the third year rent of $750,000. This would also deprive the PRA of another year to find other alternatives that could make the PRA financially viable. If the City were to stick to the present rent formula and the PRA went broke aftertwo years the City would receive over the two years approximately $1,500,000 based on the PRA projections. However, if the City were to fix the operating fee at $500,000 per annum for the three year term and this helped the PRA survive for another year the City would also receive $1,500,000 and the PRA would get a further year to turn the operation around. Staff note that all the foregoing projections are based on present trends in attendance, wagering, purses and horse fields continuing downward. Provincial tax rebates to the horse industry are increasing purses and may help the financial viability of the PRA but the direct affect to the PRA’s bottom line is not known at this time. Based on the foregoing staff recommend that for the three-year term the fee be fixed at $500,000. per year. Under the proposed three-year term if the PRA does survive the next three years the City will then be able to negotiate a new rent formula based on the projected financial situation of the PRA at that time. Gaming: The PRA proposes that the City remove restrictions on some forms of gaming and to review how this is accepted after one year. The gaming activities requested by the PRA to be allowed are: BC Lottery Corporation lottery terminals (to sell lottery tickets), KENO, BINGO hall, and, possibly, an electronic horse racing video game. Initially, slot machines were verbally requested but have not been included in this proposal. The previously agreed-upon terms did not allow any form of gambling except that already allowed at the Racetrack related to horse racing. The proposed forms of gaming, namely BC Lottery outlets (where lottery tickets are sold), KENO and BINGO hall would conform with existing City policy. The electronic horse racing video game however, does not correspond with City policy since present Council policy prohibits the introduction of any expanded form of electronic gaming in Vancouver. Staff do not support this use at the Racetrack. Lottery tickets are already sold in more than 300 BC Lottery outlets in stores in the City of Vancouver. In many of these stores, the game of KENO is also sold. Staff would not oppose the installation of BC Lottery outlets for the sale of lottery tickets and KENO at the Racetrack. In regards to the BINGO hall proposal, the City already has an established policy and guidelines to deal with Bingo hall applications. These guidelines establish a pre-site clearance process that would include neighbourhood notification and a public meeting. City staff are cautious about the viability of a BINGO proposal. From July 1993 to June 1994, there was a BINGO hall operating out of the adjacent Gardens Auditorium. The BINGO hall at that location failed to attract traditional BINGO customers for reasons that may still be valid today (issues such as parking, distance to transit lines, isolation, etc.). Nevertheless, staff are willing to work with the proponent and the Provincial Government (through the BC Gaming Commission) to look at the viability of the proposal if this materializes. It would only be after staff have had the opportunity to analyse the input obtained through a community process, including analysis of potential community and social impacts that a final staff position on a BINGO hall at the Racetrack could be concluded. Accordingly, staff support BINGO hall being a permissible use in the Operating Agreement but with the actual approval of the activity to be pursued through the normal approval process (i.e. it may or may not be approved). Other Uses: The PRA proposes that the City remove limitations on certain business activities beyond horse racing. The business activities requested by the PRA to be allowed are: weddings and wedding photography, outdoor ‘show-and-shine’ shows, recreation vehicle shows and sales, car shows, seminars and speeches, conventions, dances, movie studios and sporting events in the infield. Also proposed is flexibility to investigate business operations not related to horse racing or gaming including a micro brewery, a movie complex or other entertainment venues. The previously agreed-upon use terms were the same as those long in place in the earlier leases. These state that the PRA can use the Racetrack site only for horse racing with pari-mutual betting (which includes any betting on-site or off-site which utilizes the betting system on site). No other use is allowed without the prior consent of the City. There are some important considerations regarding PRA activities beyond horseracing at the Racetrack. The essential concern is our policy to only allow recreational activities suitable to the park setting. Given the short time-frame and foregoing of capital commitments that the PRA has requested in their Operating Agreement, any use which requires major changes is questionable. Finally, uses which increase impacts on the surrounding community should be avoided. Accordingly, staff recommend that any expansion of uses be based upon a coherent business plan and that they be considered by the City on a case-by-case basis based upon the following criteria: - the use does not require significant construction and will not change the character of the site; - the use is compatible with the park; - the use preferably occurs during the race season when other activities are already occurring on the site; - the use is not of a significant scale that will cause discernable impacts on the area or the park; and - the use is supported by the PNE as long as they operate at Hastings Park. Reviewing the additional uses now requested in light of these criteria, staff could support: weddings and wedding photography; outdoor ‘show-and-shine’ shows; modestly-scaled seminars, speeches, business meetings, conventions or dances; sporting events of an amateur nature; and movie shoots of a temporary nature. Staff do not support: recreation vehicle shows and sales; car shows; professional or large scale sporting events. Staff would be strongly opposed to uses requiring significant capital investment and construction such as: movie studios, micro brewery, a movie complex or other entertainment venues. Staff also recommend that a termination clause be included in the Operating Agreement in regard to additional uses whereby any of these uses may be terminated at the sole discretion of the City on five days written notice, without compensation by the City to the PRA or the user groups. This will allow the City to deal with any such uses that prove to be problematic or disruptive to the community or the park. Parking: The PRA proposes that they be given control of a parking lot and whoever controls other parking be required to consult the PRA on rates and times. The previously agreed-upon terms have all parking on Hastings Park controlled by the PNE during their tenure on the site and by the City thereafter. Parking rates and regulations are to be set in accordance with a parking agreement between the PRA and PNE, with the City as a consenting party. The finalization of a new parking agreement, resolving historic disagreements between the PNE and PRA, was a condition by Council of granting any new Operating Agreement for either the PRA or PNE. While staff have confirmation that terms for a new agreement have been agreed upon, the City has not yet been provided with an executed copy of this new parking agreement, which was to include a release of the City from any liability or claims by either party pursuant to the previous parking agreement. Staff cannot support moving control of a parking lot to the PRA at this time because of the City’s previous commitment to the PNE. The PNE Operating Agreement will run until December 2002, after which an alternative parking arrangement with the PRA could be contemplated. However, since the PRA Operating Agreement is now proposed for only three years, there seems little merit in reframing the parking arrangements over the short term. It is recommended that this be considered only if a further tenure, beyond three years, is requested by the PRA. Childcare: The PRA proposes to withdraw from participation in the creation of a new childcare centre for the area and, therefore, to amend the terms to delete references to that childcare centre. The PRA would support that the existing temporary childcare centre be continued under current arrangements as long as it is licensed and viable but the PRA will not extend it in any way. If the temporary childcare centre closes, the PRA says it will ban children from their stabling area (the ‘backstretch’). The previously agreed-upon childcare terms comprise several aspects: - the PRA is required to ensure there is adequate care and supervision of young children on site; - the PRA is to contribute directly and shall facilitate the racing industry to contribute, in amounts to be agreed upon that represent a fair share based on Racetrack childcare demand, capital funds toward a childcare centre for the area; - if the childcare centre does not proceed, and if the PRA is otherwise unable to ensure there is adequate supervision of young children on site, the City may prohibit young children from being in the backstretch areas for safety reasons to avoid potential City liability in case of accident. Community Care Facilities Licensing (CCFL) has confirmed that the temporary child care centre can continue under the current arrangements as it meets health and safety requirements. While there are still reservations about the existing space, the alternatives at this time pose a significant health and safety risk for children. CCFL has, however, indicated that it expects that the PRA and the sponsoring agency will continue to actively seek a long-term suitable space. The sponsoring agency is currently seeking ongoing operating funds from various sources. The Director of Social Planning will support the continuation of the temporary site, on the provision that there are not additional costs to the City. Staff note that without the participation of the PRA, the creation of a new childcare centre (proposed for the Rollerland Building south of the Racetrack) is not viable, given current funding options. Accordingly, staff recommend that the PRA Operating Agreement be amended to require that, if and when the temporary childcare is discontinued, the PRA will prohibit children from being in the backstretch area and shall take steps to prevent and monitor this, to the satisfaction of the City and the Ministry of Children and Families. The PRA will notify (in writing and through a community meeting) the backstretch workers and the various horse owner associations of their intention to ban children from the backstretch and/or Racetrack area. The PRA should be required to develop a plan which sets out, to the satisfaction of the Director of Social Planning, how and to what extent monitoring of this ban will occur and what follow-up actions will be taken by the PRA. The PRA must agree to release and indemnify the City from any claims made against the City relating to any personal injury or death to any children on the site either in the backstretch or in the childcare centre. The City will notify the Ministry of Children and Families and the Ministry of Social Development and Economic Security of this decision and request that the Ministry for Children and Families monitor the potential child protection issues. The City Childcare Coordinator will continue to explore community based options for the childcare centre.   CONCLUSION As a result of the PRA’s proposed amendments to the terms of the Operating Agreement and building lease, the most current drafts prepared by the Director of Legal Services must be significantly re-written. Of the amendments proposed by the PRA, in summary, staff recommend: - that the time frame, fee/rent, use allowances, specified gaming allowances and childcare requirements be revised; - that a separate Grandstand building lease not be pursued; - that the capital expenditures and future park expansion provisions be deleted; - that the general gaming and parking provisions remain as is; and - that all other terms remain as previously agreed upon except as deemed necessary by the Director of Legal Services. This should give the PRA significant latitude to revamp their financial arrangements and operations so as to ensure their continued operation of the Racetrack on Hastings Park. On this basis, the Director of Legal Services, in consultation with the Director of Current Planning and the General Manager of Parks and Recreation, will prepare the final form of Operating Agreement with the PRA for signature by the City Manager. * * * * *

(c) 2000 City of Vancouver