ADMINISTRATIVE REPORT

TO:

Standing Committee on Planning and Environment

FROM:

The City Manager in consultation with the General Manager of the Community Services Group

SUBJECT:

Operating Funding for the City of Vancouver Heritage Conservation Foundation (Operating as the Vancouver Heritage Foundation, VHF)

 

RECOMMENDATION

CITY MANAGER'S COMMENTS

COUNCIL POLICY

Council approved the creation of the City of Vancouver Heritage Conservation Foundation, known as the Vancouver Heritage Foundation (VHF), in June 1992, with the Mayor and Council as its Directors.

On January 1, 1998, the Mayor and Council relinquished day-to-day governance to an independent Board of Directors appointed by City Council, who remain as the Honorary Patrons.

PURPOSE

This report seeks Council's approval of a 3-year contract with the VHF to promote and enable heritage preservation in the City of Vancouver; source of funds to be General Revenue.

BACKGROUND

Earlier this year, Council approved a grant of $100,000 to the VHF and requested that staff report back on a source of revenue for the long-term financing of the VHF. Previously, the City supported the VHF through a $250,000 grant over a 3-year period. In addition, in July 1997, a private donation of $219,000 to the Heritage Foundation, along with accrued interest in the amount of $46,000, was transferred to the Heritage Foundation for the creation of an endowment fund under the auspices of the Vancouver Foundation.

DISCUSSION

The Vancouver Heritage Foundation provides heritage building owners technical support, education and grants which encourage restoration and maintenance of heritage buildings, and raises awareness and funds in support of the City's heritage. So far, the Vancouver Heritage Foundation has brought 9 new heritage designations to the City.

As an adjunct to the City's Heritage Program which focusses primarily on administering the City's heritage policies and by-laws, the VHF provides the following services:

· Provides education and awareness activities for heritage buildings owners on maintenance and restoration techniques.
· Liaises and builds relationships with individual heritage building owners that motivates them, and in some cases their neighbours, to maintain and restore their homes.
· Enlists the support of related corporate partners such as paint and building supply companies and individual contractors to supply restoration materials and expertise to interested homeowners.

The VHF is now in full operation with major events and programs underway, including the True Colours program, the Annual Heritage Fair, education and information programs. Over the past two years, the VHF has focussed on establishing a recognized profile which is an essential predecessor to fund-raising. These efforts are proving to be very successful. Over the past 18 months the Foundation has:

· Published a newsletter, Old News, communicating to the interested public the mandate of the Foundation.
· Set up a website that is updated on a regular basis,

· Mounted workshops for heritage homeowners and contractors on the restoration of wood windows, porches, stairs, railings and stained glass.
· Partnered with SFU to bring in Mayor Joseph Riley to speak to downtown heritage building owners on the positive influence of heritage preservation on the development of Charleston, South Carolina.
· Published, in partnership with the BC Heritage Trust and the Victoria Heritage Foundation and the Heritage Society of BC, a series of 5 information pamphlets on the restoration of wood siding, masonry, wood windows, paint and how to determine the True Colours of a heritage house.
· Printed notecards and posters, using an image donated to the VHF by Michael Kluckner.
· Set up a database of Vancouverites interested in heritage restoration.
· Mounted two Heritage & Antique Fairs to raise funds for the organization and to provide education and sources for materials and expertise on restoration.

The Board is now turning its attention to fund-raising and developing the endowment fund to sustain the Foundation and its work over the long term. The goal is to raise an endowment of $2 million over the next 3-5 years. The interest from an endowment this size would be approximately $100,000, depending on interest rates. However, of all types of fundraising, endowment dollars are the most difficult to raise. Endowment gifts usually start at $10,000. To create donor confidence a stable source of operating funding is needed during the campaign. It is necessary to spend money, in some cases 10% of the campaign goal, on packaged materials explaining the case for giving and events to attract the attention of donors. Relationships with individual donors are cultivated over a number of years. Only a small portion of gifts to an endowment campaign are current or cash gifts. Most gifts are gifts in kind of real property or gifts that are left to the Foundation in a person's will. The latter take an average of 15 years to realize.

In support of these efforts, the VHF has prepared a 5-year Business Plan. Attached as Appendix A, the Plan proposes that over a 3-5 year period, there will be sufficient endowment to cover $100,000 out of an annual budget of $175,000. $50,000 will come from interest income from the newly acquired cash gifts to the endowment campaign, and $50,000 will come from other fundraising endeavours such as the Heritage & Antiques Fair and demonstration restoration projects of buildings donated to the Foundation, protected under designation, restored and sold as market housing. As the endowment grows the dependency of the Foundation on the City will diminish. However, to cover operating expenses of $175,000 would take an endowment of $3.5M which is an unrealistic goal for this time period.

Financial Implications

Staff have considered various ways of most appropriately funding the operating costs of the VHF and have concluded that a 3-year contract with the VHF best serves both the City and the Foundation. A contract, rather than an annual grant, provides some stability for the VHF and, through an annual review process, enables the City to assure expectations are met. Staff share the caution about the difficulties of raising an endowment sufficient to fully cover operating costs, but note the commitments in the Business Plan.

The City does not have the legislative authority to source the funding through a specific fee. Therefore, funding will be provided through the annual operating budget.

CONCLUSION

The VHF performs an important service in a rapidly changing urban environment. Operating stability is essential for the VHF to focus on its mission and be successful in the long term.

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BACKGROUND

The Vancouver Heritage Foundation, set up in 1992, (VHF) has been under the direction of a private citizen board of directors since January, 1998. Between 1997 and 2000 the Foundation operated on a grant of $250,000 from the City of Vancouver paid out over 4 years. In addition, a one time grant of $249,000 was made to the Foundation for investment purposes.

Previous to 1998, the VHF was operated from City Hall under the direction of Mayor & Council who remain its honorary directors. The activities of the Foundation over the past three years have been previously noted in the January 2, 2001 report to Planning & Environment Committee of City Council. (see attached VHF Timeline) At that meeting Council resolved to grant the VHF operating funds of $100,000 for the year 2001 and to report back on a source of long term financing for the Foundation.

Subsequent to the Planning & Environment resolutions City Staff have requested that the VHF present a business plan.

MISSION & GOALS (reaffirmed in January, 2001)

The VHF operates under the mission, "Assisting with the conservation of Vancouver's built heritage for its public benefit". To achieve this mission the foundation has four operating goals:

1. Create a sustainable organization in perpetuity through major gifts, planned gifts and grants.
2. Develop programs that encourage private economic investment in built heritage.
3. Educate heritage building owners about the benefits and methods of built heritage conservation.
4. Promote public and industry involvement in built heritage conservation.

To fulfill its mission the VHF has undertaken the activities and projects outlined in the attached Timeline and Annual Work Plan documents. The focus to date has been on profile raising opportunities for the Foundation through the Fair, True Colours, creation of a website and development of some printed materials, including brochure, newsletter, gifts cards, poster and restoration technique pamphlets; and building relationships with other heritage organizations. Beginning in 2001 there is a planned shift of priority; from developing new programming activities that educate and raise profile, to fund development, specifically building the endowment fund of theFoundation to increase investment revenue that will, in the future, partially support the Foundation's conservation activities.

RATIONALE FOR CONTINUING OPERATING GRANT FROM THE CITY

The Vancouver Heritage Foundation is asking for ongoing financial support because; (1) the Foundation supports the City's heritage policy of protecting built heritage through voluntary protection, (2) the civic government is the largest contributor of financial support of heritage organizations in other Canadian cities., (3) the economic benefits of heritage restoration as documented in Canada and US, and (4) it is unlikely that fund development for endowment purposes will fully support VHF operating costs.

The City's heritage policy of protecting buildings on the heritage register (inventory) through voluntary designation is well served through the activities of the Vancouver Heritage Foundation. The Foundation has brought 9 new designations to the city in 1999 & 2000. It is currently working with 5 additional homeowners who have indicated a willingness to designate their homes through the True Colours program. By fulfilling its mission of assisting in the conservation of Vancouver's built heritage, through programs and events such as the True Colours and the Heritage & Antiques Fair, the Foundation is raising tremendous profile for, and public interest in, the conservation of the city's heritage buildings.

Across Canada, heritage foundations receive civic funding. For example:

1. Metro Toronto, at the time their amalgamation, set up a grant fund of 1.4 Million dollars, the interest of which funds the designated house grant program administered by the city's Heritage Preservation Services.
2. New Westminster grants about $20,000 to residential heritage houses, over and above their grants available to commercial buildings. Their grants are administered by the city.
3. The District of Saanich Heritage Foundation is administered by city clerk staff and homeowner grants are funded by the district. On average they have given out $24,000 in grants to designated heritage properties in each of the last three years.
4. The Victoria Heritage Foundation receives about $105,000 per year. $60,000 is given out in grants with the remainder going to administer the grants. Other programs, including their education programs, are funded separately through grants written by and awarded to the Foundation by the Heritage Society of BC and the BC Heritage Trust as well as the BC Government Heritage Branch.
5. Surrey planning department grants about $30,000 per year to owners of heritage properties.

In other jurisdictions including, Ontario, Victoria, Texas and New Jersey to name a few, the economic benefits of heritage revitalization have been demonstrated through research studies. In these cities heritage restoration has increased jobs and tax benefits to the city. The Foundation is committed to undertaking such a study for the City of Vancouver.

Within the next five years it is unlikely that an organization of the small size and stature of the Foundation will raise sufficient endowment money to generate interest to cover all of their operating expenses. An endowment campaign to raise $2 Million will take between 3-5 years to realize if all of the organization's resources are put towards fundraising. However, putting all Foundation energies into fund development is unwise given that for an endowment campaign to be successful, activities to generate the Foundation's profile need to be continued. To continue current programs and raise endowment funds at the same time, will stretch out any campaign, given the small size of the organization.

An endowment of $2 Million will generate annual interest of about $100,000. However, only about one half of the gifts to an endowment campaign are current or cash/ cash equivalent gifts. Therefore it is unrealistic to expect more about $50,000 in interest for the first number of years. It is also important to note that planned gifts, including bequests in wills, can take an average of 15 years to realize. The remainder of the operating budget will come from events such as the Fair, perhaps direct access gaming revenue which has been applied for, and given what is happening in other cities and the support the Foundation gives to the City's heritage policies, continued operating grants from the City of Vancouver.

OPERATIONS

The VHF currently operates on an annual budget of $154,000 (see attached 3 year budget). Staffing consists of a part time executive director (3 days/week) working out of a home office. To date there have been no occupancy expenses but these will need to be factored into future operating budgets. It is expected that the operating budget will increase to $194,000 in 2003, due mainly to occupancy expenses and an increase of the Executive Director position to four days per week. In addition as interest income from the endowment increases, so too will the amount given out in homeowner grants for maintenance and restoration of designated houses.

Current operating money comes from three sources:

In future, any increase in budget will come from fund development activities such as events, major gifts campaigns, restoration project development activities and sources such as grants and gaming.

TARGET AUDIENCE

In our view the public at large benefits from the preservation and restoration of our built form heritage. Our heritage buildings, interiors and districts are part of the urban context for our daily lives. Heritage is an artifact of our evolving culture and is a link to earlier times. The Foundation has identified its markets or target audiences as:

Program target audiences:

1. Heritage building owners interested in maintaining the restoring their building.
2. Industries and professionals who supply and work with heritage building owners and thus influence homeowners' decisions regarding their restoration work..

Fund Development target audiences:

1. Accountants & lawyers who influence their clients' charitable giving choices.
2. Persons of wealth in Vancouver who have an interest in preserving Vancouver's past either for business reasons or for personal satisfaction.

FUND DEVELOPMENT PLANS

The VHF is committed to increasing the endowment fund already set up at the Vancouver Foundation through the solicitation of major gifts, fundraising through the Heritage & Antiques Fair and setting strategies for garnering bequests and other planned gifts.

Most fund development plans are multifaceted, encompassing a combination of annual fundraising through events, major gifts and planned giving. The enclosed plan follows this three pronged approach and adds a fourth unique opportunity.

Annual Fundraising

Heritage & Antiques Fair

The recently held Heritage & Antiques fair was tremendously successful on many levels:

· The fair doubled its numbers of education sessions, exhibitors, opening night guests, gate admissions and revenue over the first fair held in 1999.
· Over 20 public education programs offered on heritage related topics.
· Partnerships created with related industries
· The Opening Benefit of over 200 guests established initial contact with potential major donors.
· Heightened public awareness about heritage in our city.
· It raised over $30,000 for the Foundation in 2001 and is projected to increase to about $75,000 by 2003. As the novelty of the event declines, the proceeds will probably level off.

The Heritage & Antiques Fair fulfills the mission and goals of the Foundation by linking with their intended clients who are homeowners interested in undertaking restoration projects; building relationships with potential major donors; linking with related businesses; building awareness for heritage conservation in the city.

The Fair, although an incredible volunteer and professional effort, raises funds for the Foundation. The Fair expenses are projected to remain about $100,000 over the next three years. Over the next3-5 years the funds raised at the Fair, which are projected to increase from $35,000 in 2001 to $75,000 in 2003, will be used by the Foundation to augment the operating dollars from the City grant.

Major Gifts to Build the Endowment Currently Set up at the Vancouver Foundation

To create interest income of $100,000, the VHF needs to build an endowment of $2M. The interest income from such an endowment will at best provide about half of the organization's projected operating budget of about $200,000 in 2003. For a small organization this is a very ambitious goal and it would take a minimum of three years and more likely 5 years to raise a $2M endowment. A suggested campaign gift chart is:

5 gifts of $100,000 $500,000

Components of the major gifts campaign include:

· Feasibility Study to ensure fundraising goal is attainable (see attached)
· Case Statement materials outlining the case for giving to the Foundation (completed in 2001)
· Gift Chart outlining the gifts needed to attain the fundraising goal
· Donor prospects list developed including who the best individuals to make the solicitation are.
· Recognition Plan for donors
· Stewardship Plan for maintaining relationships with donors.

A Major Gifts campaign would begin with a feasibility study to ensure the goal is a realistic one and to begin to make connections with potential donors. This questionnaire would be completed with about a dozen key people.

Major Gifts are realized after months and sometimes years of cultivating donors. This cultivation has been started by the VHF with its downtown breakfast for heritage building owners and the opening benefit of the Fair. To move the cultivation to the next level will involve personal and small group approaches with case statement materials demonstrating why this is a good cause. The case statement materials are being developed during 2001. Major Gifts are solicited one by one, or by two or three key people, mainly board members, getting in the donor's door to make their pitch using carefully constructed materials outlining the Foundation's case. A carefully crafted list of donorprospects, including important background information and who are the best people to make the approach, is an important component of solicitation.

Planned Giving

Planned Giving is the most long term type of fund development. The rule of thumb is that it takes on average 15 years to actually benefit from a bequest. The Foundation currently has two bequests. Planned Giving involves approaches to two groups: lawyers and accountants who advise clients on their wills, and individuals who may be potential donors, such as owners of Heritage "A" buildings and person's of wealth in Vancouver.

There is currently a group of board and community members working on developing a VHF approach to lawyers and accountants, drawing attention to relevant tax advantages available to their clients when they gift property to a foundation such as ours. Lawyers and accountants have influence over the financial decisions of their clients. Our objective is get our name and our message out to these people of influence.

Current Gifts of Real Property

From time to time current (not bequests or future) gifts of real property come available to the Foundation. The Foundation can, on accepting these gifts, undertake protection through designation or Heritage Revitalization Agreement it if it is a heritage property, restore, retain and manage the property, or sell the property with the proceeds benefitting the Vancouver Heritage Foundation. It is recognized by the VHF Board of Directors that there is a need to develop a set of guidelines for the receipt of and donor recognition for such gifts. Policies from Historic Seattle, Heritage Foundation of Canada and other heritage organizations that receive gifts of property are being gathered for comparison.

Currently, the VHF is working with a donor on a proposed project to donate and move one of the last extant lane houses in the downtown core to city owned property on Mole Hill, restore the house to its original residential use and sell it for market housing. The proforma prepared for the project demonstrates that with the house, its move and new foundations, and the new site donated to the Foundation, there is fundraising potential for the Foundation in the project. The funds realized from such a project could assist in building the endowment fund of the Foundation. However, the use of such funds would be a policy decision of the Board of Directors.

Addendum:

STRENGTHS, WEAKNESSES, OPPORTUNITIES & THREATS FACING VHF

Strengths (internal)
Clear mission and goals
Desire to work cooperatively with other heritage groups
Good reputation as an organization within civic heritage groups
Good connections within city hall
Support from the founding directors, Mayor & Council

Weaknesses (internal)
No office or meeting space (no physical presence)
Understaffed
Financially dependent on the City
Short organizational history upon which to attract major & planned gifts
Few annual donors or people who identify with the organization
Few donors over 55 years of age to base a planned giving program on
Built heritage is a cultural issue and harder to fund raise for than social or health issues.

Opportunities (external)
Successful programs such as the Fair & True Colours raise awareness about the VHF
Connections for fundraising opportunities are made through Opening Benefit of Fair
Only heritage group with a fundraising mandate within the City
Increasing interest in heritage in Vancouver
Receiving donated building and using it as a model project

Threats (external)
Continued operating funding from city uncertain
Arts & culture endowment funds in Vancouver are not well established
Heritage Conservation competes for charitable dollars against health organizations and other well established arts and culture organizations.
No provincial government commitment for heritage restoration in Vancouver
Heritage viewed by property owners in Vancouver as a liability not an asset. This cannot be changed overnight.

ATTACHMENTS THAT DO NOT HAVE ELECTRONIC COPY ARE AVAILABLE ON FILE IN THE CITY CLERK'S OFFICE

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