Agenda Index City of Vancouver

ADMINISTRATIVE REPORT

TO:

Standing Committee on City Services & Budgets

FROM:

Directors, Office of Cultural Affairs & Finance, in consultation with the Director of Legal Services

SUBJECT:

Vancouver Art Gallery
- Annual Report & 2002 Operating Grant; - Amendments to By-laws; and
- Lease/Operating Agreement

 

RECOMMENDATIONS

CITY MANAGER'S COMMENTS

COUNCIL POLICY

On March 31, 1992, City Council approved a change in the basis of the City's financial support to the VAG from a grant in support of specific items to a grant supporting general operations.

Approval of grants requires eight affirmative votes of Council.

In October 1980, British Columbia Buildings Corporation (BCBC) leased Block 51, DL 541, for 99 years, to the City as premises for the Vancouver Art Gallery. A sublease dated October 1992 between the City and the VAG has not been signed.

PURPOSE AND SUMMARY

This report provides a review of the Vancouver Art Gallery's 2001 activities and presents for Council's consideration its 2002 Operating Grant request, By-law amendments, and a Supplemental Grant request. This report also seeks Council's authorization to enter into a sublease/operating agreement with the VAG.

The VAG marked its 70th anniversary year (2001) with substantial change and has now refocused its energies in a new strategic direction. As staff noted in last year's report, this direction has some risk as the VAG reinvests in its operations. However, through careful monitoring of results and strategies to address risk, staff are confident that the VAG will be able to sustain its reinvestment program, perhaps at a slower pace, but within a balanced budget.

The VAG is exploring ways to enhance its care of the City's Collection and has submitted a request for supplemental funding for this three-year project. Staff propose to review and report back on this request in the context of other supplemental requests received from the Major Exhibiting Institutions.

Finally, staff are working with the VAG to streamline the relationship between the Association and the City, and to formalize this relationship in a new lease/operating agreement. The report also seeks Council's approval of By-law amendments which arise from the VAG's governance review.

BACKGROUND

Founded in 1931, The Vancouver Art Gallery Association is an independent not-for-profit cultural organization which operates Canada's fourth largest public art museum, and collects, preserves and exhibits the City of Vancouver's Collection of fine art. The Collection comprises over 7,600 works with an estimated value of $100 million. The VAG occupies a provincially-owned building which is leased to the City of Vancouver for a 99-year term.

2001 Year In Review
2001 marked the VAG's 70th anniversary and the appointment of a new Director. Work focussed on rebuilding relationships with the VAG's various communities and addressing the financial, artistic, governance and community concerns that resulted from a challenging year in 2000. Recognizing issues of leadership and governance, the Board established new Terms of Reference, a Governance Committee, and performance appraisal processes for the Director and Board members. The VAG also developed a three-year Strategic Plan which affirmed the Gallery's commitment to contemporary art and artists, as well as to artistic production in Vancouver and the region.

The Plan also identified weaknesses in the areas of fund raising and marketing, and the institution hired several senior staff to fill key vacancies in development and marketing. The Gallery also added new positions such as the Associate Director, whose responsibilities for day-to-day operations will allow the Director to spend more time on development and fund raising, as well as implementing the overall vision and plan for the institution.

Following the financial challenges of 2000, the VAG developed programming within strict financial parameters. In 2001, the Gallery highlighted the richness of private collections and the permanent collection in the Vancouver Collects exhibition series. In the Fall, the Gallery unveiled the first two major public art acquisitions in ten years with works by Kim Adams and Ken Lum featured around the exterior of the building. The Gallery also featured well-known Vancouver artists Stan Douglas and Gathie Falk in exhibitions that travelled to the Museum of Contemporary Art in Los Angeles and across Canada as part of a national tour respectively. The VAG's 2001 Annual Report will be circulated under separate cover to Council and is available at the City Clerk's Office.

2002 Plans
Major temporary exhibitions for 2002 include The Uncanny: Experiments in Cyborg Culture; Emily Carr, Georgia O'Keefe and Frida Kahlo: Places of Their Own; as well as a retrospective of work by Tom Thompson. In addition, there will be several exhibitions focussing on the work of individual artists including: Douglas Gordon (Scotland), Won Ju Lim (USA), Janet Cardiff and Liz Magor (Canada). A reinstallation of works from the VAG's permanent collection, as well as the temporary exhibition Drawing the Forest, will feature well-known B.C. artist Emily Carr.

Public programming will include plans to add Gallery animators for exhibitions, continue with the Philosopher Café series, two day-long symposia for the Cyborg and Douglas Gordon exhibits, and remounting the "Open Studio" in conjunction with both the Cyborg and Carr, O'Keefe, Kahlo exhibitions. Two more public art projects are in the works (Janet Cardiff and Robert Davidson), as well as a new artist-in residence program. The Gallery will continue to build its resources in the areas of development and marketing, and launch new fund raising/profiling initiatives such as the International Women in the Arts Award.

DISCUSSION

Operating Grant
The financial implications of 2000 carried over to 2001, necessitating continued expenditure reductions. This included significant cuts to the exhibition program to balance the budget. Private sector fund raising increased by 8%, but overall revenues were down by 6.7% over 2000. However, the VAG ended 2001with a surplus of $167,384 on a total budget of $5.7 million as a result of a budget management program and a very successful art auction late in the year. The VAG's 2001 financial statements are attached to this report as Appendix "A".

Paid attendance in 2001 dropped by 8% over 2000, which is in part attributable to the recent trend in attendance caused by external events (September 11th), which many of the City's cultural and exhibiting organizations have experienced. Admission revenues however were maintained at $1,052,539, a 0.6% increase over 2000. While the VAG has been resourceful in programming within a limited budget, plans have been made to reinstate exhibitions and programming resources to former levels, as reductions to these budgets over the long-term are not sustainable and make the task of rebuilding audiences and revenues that much more difficult. The temporary exhibitions planned for 2002 are expected to attract a record number of visitors. However, as two of these exhibitions which have the greatest admissions revenue potential take place in the second half of the year, the VAG has projected conservative increases in its admissions revenues.

In last year's report, the VAG had put forward a deficit budget for 2002. This budget has now been modified to show a small surplus, but still has aggressive fund raising goals. Donations, corporate sponsorships and foundations income are projected to double between 2001 and 2002, but two-thirds of this amount have already been committed to date. The VAG has completed a Risk Assessment and has drafted contingency plans which will be implemented if necessary to maintain a balanced budget. Staff commend the VAG's commitment to restoring its exhibitions and programming to pre-2000 levels within a balanced budget. VAG has also been reinstated with the Vancouver Arts Stabilization Team (VAST) program and will be receiving its 2000 and 2001 grants. Staff are therefore recommending an operating grant of $1,891,500.

The "Other" grants budget is set year over year through a ceiling report based on Council's direction with respect to inflation. However, in 2000 no increase was provided for the Vancouver Art Gallery, while 0.5% increase was provided to the other Major Exhibiting Institutions. This omission has only recently been noted and a one-time grant of $18,375 from Contingency Reserve is being recommended to reflect the appropriate grant level.

Supplemental Grant Request
Two years ago the VAG received a $100,000 grant from the Getty Foundation to assess and document the state of the permanent collection. This work is nearly completed and the VAG plans to establish a Collection Care Fund to address areas raised in the Getty conservation survey. The Gallery has made a supplemental grant request to the City in the amount of $67,000 per year for three years towards this Collection Care project. Staff will review this request and report back in the context of all supplemental grant requests received from the Major Exhibiting Institutions.

By-law Amendments
By-law 14.1 of The Vancouver Art Gallery Association provides that "no amendment to these By-laws shall be made without being approved by the Council of the City ofVancouver." The Governance Committee of the VAG has recently completed an internal review and has recommended changes to the VAG By-laws that better reflect operations.

Several of the proposed amendments are minor text amendments for clarification (i.e. the substitution of "President" for "Chair"), and several set out reasonable changes to the permitted length of terms for Trustees. One proposed amendment, deletes the By-law that provides for a member of City Council to sit on, or appoint an alternate to the Board of Trustees. A 1988 Council policy states "Councillors and civic staff must not represent the City on non-profit Boards." This policy specifically eliminated appointments to several Boards including The Vancouver Art Gallery Association. However, the VAG's By-laws have not yet been changed to reflect this City policy. Legal Services staff has reviewed the proposed amendments as outlined in Appendix "B" of this report and recommend approval.

Sublease/Operating Agreement
The Province through the British Columbia Buildings Corporation (BCBC) owns the lands (Block 51) and the buildings situated on the lands which are mainly occupied by the VAG. In October 1980, BCBC leased Block 51, for 99 years, to the City as premises for the Vancouver Art Gallery. A sublease dated October 1992 between the City and the VAG has not been signed. Staff propose to enter into a sublease/operating agreement with the VAG under the terms and conditions appended to this report as Appendix "C".

Exterior Maintenance
The exterior of the VAG premises are an important part of the public realm in the downtown. In addition to being the symbolic entrance to the VAG ,"Centennial Plaza" north of the VAG has become an important public gathering position. The Plaza and the grounds are heavily used by the general public and by the VAG for film shoots and other rental events. It has become increasingly difficult to maintain the grounds and Plaza in a manner that both the VAG and City staff feel is warranted.

To address this concern, the VAG has made a proposal to the City to assume responsibility for a portion of the exterior maintenance of the building and grounds including the Plaza. Under the agreement between BCBC and the City, BCBC is responsible for conducting and carrying out the gardening, landscaping, snow removal and general maintenance (the "maintenance") of the grounds of Block 51, all at the City's cost - other than BCBC is responsible for the costs related to the maintenance of the fountain area on the Plaza. Building Management currently provides $80,200 (2001 budget) towards the upkeep of the grounds.

The draft 1992 agreement between the City and the VAG permits the VAG to allow third parties to use the exterior grounds of the Gallery with the City's prior written consent. The VAG may retain all revenues from such use and the City is responsible for maintaining thegrounds. City and VAG staff agree that a change to the relationship that aligns the responsibilities with the revenues will result in a better public realm.

The VAG has obtained a proposal from BCBC to extend its current grounds work at Robson Square to include the VAG exterior grounds and Plaza. The VAG proposes to engage BCBC to take over responsibility for the day-to-day maintenance that results from general public use, as well as VAG-initiated activities and rentals. Building Management will continue to be responsible for occasional maintenance and repairs that are the result of extraordinary public use of the grounds for demonstrations and City-permitted events. Under the Head Lease, the City shall remain responsible to BCBC for the cost of the grounds work other than the grounds work related to the fountain area. The proposed lease/operating agreement will pass on the City's obligations with respect to these costs to the VAG, and the VAG shall pay BCBC directly for the cost of the grounds work other than the grounds work related to the fountain area. Any proposed changes to the grounds work arrangements set forth in the Head Lease between the City and BCBC shall be subject to an amendment of the Head Lease or to such other arrangements as the City and BCBC agree.

Staff therefore recommends that up to $60,000 be transferred from the Building Management operating budget to the "Other" Grants budget for allocation to the VAG, subject to the execution of a sublease that will set out the terms of the grounds maintenance, among other terms and conditions. The balance of the Building Management budget will be retained to cover the occasional extraordinary costs.

FINANCIAL IMPLICATIONS

Staff are recommending to Council a 2002 operating grant of $1,891,500 based on an increase of 1.75% over the 2001 grant to cover inflation based on Council policy. The source of funds for the operating grant is the "Other" Grants allocation in the 2002 Operating Budget. Staff also recommend a one-time grant in the amount of $18,735 from Contingency Reserve to reflect the adjusted grant level for the VAG.

The exterior grounds maintenance recommendation proposes to reallocate existing funds from the Building Management budget to the "Other" Grants budget. This will not happen until such time as the lease is signed, so staff recommend that the funds be pro-rated to reflect the date of signing.

CONCLUSION

The VAG has been managing this period of transition and rejuvenation of the institution in a fiscally responsible manner. Preliminary strategic plans which proposed an ambitiousrenewal of the institution have been balanced with the desire to maintain a balanced budget. Therefore, staff are recommending to Council a 2002 operating grant of $1,891,500 to The Vancouver Art Gallery Association.

As discussed above, staff propose to defer consideration of the current request for a $67,000 supplemental grant. Rather, to ensure an equitable process, staff propose to review supplemental grant requests from the Major Exhibiting Institutions concurrently, and make recommendations in one report back to Council.

Further, the VAG is working to clarify and formalize both its By-laws and legal agreements which are reflected in the recommendations contained in this report and supported by staff.

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LINK TO APPENDICES A AND B

 

APPENDIX C 

Agreement between the City of Vancouver (City)
and
The Vancouver Art Gallery Association (VAG)

DRAFT TERMS

Term: Fifteen years commencing January 1, 2002

Rent: $1.00 payable in advance

Premises: A portion of the building located at 800 West Georgia St. currently occupied by the VAG

Grant of Sublease and Non-exclusive License
The City to grant:
· a sublease of the Premises as outlined in the plan attached as a Schedule for purposes set out in the "Use" section below; and
· a non-exclusive licence to use the Grounds as outlined in the plan attached as a Schedule generally for the purposes set out in the "Use" section below.

Related Agreements:
The Premises and Grounds are owned by British Columbia Buildings Corporation (BCBC) and leased to the City for a term of 99 years, through a lease agreement dated October 29, 1980.

The Memorandum of Understanding among BCBC, the City of Vancouver and The Vancouver Art Gallery Association dated December 5, 2000.

Use:
Permitted use of the Premises and Grounds include:
· operation of an art gallery within the Mandate and Cultural Objectives established by the VAG, appended to the agreement as a Schedule, and approved by the City (see below);
· purposes necessarily incidental to the operations of an art gallery, and permitted within the zoning including a gift shop, café, venue rentals and fund raising activities in accordance with an Occasional Third Party Use Policy (see Rentals section).

Cultural Objectives:
As part of the lease agreement the VAG's Mandate and Cultural Objectives will be included and used as annual and periodic performance measures.

 

Collection:
The VAG holds artworks which belong to the City (the "Collection"). The VAG will manage the Collection in accordance with a Collections Policy, which will be based on "industry" standards such as the Canadian Museums Association or BC Museums Association, and subject to City review and approval, provided that such review and approval is consistent with "industry" standards such as the Canadian Museums Association or BC Museums Association.

Equipment, Fixtures & Furnishings:
Equipment, fixtures and furnishings which do not form part of the base building, and are not part of the Collection remain the property of the City; however, the VAG will be responsible for all costs associated with their maintenance, insurance, and replacement.

Public Access:
The agreement will set a standard for access for the general public to exhibits, programs and rental opportunities including minimum hours of operations etc..

Reporting to the City:
On or before April 30th of each year, the VAG will provide to the City the following:
· audited financial statements for the previous year, prepared at the VAG's expense by a firm of chartered accountants and to include all operating, capital and special purpose funds;
· an annual budget, approved by the Board of Directors, and including an estimate of all revenues and expenditures;
· a summary of activities for the past year demonstrating how they have fulfilled their Cultural Objectives;
· a summary of activities for the coming year detailing how such activities will work towards accomplishing the VAG's Cultural Objectives; and
· any changes that the VAG may wish to make to its Cultural Objectives, Collection Policy, Occasional Third Party Use Policy, Service Agreement, or other Policies which form part of the lease agreement require Council approval. Changes will be reviewed by the City and reported to Council along with any annual review and grant request.

At any time requested by the City, the VAG will provide to the City such other financial reports as the City requires, in its sole discretion.

Further, the VAG will regularly submit minutes of all Board meetings to the City.

 

Occasional Third Party Use:
The VAG may contract with third parties for occasional use of the Premises and Grounds as set out in an Occasional Third Party Use Policy. Occasional Third Party Use will be required to be appropriate to, and support the Mandate of the VAG. Only those extraordinary uses which are
outside of the uses permitted by the Occasional Third Party Use Policy will require prior City approval. The VAG agrees to abide by any rules or regulations imposed by the City provided that such rules and regulations are consistent with the Occasional Third Party Use Policy.

Notwithstanding the Occasional Third Party Use Policy, the VAG may not assign, or sublet all or any portion of the Premises or Grounds without the City's prior written consent.

Insurance:
The City will indemnify the directors, officers, staff and volunteers of the VAG for up to $5 million under terms satisfactory to the Director of Legal Services.

The City will insure the building against fire, vandalism etc. as determined by the City's Director of Risk Management.

The VAG will be responsible for insuring the Collection, equipment, fixtures and furniture and will be required to maintain comprehensive general liability insurance as well as all risk broad form tenant's legal liability insurance in the amounts and types satisfactory to the City's Director of Risk Management.

Utilities, Maintenance, Repairs and Security:
The VAG will pay for heating, lighting, fuel, water, garbage removal; all janitorial and internal security services; all maintenance and repairs (other than Capital Repairs) to the Premises and the Collection, including exterior banners and art installations as well as plate glass replacement, all as outlined in a Service Agreement which shall be appended to the lease agreement; all telephone and cable services as well as elevator and internal security systems and their associated repairs.

Subject to the will of Council, the resources available and the approval of BCBC pursuant to the Head Lease, the City will make such capital repairs (including but not limited to repairs to the roof, bearing walls and floors) as the City deems necessary. The definition of capital repairs shall be detailed in the Service Agreement.

Improvements:
The City's and BCBC's consent is required by the VAG to alter, erect, or modify (hereinafter referred to as improvements) the Premises or Grounds in any way other than temporary alterations. In the event that the City's consent is given, the City may attach conditions or

 

deadlines as it sees fit and the VAG will be responsible for all cost of improvements, and claims or liabilities of any kind arising from the improvements.

Early Termination:
The City may terminate the lease agreement prior to the end of the Term on the happening of any one or more of the following events:
· VAG is in default on any payments owed to the City following 30 days notice;
· VAG defaults in performing any other provision of this agreement and if the default has not been remediated within 60 days;
· the Premises are closed to the public for 30 days without the City's consent, unless the closure is due to an event of force majeure;
· the Premises are not used in the operation of an art gallery;
· if the Head Lease is terminated; and/or
· VAG becomes bankrupt, is wound up or dissolved.

And such other terms and conditions as may be satisfactory to the Directors of Legal Services, Real Estate, and the Office of Cultural Affairs, it being noted that no rights or obligations hereby arise or take effect until the agreement has been executed by both the City and the VAG.

 

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