Agenda Index City of Vancouver

ADMINISTRATIVE REPORT

TO:

Standing Committee on City Services and Budgets

FROM:

Director of Current Planning, in consultation with the General Manager of Parks and Recreation and the Director of Legal Services

SUBJECT:

Arrangements for the Pacific National Exhibition Through 2003

 

RECOMMENDATION

CITY MANAGER'S COMMENTS

COUNCIL POLICY

In January 1990, City Council approved that Hastings Park be restored to predominantly park use with abundant green space and trees, instead of asphalt and buildings.

In March 1997, after a two-year community consultation process, both City Council and Park Board approved the Hastings Park Restoration Plan.

In November 1994, City Council authorized a lease with the Pacific National Exhibition (PNE) for Hastings Park including a clause that the PNE vacate the site at the end of 1996. In February 1996, the termination date was extended until September 1997. In April 1997, the termination date was extended until the end of 1999.

In June 1999, City Council approved terms for an Operating Agreement for the PNE occupation and use of Hastings Park, except the Racetrack area. This Operating Agreement has not been finalized. Accordingly, the PNE has since been occupying and using a portion of Hastings Park generally in accordance with the terms of the 1994 Lease and certain terms approved by Council in 1999.

PURPOSE

The purpose of this report is to respond to the Provincial government's proposition that the City assume ownership of the PNE (which encompasses the Fair, Playland and annual building rental and facility operations) by asking Council to instruct staff to strike a negotiating team. In the meantime, to permit the PNE to continue its operations through 2003, it recommends that Council direct the finalization of an Operating Agreement between the City and PNE, the terms and conditions of which have already been approved.

BACKGROUND

Park Restoration
The Hastings Park Restoration Plan was approved in 1997 after extensive public involvement and Park Board staff analysis and design. To date, significant progress has been made on implementing this Plan, with the creation of the Sanctuary, Italian Gardens, and the Empire Fields. It is estimated that of the total 45 hectares (111 acres) that comprise Hastings Park, one third or 12 hectares (30 acres) have already been restored. The cost of the restoration efforts to date is approximately $13 million.

The next phases of the Plan, between 2003 and 2005, would involve the creation of Windermere Hill (restoring the site where Playland currently exists) and the greening ofExhibition Bowl as an extension of the Sanctuary (refer to Appendix A for a complete overview of the restoration phases).

Restoration Principles
To reconcile the park restoration plan with continued use of the park by the PNE, a set of basic principles was framed in 1999, as listed in Appendix B. These principles acknowledge first and foremost that the green park restoration should proceed as planned upon availability of funding. They also affirm the significance of the PNE as a British Columbia institution, that the PNE is expected to relocate to new and better future premises, but that the PNE may have a place at Hastings Park until the realization of park restoration precludes this. And the principles acknowledge that while on-site jobs will change, all decisions should be sensitive to the impact on these jobs.

PNE Relocation Activities
The PNE has been actively searching for an alternate permanent home. Options regarding sites and partners have been explored. New amusement park design concepts have been framed. Extensive resources have been expended by the PNE. A recent scenario involved the PNE moving to a 38 hectare (94 acre) site in Surrey. They even went so far as to purchase the land, however the Provincial government later put the move on hold pending the results of a Provincial review of core services.

In 2001, the Provincial government announced that as a result of its core services review the PNE was not compatible with provincial public policy objectives. As a consequence, the Government decided it would not support any future relocation of the PNE and therefore cancelled the planned relocation to Surrey, placing the purchased property on the market. Further, the Province raised the proposition that the PNE, including its liabilities and obligations, be turned over to the City.

DISCUSSION

The Province's proposition raises new choices for the City. Inherently, it suggests that the PNE would remain at Hastings Park in some form. If the City were to entertain the Province's offer, new policy arrangements would be required. Most immediately, this would likely have some impact upon the 1997 Hastings Park Restoration Plan and the 1999 Hastings Park Restoration Principles, both of which were premised on the relocation of the PNE to another site. In an effort to better understand these and any further implications, staff undertook a detailed investigation into PNE operations, including its financial performance, the state of its buildings and facilities and its overall economic impact on the City and the region (refer to Appendix C for an executive summary of the staff report).

Financial Performance
Staff met extensively with the PNE Executive to review the PNE's financial statements from the past five years (1997 to 2001). From those statements, its appears that the PNE's three primary revenue streams provide a combined revenue of approximately $36 million annually.
However, through expenditures on PNE operations, including repairs to and operation of all buildings and facilities, as well as maintenance of the restored park areas, the PNE spends most of its revenues. It is difficult to state definitively the cost of each operating area. While direct costs are charged against each operating area, the PNE has an integrated administrative structure that is not distributed.

Figure 1 in Appendix D illustrates the impact of this administrative overhead on the PNE's overall financial performance. While each business stream provides a positive net contribution, they are offset by substantial administrative costs of approximately $7.5 million. In 2001, this resulted in the PNE essentially breaking even. Over the past five years, the PNE has run a deficit in three of those years and by the end of last year, the PNE had an accumulated deficit of about $3.6 million. Also over this five year period, the city and province have contributed $4.3 million for a variety of reasons outlined below.

According to the PNE Executive, much of their deficit is attributable to a continually shrinking site area due to the restoration efforts and an uncertain future that has resulted from short term operating agreements with the City. The latter point has prevented the PNE from entering into long term rental commitments and has required it to depreciate its assets sooner than desired. Also, the PNE incurred expenses in their effort to relocate to another site. PNE administration has stated that without these influences, it could have reported a net income rather than a loss.

Despite the losses, the PNE has been able to maintain a positive cash position from its operations. The PNE has done this at the expense of investment in capital assets. Any expenditures have been limited to those items that the PNE requires to carry on operating and to those that offer a positive return with a short payback period. The PNE does not have the cash reserves to cover unforseen events such as bad weather or major equipment failure.

Buildings and Facilities
As a part of the study, staff undertook an assessment of the condition of every building and facility, including those at Playland. With the exception of the Livestock Building (which staff would recommend be demolished), all of the remaining structures are in reasonable condition consistent with their age. However, the buildings have been maintained and upgraded only for short term use.

Much of the buildings' status can be attributed to the limited cash reserves of the PNE. It has had to budget its investment in its assets carefully giving priority to those assets critical to its ongoing operations. The Province provided a cash infusion to the PNE of $1.4 million in 2000 for repairs and upgrades of equipment. The City, as per our Agreements, has contributed a total of approximately $1.6 million over the past five years in maintenance. Nevertheless, despite the cash injection and the $2.2 million that the PNE estimates it spends annually on maintenance and utilities, there exists a backlog of deferred maintenance issues on the PNE infrastructure. It is also estimated that capital improvements of approximately $5 million must be made to on-site structures to bring them up to City standards.

Playland
The PNE owns all of the rides with the exception of three (Revelation, Hell's Gate and Helevator) that are under lease-to-purchase agreements. The leases expire by 2005 and the estimated early buy out of the leases at the end of 2002 is $4.1 million. If Playland operation were to cease, this cost would be offset by the net realizable value of all the rides, which at the end of 2002 is estimated by the PNE to be at $4.6 million.

With regard to the wooden roller coaster at Playland, a study commissioned by the City indicates that it is in largely serviceable condition. It suffers from deterioration of its wood components and will require continued maintenance to ensure it remains in good working order. Given its state, the roller coaster is not a good candidate for relocation.

PNE Economic Impacts
The City retained an external consultant to assess the economic impact the PNE has upon the City and GVRD. The study indicated that in 2001, the PNE contributed just over $115 million to the GDP of the region, clearly suggesting that it has an economic impact on the GVRD and the Province. Moreover, the PNE generated roughly $62 million in Federal, Provincial and local taxes. In terms of employment, the PNE created over 3,000 full-year jobs with approximately $81 million in salaries and wages.

While it can be inferred from the above figures that the PNE has an impact on Vancouver's economy, it was not possible to evaluate the specific impact of the PNE on the City's economy due to insufficient data. Similarly, it could not be determined what the impact would be if the Fair and Playland ceased to operate. It is assumed that the year-round operations would continue to create economic spin-offs even if the Fair and Playland no longer operated.

RESPONSE TO PROVINCIAL PROPOSITION

After reviewing the analysis from the internal and external studies, staff have concluded that ownership of the PNE entails substantial financial liabilities. If Council were to acquire the PNE, it would necessitate that the City would have to bank roll the working capital requirements of PNE, with risk that continued losses would require ongoing cash contributions. There would also exist the costs associated with addressing the deferred maintenance on the buildings and facilities.

Given that, staff have identified two options for Council to consider:

1. Do not accept the Province's proposition.

2. Proceed now to negotiations with the Province by endorsing a negotiating team.

If Council were to proceed with option 1, the City would not assume the costs and liabilities associated with the PNE. As well, it would ensure that park restoration efforts could unfold as planned. However, failure to move towards negotiations with the Province would likely result in the ceasing of PNE operations. As indicated above, this could have possible economic implications to the City and region, including the loss of on-site jobs. Staff, therefore, recommend that Council undertake option 2 and instruct the City Manager to assemble a negotiating team that will endeavour to achieve an agreement with the Province regarding the future of the PNE which is beneficial to the City. That said, staff are cognisant of the PNE's financial implications and therefore the intent of any negotiations would be to protect the City from the PNE's past, but also future, liabilities and obligations.

PNE EXTENSION

Given the level of uncertainty surrounding the possible duration of any negotiations with the Province and the need for continuity and greater certainty expressed by the PNE, staff recommend that the PNE be permitted to remain at Hastings Park until at least the end of 2003. In 1999, Council approved terms and conditions for an Operating Agreement between the PNE and the City to the end of 2002. However, the Agreement remains unsigned. The approved general operating arrangements with the PNE should now be brought to a conclusion with the signing of the Operating Agreement, noting that the term of the Agreement would be extended to 2003. Staff agree that such an extension would minimally impact the implementation of the Restoration Plan as the Agreement originally provided for such a contingency.

PUBLIC PROCESS

In the event that any negotiations with the Province result in a change in the ownership of the PNE, staff support a joint City/Park Board public process that would then be undertaken to determine how, and in what form, the operation could be integrated into the community and park setting. It is anticipated that, if required, any detailed public involvement would occur outside of the CityPlan Community Vision process now underway in the Hastings/Sunrise community. While the exact time line for such a public process is currently difficult to predict, given the timing of the Visioning program, it could start early in 2003. If and at such time as an agreement is reached between the City and the Province, staff will report back to Council with a more detailed work program and budget.

CONCLUSION

Over the past five years, significant progress has been made towards the restoration of Hastings Park, during which the PNE has demonstrated its ability to reinvent itself and adapt its operation to the park setting. However, upcoming restoration stages and the recent actions from the Provincial government stemming from its core services review have placed the future of the PNE, in its current form, in doubt. Assembling a negotiating team provides the City with the means to help determine the role, if any, of the PNE at Hastings Park. In the meantime, while these processes for the long term are underway, the finalization of an Operating Agreement, the terms and conditions of which were approved in 1999, with an extension of the term to the end of 2003, will provide the PNE a measure of certainty and continuity.

* * * * *

APPENDIX A
Page 1 of 1

Hastings Park Restoration Phasing and Budget
(From the 1997 Hastings Park Restoration Plan)

·The Hastings Park Restoration Plan was unanimously approved by the Park Board and City Council in March 1997.

·Phase 1 involved the removal of five buildings during 1997-98: the BC Pavilion, the Food Building, Showmart, the Display Barn and the Poultry Building. The Challenger Relief Map was saved and placed in storage until a new home is found for the map. Cost: $3.0 million

·Phase 2 involves the creation of 10 acres of restored park land during 1998-99 (to be completed by July 1999), namely the central park space called "the sanctuary" which includes a major pond and its surrounding landscaping. Cost: $4.2 million

·Phase 3 would involve the creation of 27 acres of restored park land during 2000-2002 and include three components: a) a 7 acre area along Renfrew Street with a children's playground, tennis and basketball courts, and landscaping; b) a 6 acre area in the centre of the site that would be added to the "sanctuary"; and c) a 14 acre area called "Empire Fields" for sports fields. Cost: $10.5 million

·Phase 4 would involve the creation of 38 acres of restored park land during 2003-2005, including the landscaping of the Playland site and areas between the "sanctuary" and Renfrew Street. Cost: $8.3 million

·Phase 5 would involve the creation of 36 acres of restored park land during 2006-2008 (and potentially beyond), including the central park connection to New Brighton Park, the landscaping of the area where the Livestock Building now stands, and tree planting and other improvements around and north of the Coliseum. Cost: $13.6 million

·The restoration involves the transformation of 111 acres at a cost of about $40 million. Not included in this total are the renovations to the Forum, Garden Auditorium and Rollerland (about $4 to $5 million). The $45 million total is consistent with the staff estimate from 1997, when the Restoration Plan was approved.

APPENDIX B
Page 1 of 2

Hastings Park Restoration Principles

Park Restoration

·That the spirit and intent of the 1889 Trust ("maintained and preserved for the use, recreation and enjoyment of the public") continue to guide City and Park Board actions regarding Hastings Park.

·That Hastings Park be restored in a timely way (considering budgets, construction requirements and phase out of existing commitments) to dominant park use with abundant green space and trees, based on the Hastings Park Restoration Plan approved by the Board and Council in 1997.

·That a cooperative management arrangement be put in place for Hastings Park with the intent to ultimately vest restored park land to the "care and custody" of the Park Board.

PNE and Playland

·That the PNE's annual fair as an institution in British Columbia is supported.

·That the PNE and Playland are expected to relocate to a new and better suited site as soon as possible, but this should have careful regard to jobs and funding support.

·That the PNE and Playland tenure be reshaped with the intent that they be permitted to remain for the annual fair and the summer months for the amusement park until they have relocated or until such time that their activities are no longer compatible with the restoration of the park.

·That, as long as the PNE and Playland are at Hastings Park, they are expected to evolve in character to continue to be compatible and to accommodate the unfolding progress of the Hastings Park Restoration Plan.

Racetrack

·That the racetrack be permitted to stay on a longer-term basis, and that the operators be required to make reasonable improvements to the facilities and their neighbourliness, and move toward implementing the park connection to New Brighton Park as shown in the Hastings Park Restoration Plan.

APPENDIX B
Page 2 of 2

Buildings

·That other buildings identified to stay and be further used or reused are the Coliseum, the Agrodome, the Garden Auditorium, the Forum and Rollerland.

Parking

·That parking be provided as defined in the Hastings Park Restoration Plan, with negative impacts on park space to be minimized.

Employment

·That it be acknowledged that jobs at Hastings Park will change, that the park restoration program and the evolution of the PNE should be sensitive to the impacts on jobs, and that arrangements to accommodate employment transition be implemented.

APPENDIX C
Page 1 of 8

2002 PNE Review

Executive Summary - PNE Review Report

In 2001, The Provincial Government announced that, as a result of its Core Review, the PNE (the Fair, Playland, and the year-round building rentals) wasn't compatible with the provincial public policy objectives. As a consequence, the Province cancelled the planned relocation of the PNE to Surrey and offered the PNE to the City of Vancouver.

This offer poses new choices for the City in that in 1997 both City Council and the Board of Parks and Recreation approved a long-term Restoration Plan for Hastings Park, premised on the relocation of the PNE to another site. So far, 12 of a possible 45 hectares have been restored at a cost of about $13 million; however, the three restored park areas are not physically integrated. The implementation of the Restoration Plan has increasingly constricted the PNE to a dwindling area of the Park. Continuation of a fair and/or an amusement park in Hastings Park may necessitate changes to the Restoration Plan.

The report is divided into two broad areas:

· Financial Performance of the PNE

· Status of the PNE's Buildings and Facilities

The content of this report is based upon the PNE's financial statements over the past five years, a walk-through inspection of the buildings and facilities, and considerable information provided by the PNE Executive. It is also based upon two studies commissioned by the City. One covered the economic impact of the PNE operations. The other covered the condition of the wooden roller coaster.

Included in this Summary is an overview of the operating climate over the past decade as well as staff comments on the economic impact study and the PNE's 2002 Business Plan.

The cooperation of the PNE Executive was crucial to this exercise. They provided information, arranged briefings as well as site inspections, and responded to numerous questions from staff all with good humor and patience. Their participation was unstinting and very much appreciated.

APPENDIX C
Page 2 of 8

Financial Performance

The PNE has primarily three revenue streams that produce a combined revenue of about $36,000,000 per year.

Revenue Stream  Revenue (yr 2001)  %
Fair (17 days/year) $20,179,106* 56
Playland (100 days/year)     6,401,455* 18
Year-Round Operations (rentals)     7,044,408 20
Corporate     2,332,299 6
  $35,957,268 100 %

The PNE has a revolving line of credit, guaranteed by the Provincial Government, of $12,000,000. The average monthly balance is about $4,000,000 while the highest balance is approximately $8,600,000. Recently, the City agreed to pay up to $300,000 per year of any deficit incurred by the PNE. This agreement recognizes the impact of the park restoration on the PNE's operation.

Annual attendance over the five-year analysis period has averaged about 1,000,000 for the Fair and about 240,000 for Playland.

Annual Attendance

 

2001

2000

1999

1998

1997

Fair

952,291

1,055,292

1,058,432

1,017,440

908,064

Playland

266,335

282,800

223,213

223,882

198,857

Expenditures cover PNE operations, including repairs to and operation of all buildings and facilities, as well as maintenance of the restored park land. While direct costs are charged against operating areas, the PNE has an integrated administrative structure, costing about $8,000,000 annually, that is not distributed. This cost centre includes not only salaries and benefits for administrative staff but also a variety of other charges such as asset depreciation, interest charges, absences by all staff for any reason, and Workers Compensation Board premiums. Consequently, it is not possible to state definitively the cost of each operating area or the financial impact of modifying any of the operating areas.

Over the five-year analysis period - 1997 to 2001, the PNE has run at a deficit in three of those years. The PNE currently has an accumulated deficit of $3,600,000.

APPENDIX C
Page 3 of 8

PNE's Financial Performance

2001

2000

1999

1998

1997

$56,465

($622,995)

($682,043)

$1,395,167

($2,268,944)

PNE administration attribute part of the deficit to accelerated depreciation on plant and equipment dictated by the uncertain future of the PNE. Also, during 2001, the PNE received a $1,200,000 refund of GST paid in error over part of 1999 through 2001. The on-going effect of the ruling will be a saving of approximately $400,000 per year. This would have reduced operating deficits in previous years and turned the operating surplus position of 2001 into an operating deficit of ($343,535).

Over the five year period, the Province contributed $3,152,500 and the City contributed $1,255,000 toward the PNE operations. These contributions were included in the year-end figures above. Of the $3.152,000 in Provincial funding, $2,000,000 received in 1998 related to a settlement of a lawsuit in 1996 for $2,200,000. Another $1,100,000 related to a termination payment required under the operating agreement with the City of Vancouver. The City's contribution was largely to offset expenditures made on the maintenance of grounds and facilities.

While the PNE has reported a loss in three of the last five years, it does provide some offsetting benefits in addition to its entertainment value. The PNE is a significant source of temporary employment for young adults with about 3600 positions. In addition, the PNE does provide an economic benefit beyond its boundary. Pannell Kerr Forster Consulting Inc. was hired by the City to evaluate this benefit. Their report is report is attached. Staff comments on the report are included in this Summary.

Status of Buildings and Facilities

PNE operations include the rental of six buildings with a total rental area of 190,819 square feet. Four were built in the 1930's and early 40's while two were built in the 1960's. Three buildings are on the City's heritage inventory with the Garden Auditorium being the highest rated. It is on the "A" list. In addition, the PNE also operates an administration building.

APPENDIX C
Page 4 of 8

The PNE is responsible for the maintenance and operation of all buildings and facilities. A walk through inspection revealed that all, with the exception of the Livestock Building, which should be demolished, are in a reasonable state of repair. The PNE spends about $2,200,000 annually on repairs and utilities for the buildings. City staff feel this figure is reasonable given the age, condition and use of the buildings.

While the PNE has funded building repairs and maintenance, its ability to fund major capital maintenance on the City-owned buildings, listed above, is limited. Consequently, both the Province and the City have contributed funds for capital maintenance. In the last five years, the City contributed $275,000 toward a partial re-roofing of the coliseum and a chiller repair. The PNE intends to repay these costs but so far has not done so. In addition, Council has committed $700,000 for other, upcoming major maintenance. PNE staff have identified some $5,000,000 worth of additional capital maintenance needs that will have to be undertaken in the near future if the buildings are to be retained and continue in operation.

In terms of community use, the PNE's rental buildings and site locations are used for a variety of community, religious and ethnic events throughout the year. In addition, the PNE subsidizes a community ice skating program in the Agrodome for minor hockey and figure skating. In 1997, the Board of Parks and Recreation commissioned a study on potential, future uses for the Forum, Garden Auditorium and Rollerland. One of the more promising suggestions was to renovate the Forum into a community centre to replace the aging Hastings Community Centre located at Hastings and Lillooet. However, any use of these buildings for community purposes would necessitate substantial renovations and upgrading. It was anticipated that the Agrodome would continue to operate as a community ice skating facility and the Livestock Building would be demolished.

Playland
Playland consists of 18 adult attractions and 14 Kids Place attractions as well as various amusement arcades and shooting galleries. All the rides are owned by the PNE with the exception of three that are under lease-to-purchase agreements.

· Revelation

· Hell's Gate
· Helevator

These leases all end by 2005. The PNE estimates the cost to buy out these leases, at the end of 2002, to be $4,131,508. If lease payments were continued beyond 2002, then further payments would diminish this cost in proportion to the amount of time remaining on the leases. If, however, Playland operations cease at the end of 2002, this cost would be offset by the net realizable value of all the rides, which the PNE estimates at $4,635,590.

APPENDIX C
Page 5 of 8

Playland and the Fair support each other. Playland receives, on average, 34.5% of its total annual ridership during the 17-day Fair. Closing Playland would have a negative impact on Fair attendance and revenues although the extent is difficult to predict. Consistent with many other fairs in North America, bringing in portable rides for the Fair period is a viable option, but they would not include the larger rides, which are a major draw for Playland.

Wooden Roller Coaster
The wooden roller coaster enjoys some community attachment. A study commissioned by the City indicates that it is in reasonable condition and could remain so with continuous repairs. However, the roller coaster is not a good candidate for relocation and is not a sufficient attraction, by itself, to continue in operation should Playland be closed.

Operating Climate

While the summary above covers the measurable parameters of the PNE's operations, it would be remiss not to comment on the impact of the operating climate on the PNE over the recent past. The past decade has been a period of uncertainty for the PNE. The PNE Executive spent a considerable effort pursuing a new amusement and exhibition park on a new site in Surrey. Meanwhile, the City developed the Hastings Park Restoration Plan and proceeded to implement its early phases, in anticipation of the PNE's relocation. Given the uncertainty over the timing of the relocation, the PNE operated under a series of short-term agreements. This operating climate had its consequences. The PNE had to continuously adapt to a shrinking area for the Fair as park restoration proceeded. In addition, the short term agreements prevented the PNE from entering into long term rental commitments and forced it to depreciate assets faster than would otherwise have been necessary, both of which were detrimental to the PNE's financial performance. Despite these challenges, the PNE continued to evolve. The PNE continued to modify it's attractions and programs, adding new rides in Playland, as well as developing new Fairtime shows such as Monster Motor Madness, Outrageous, Cirque Pop, and the award winning Fire in the Night.

The PNE Executive has developed a four-year business plan to enhance the attraction of the PNE and to make it pay its way. In the first year, 2002, the plan includes greater promotion of the PNE's offerings to the public, some reorganization to consolidate functions, and operational improvements to increase efficiency. The PNE's 2002 business plan and budget are attached, showing a budgeted net income of $1.1 million. Staff comments on the plan are included in this Summary.

APPENDIX C
Page 6 of 8

Staff Comments on the Economic Impact Study on the PNE

The City of Vancouver hired Pannell Kerr Forster Consulting Inc. to carry out an economic impact study of the PNE's operations on the local and provincial economies. The consultant used the Tourism Economic Assessment Model (TEAM) developed for Tourism Vancouver by the Canadian Tourism Institute, an affiliate of the Conference Board of Canada. The consultant relied upon data provided by the PNE for 2001.

The consultant concluded that the Fair, Playland and Year Round Operations (facility rentals) contribute a total of $115.2M (million) to the Gross Domestic Product (GDP) of the GVRD. This contains the equivalent of 3151 full time jobs drawing $80.8M in salaries and wages. The PNE contributed more than this to the overall Provincial economy. The PNE's economic impact generated $61.9 M in Federal, Provincial and municipal taxes (GVRD area). The following table outlines the PNE's economic contributions.

Economic Impact of the PNE on the Economies of the GVRD and the Province

 

GVRD

Province (includes GVRD)

Taxes*

 

GDP

Jobs

Wages

GDP

Jobs

Wages

  

Fair/Playland

$95.1M

2639

$65.3M

$114.6M

2940

$76.7M

$50.7M

Yr Round Ops

20.1M

512

15.5M

24.5M

577

18.0M

11.2M

Totals

$115.2M

3151

$80.8M

$139.1M

3517

$94.7M

$61.9M

The study shows that the PNE clearly has an economic impact on the GVRD and the Province. The consultant concluded that it was not possible to evaluate the specific impact of the PNE on the City's economy as there was insufficient data to support the analysis. Nevertheless, it can be inferred that the PNE also has a significant positive impact on Vancouver's economy.

The consultant also could not make conclusions about the economic impact that would still occur even if the Fair and Playland didn't exist. That is, whether residents and visitors currently attending the fair and other events hosted by the PNE would otherwise spend on other activities and attractions within the City and region. It is reasonable to assume however, that the Year-Round Operations, especially those in the Coliseum, would continue to create economic activity even if the Fair and Playland ceased operation.

APPENDIX C
Page 7 of 8

Staff Comments on the PNE's 2002 Business Plan

Summary of the Plan
The Plan opens with a promotion of the PNE's social and economic contributions to the City. The Plan then recognizes the PNE's total accumulated debt of ($3,600,000) as of December 31, 2000. This debt is attributed to a variety of negative impacts on financial performance such as expenditures for the planned relocation, the financial impact of short term tenure on bookings and asset depreciation, the shrinking footprint on the PNE due to park restoration, and reduced parking revenues from the racetrack. Over the four-year period - 1997 to 2000 - the PNE calculates that the total deficit of ($2,178,815) would have been a profit of $2,248,685, if the negative impacts were discounted. While not identified as a negative impact, the Plan does point out that the PNE contributes about $2,500,000 annually to the maintenance of buildings and restored park, costs that the City would otherwise have to pay.

Next, the Plan describes three operating scenarios for the PNE:

1) Profitability at Hastings Park without long term tenure

2) Growth with long term tenure in the existing space
3) Growth with long term tenure and increased space

Under Scenario 1, the Plan proposes a four-year undertaking, starting in 2002, to profitability and to pay off the accumulated deficit. This would be achieved through reductions in costs and improvements in operational efficiencies. Budget targets would be achieved through a combination of cost controls, staff commitment and accountability. Capital expenditures would be limited to necessities and those providing a short pay back period. Under this Scenario, the PNE would augment the promotion of its value and program variety to the public, increase merchandizing, and maximize the number of event days on the site.

Scenario 2 proposes nine opportunities for growth. These include event management and co-production, travelling shows such as the Cirque Pop, theme attractions for holidays such as Christmas and Halloween, rentals/sales of PNE-owned programs, and enhancements to attract more film production on site.

Scenario 3 proposes the development of a consumer and trade show venue. A study, commissioned by the PNE in 2001, recommended a 150,000 square foot facility.

APPENDIX C
Page 8 of 8

Staff Comments

· The Business Plan assumes that the PNE will remain at Hastings Park more or less as it is now. This puts the Business Plan in conflict with the Hastings Park Restoration Plan, which is based on the PNE relocating to some other site. In the Restoration Plan, the area currently occupied by Playland is scheduled for restoration to park over the 2003-2005 period. If the PNE, in some format, is to stay at Hastings Park, then the Restoration Plan will likely have to be revisited.

· Only Scenario 1 has specific financial targets. Scenarios 2 and 3, proposed as growth options, are outlined primarily as concepts. While the ideas proposed in Scenarios 2 and 3 have merit, further work would be required to determine their potential.

· None of the Scenarios in the Plan contemplate any relocation of the PNE within the park. Consequently, no funds have been identified for relocation. Given its current financial situation, the ability of the PNE to fund any relocation is questionable.

· The Plan does not address the estimated $5,000,000 worth of capital maintenance on the buildings that has been identified and will be required over the near future.

· The financial performance of the PNE between 1997 and 2001 resulted in a deficit in three of the five years and a net deficit over the period. While some negative factors, such as expenditures for relocation, are over which should help correct this situation there isn't a strong record of financial performance to back the PNE's projections of profitability by 2002 and retirement of the accumulated deficit by 2005.

APPENDIX D
Page 1 of 1

PNE Business Stream 2001 Contribution

Figure 1

csb020801revised.htm

 

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