SUPPORTS ITEM NO. 5
CS&B COMMITTEE AGENDA
JUNE 1, 1995
ADMINISTRATIVE REPORT
Date: May 24, 1995
TO: Standing Committee on City Services and Budgets
FROM: Director of Finance
SUBJECT: Pacific Space Centre Society -
Canada-BC Infrastructure Project
RECOMMENDATION
A. THAT Council approve a repayable grant of up to $1.2
million to the Pacific Space Centre Society to bridge
finance the Canada-BC Infrastructure Project, with the
source of funds to be Revenue Surplus. The grant is to
be repaid with the proceeds from the Canada-BC
Infrastructure Program.
FURTHER THAT the Director of Finance be authorized to
disburse the funds to the Pacific Space Centre Society
generally as discussed in the report.
B. THAT the City be responsible for 50% of the cost of the
necessary upgrades and modifications to the building, as
a direct result of the Canada-BC Infrastructure Project,
up to a maximum of $100,000; source of funds to be
Capital Reserve.
FURTHER THAT any cost in excess of the City's share
would be the responsibility of the Pacific Space Centre
Society.
CONSIDERATION
The Director of Finance submits a choice between C or D for
consideration, noting that it is normal policy to charge
interest on loans for internal projects financed from
Reserves or Special Funds.
C. THAT Council forgive the interest loss to the City,
estimated to be $28,000, during the term of the bridge
financing of the Pacific Space Centre Society's Canada-
BC Infrastructure Project.
OR
D. THAT Council charge interest on the repayable grant to
the Pacific Space Centre Society, estimated to be
$28,000 during the term of the bridge financing.
GENERAL MANAGER'S COMMENTS
The General Manager of Corporate Services RECOMMENDS A and B
and submits a choice between C or D for CONSIDERATION,
noting that this project will likely generate additional
building maintenance costs which may impact the City's
operating budget in future years. Approval of A and C, both
of which are grants, requires eight affirmative votes.
CITY MANAGER'S COMMENTS
The Federal-Provincial Infrastructure Program requires that
funds be expended prior to payment of infrastructure grants.
During the evaluation of infrastructure grants, the Province
expressed concern about the Planetarium's capability to
finance the infrastructure portion of the grant. In order
to provide the Province with some comfort in this regard, I
agreed to recommend to Council that the City provide bridge
financing for the infrastructure component, where repayment
is assured.
The Planetarium has not requested capital funding from the
City. Further, they have agreed to bear 50% of the cost of
any renovations to the Planetarium-Museum complex as a
result of their changes. (These adjustments relate to areas
where the building does not meet current code.) Under these
circum-stances, their request for an interest free loan to
cover the period between expenditure of funds and recovery
from the infrastructure program seems reasonable.
Accordingly, the City Manager RECOMMENDS approval of A, B
and C.
COUNCIL POLICY
Approval of grants requires eight affirmative votes.
BACKGROUND
City Council, on September 13, 1994, approved a report from the
City Engineer endorsing the application by the Pacific Space
Centre Society to the Canada-BC Infrastructure Program for 'soft
infra-structure' capital project funding. The project involves
construc-tion of a 27,000 square feet education, tourism and
entertainment facility, within the existing city-owned structure,
to provide a showcase for some of B.C.'s advance technology in
space exploration and astronomy.
DISCUSSION
On February 1, 1995, the Pacific Space Centre Society was
notified by the Canada-BC Infrastructure Program that $5,706,158,
representing 2/3 of the cost of the project, had been approved.
The remaining 1/3 of the cost of the project, $2,853,079, will be
raised by the Society through fundraising, donations and
corporate sponsorship. At this time, the Society has $1.1
million in confirmed donation funds which will be received over a
three year period. Plans are being finalized to raise the
remaining $1.75 million. The Society has not requested the City
to provide any capital funds towards the project at this time.
The project will be managed by the Society and the project team
will include staff from Facilities Development, supported by
other City staff as required. To provide control over the
project expenditures, the Pacific Space Centre Society Board, on
March 27, 1995, passed the following motion:
Expenditure commitments shall not be made and/or bridge
financing used until a community donation or commitment
has been received equal to 1/3 of the contemplated
expenses and also provided that 2/3 of the contemplated
expenses shall remain uncommitted in the available
Infrastructure Work funds.
A preliminary cash flow analysis has been prepared based on the
information provided by the Society. The analysis provides an
overview of the financial issues facing the Society and is very
conservative. It will be refined when the Master Plan is
finalized and approved, then updated on a regular basis during
the life of the project. The analysis indicates that outside
bridge financing is needed to keep the project afloat, due to the
timing differences between expenditures being incurred and
proceeds being available from the Canada-BC Infrastructure
Program.
Consequently, the Society has submitted a request to the City
seeking the necessary bridge financing on infrastructure funds,
without interest, during the term of the project.
The Director of Finance proposes that the required bridge
financing to the Pacific Space Centre Society could be provided
in the form of a repayable grant, for up to a maximum amount of
$1.2 million. This will allow for the anticipated project
expenditure/revenue pattern as detailed in the preliminary cash
flow analysis. The source of funds for the repayable grant would
be Revenue Surplus, to be repaid from the proceeds of Canada-BC
Infrastructure Program funds. The interest cost of this
repayable grant is estimated to be $28,000. It should be noted,
however, that with the limited information available at this
time, this estimate may be on the high side.
Once the Master Plan is finalized and approved, the cash flow
analysis can be refined. Steps will then be taken to adjust the
timing and amount of the cash advances to the Society to minimize
the interest cost to the City.
Other Issues
Based on the project plan provided by the Pacific Space Centre
Society at this time, the project has triggered some basic
service improvement and safety issues that should be addressed
before the Canada-BC Infrastructure Project is to proceed. Staff
from Facilities Development Division is presently working with
the Society's project staff as well as other City staff to
finalize the scope of the work. The preliminary estimate of the
cost is $200,000. The Director of Finance believes the City
should share the cost of these improvements and is recommending
that the City will fund 50% of the cost of the improvement, up to
$100,000, with the Pacific Space Centre Society responsible for
the remaining portion of the cost. The source of funds for the
project is Capital Reserve.
The initial review by the Manager of Building Management
indicates that there will be an increase in building maintenance
cost as well. Presently, the Pacific Space Centre Society is
meeting with City staff on the terms of a new operating
agreement/lease, including the issue of the ownership of the
assets. I therefore recommend that all the financing and policy
issues around this new operating agreement, together with the
terms and conditions of the new agreement, be reported to Council
later this month for consideration and approval as a package.
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