SUPPORTS ITEM NO.  3 
                                                      CS&B COMMITTEE AGENDA
                                                      OCTOBER 19, 1995     


                              ADMINISTRATIVE REPORT


                                                     Date:  August 31, 1995


     TO:       Standing Committee on City Services and Budgets

     FROM:     Director of Civic Theatres, in consultation with the
               Director of Cultural Affairs, Manager of Real Estate
               Services, Manager of Facilities Development and
               Deputy Director of Finance

     SUBJECT:  Vancouver Opera Association - Proposal to Develop Portion of
               Queen   Elizabeth  Theatre  Plaza   and  Parkade   as  Opera
               Production Centre



     RECOMMENDATION

          A.   THAT Council withhold from development  an area on and under
               the  Queen Elizabeth Theatre Plaza for a period of two years
               to allow the Vancouver  Opera Association to further develop
               its plans for an Opera Production Centre.

          B.   THAT Council approve in  principle a non-registered lease of
               a volumetric parcel containing the proposed Opera Production
               Centre under the following major terms;

               1)   Rent:  $1.00 per year with no charge for property taxes
                    or amounts in  lieu of taxes.  (As this arrangement  is
                    considered  a   grant,  EIGHT  AFFIRMATIVE   VOTES  are
                    required.)

               2)   Term:  60 years.

               3)   The  City  has the  right  to terminate  the  lease for
                    redevelopment of the site  upon one year's notice, such
                    right of termination not to  be exercised for the first
                    30 years of the 60-year term.

               4)   Further  terms and conditions  to the  satisfac-tion of
                    the  Director of  Legal Services,  the Manager  of Real
                    Estate and the Director of Civic Theatres.

          C.   THAT residual density on the site be retained by the City.


          D.   THAT Council direct staff to report back outlining the terms
               of  the lease  as soon  as the  conditions outlined  in this
               report have  been  met  to  the  satisfaction  of  the  City
               Manager.


     CITY MANAGER'S COMMENTS

          The City Manager RECOMMENDS approval of A, B, C and D.


     COUNCIL POLICY

     In  April, 1990,  and again  in December,  1991, Council  approved the
     Cultural  Facilities and  Projects  Priorities  Report which  included
     reference to  civic  support of  rehearsal/production/  administration
     spaces,   including   specific  reference   to  the   Vancouver  Opera
     Association,  subject to  the presentation  of feasible  proposals for
     their realization.

     On November 17, 1993, Council approved Vancouver Arts Initiative (VAI)
     recommendations including direction to staff to review and report back
     on  "how  the  City  might  assist  arts  organizations  in  acquiring
     production, performance and/or administrative space  through a variety
     of mechanisms  including no-risk  loans, bonusing, long-term  lease of
     City-owned  properties at  nominal rents,  and/or funding  through the
     Capital Grants program."

     With respect to "purpose-built" facilities on City property, Council's
     practice  has been  to provide  the site  with no  charge for  rent or
     amounts  in lieu  of  taxes.   These  arrangements are  considered  as
     grants.


     SUMMARY

     This report provides staff  evaluation of a proposal by  the Vancouver
     Opera  Association (VOA)  to lease  a portion  of the  Queen Elizabeth
     Theatre  Plaza, including  the present  QET Restaurant location  and a
     significant  area below the  Plaza,  and  to construct on  that site a
     building that would house the VOA's operations, an expanded restaurant
     and rental space for other arts organizations.

     The VOA is requesting;

     (a)  a 99-year lease at $1.00 per year;

     (b)  transfer of residual density rights on the site to VOA;



     (c)  exemption from property taxes; and

     (d)  assistance in  some form  (a share  of parking  revenues)with the
          cost of replacing parking spaces in the QET parkade that would be
          lost due to this development.


     Staff are recommending  approval in  principle of a  60-year lease  at
     $1.00 per year  and property tax exemption but do not support transfer
     of  density  rights nor  sharing the  cost  of replacing  lost parking
     stalls.  Staff are recommending additional conditions that include the
     City's right to terminate  the lease after 30 years  for redevelopment
     of the site and a  requirement for the VOA to demonstrate  its ability
     to independently fund both capital and operating costs.

     The  VOA are  including provision  for community  access to  the large
     rehearsal hall-cum-performance  space and  rental offices.   Terms for
     these uses will  also need to be developed to  the satisfaction of the
     City.


     BACKGROUND

     Civic Theatres  Department conducted  a feasibility study  for capital
     improvements of the three theatres  at the end of which,  in September
     1994,  a workshop was presented to Council.   The results of the study
     indicated  possibilities for  adding to  the QET/Playhouse  complex to
     provide  administrative and  production space for  resident performing

     arts  companies.   Potential  spaces  included an  addition  along the
     Cambie Street facade extending  the full length of the  complex, three
     or more  stories high;  the potential to  double the footprint  of the
     existing QET Restaurant structure  and add two floors of  rental space
     on top; and construction of a  new large rehearsal hall below grade on
     the Dunsmuir Street side of the complex.  These proposed upgrades were
     included in a preliminary development permit application approved with
     conditions on March 13, 1995.

     During  the   same  time  period,  the   Vancouver  Opera  Association
     commissioned a study of its needs for a permanent home.   A design was
     prepared  for a stand-alone  building located on  the former Greyhound
     Bus  Depot site  on  Cambie Street  and  presented to  City  staff for
     consideration.   Staff  recommended that it would be  inappropriate to
     encumber  that  site prior  to a  major  development proposal  for the
     entire site.  As the time frame  for such a development is beyond  the
     objectives of the VOA,  staff suggested they reconsider the  QET Plaza
     location.





     DISCUSSION

     Over  the  past  several years  the  Vancouver  Opera  Association has
     enjoyed considerable success resulting in an increase in the number of
     productions  each season to five operas  and an increase in the number
     of performances of each  opera.  One  consequence of this success  has
     been the retirement of their operating deficit at the end of the 1994-
     95 season.

     During the same period the VOA has also had to lease and move into new
     administrative  and production facilities.  The term of that lease has
     another three years to run at which time they will potentially have to
     move again.  Aside  from the unproductive expense of  moving, suitable
     space  for a performing arts  company is extremely  difficult to find.
     "Suitable space" means that  all of the Opera operations should  be in
     the same  building and that  building should  be part of,  or in  very
     close proximity to,  the theatre in which they perform.


     The Proposed Design

     The  VOA have retained an  architect to develop  conceptual designs to
     accommodate these needs, incorporating  them with  other needs  of the
     site and complementary community uses as the basis for their proposal.
     Some  work  has been  done with  Civic  Theatres, Social  Planning and
     Planning staff to accommodate various requirements of the site.

     In addition to the spaces required specifically  for opera production,
     the  VOA proposal provides for  additional office space  for rental at
     affordable rates  to other local  performing arts organizations  for a
     period of ten years.  It is foresee-able that the VOA might eventually
     need these spaces for expansion.  If Civic Theatres is  able to expand
     the complex  on the  Cambie  Street side  during that  time, then  the
     companies accommodated in the  VOA building would be able  to relocate
     within the complex.

     A particularly interesting part of the proposal is the large rehearsal
     hall.  At the dimensions needed for opera production, such  a room can
     also be used  as a studio or "Black Box Theatre"  of up to 250 seats. 
     The  VOA proposal includes making time available for community uses at
     reasonable rates, outside of the time dedicated to Opera use.

     The  proposed development would take up about one-half of the existing

     250  parking spaces  in the QET  Parkade.   The proposal  provides for
     excavating and constructing a new, third level of  underground parking
     so there would be no loss of parking capacity.


     The proposal also includes a restaurant space, double the footprint of
     the present one.   This is consistent with Civic  Theatres' programme.
     At  the larger size, the  restaurant becomes viable  as a full-service
     commercial operation, depending on market conditions at the time.

     The total  development proposed including the  expanded restaurant but
     excluding  parking, is 77,710 square feet.  Including all parking (old
     and new), it would be a total of 123,670 square feet.

     The Director  of  Civic Theatres  views  the proposed  development  as
     complementary to the  purposes of Civic Theatres  and a "best use"  of
     the site in that it provides an on-site home for a major resident user
     of the QET with long-term security,  similar to the Vancouver Symphony
     Orchestra's residency in the Orpheum;  it accommodates other community
     arts uses;   it  supports the  development of  a cultural precinct  or
     entertainment district; and in total it supports the long range vision
     for the QET/Playhouse complex to become a true performing arts centre.

     The  Planning Department have  reviewed the  design at  various stages
     and,  while all  of the usual  approvals must  still be  secured,  the
     overall view is that it is possible to proceed with the proposal.


     Project Funding

     The project will require a significant fund raising effort on the part
     of the VOA.   In  support  of that fund  raising effort, the Board  of
     Directors of the VOA are  making several requests of Council, but  are
     not requesting a capital grant from the City.  The  requests contained
     in  their letter,  Appendix  A,  have  been  somewhat  modified  after
     discussions with City staff.

     In summary, the requests are:

     1.   A volumetric parcel  lease to the Vancouver Opera Association for
          99 years at $1.00 per year.

     2.   Transfer of residual density  rights for the portion of  the site
          leased to the VOA.

     3.   Exemption from property taxes for the life of the lease.

     4.   A share of revenue from the parking operation in compensation for
          the capital  costs associated  with replacing the  parking stalls
          that would otherwise be eliminated by this development.


     Staff Position

     1.   Staff  support a  non-registered volumetric  parcel lease  for 60
          years with  option to renew at  $1.00 per year, for  an area that
          includes  all   of  the  proposed  VOA   development  except  the
          restaurant and parking.

          Staff are recommending  that, in the event  the City may wish  to
          redevelop the site at some time in the future, a lease be subject
          to termination upon one year's notice, such termination not to be
          exercised during the first 30 years of the 60-year term.

     2.   The VOA  will  be  required  to construct  the  restaurant  space
          including    restaurant    infrastructure   (services,    support

          facilities, etc.)  but not including  leasehold improve-ments, to
          the satisfaction of the Manager of Facilities Development.

     3.   The  VOA will be required to construct, at a minimum, one-for-one
          replacement of all parking stalls removed for this project to the
          satisfaction of the Manager of Facilities Development.

          The Development  Permit Board will  determine whether  additional
          parking  will be  required because  of this  development.   Staff
          believe that the VOA must comply with the parking requirements at
          no cost  to the City and  that no revenues should  be diverted to
          the  benefit  of the  VOA.   The  net  revenues from  the present
          parking  operation, (up  to $300,000  annually), accrue  to Civic
          Theatres  Capital  Reserve.   Reducing  this  income simply  puts
          pressure  on Civic Theatres to replace that income with other and
          potentially  more  controversial  kinds   of  income  to  support
          upgrades to the theatres.

     4.   Staff do not support the  transfer of density rights to  the VOA.
          This  kind  of transfer  of density  is  not consistent  with the
          established  principles  in  support  of  heritage  preservation.
          Staff believe that the  available density on the QET  site should
          be retained for eventual use in support of Civic Theatres capital
          improvements.

     5.   Staff support the requested  exemption from property tax for  the
          life of the lease. 

     Conditions

     Staff recommend that, prior to entering into a long term  lease, a set
     of conditions  concerning project  funding and facility  operations be
     met to the satisfaction of the City Manager as follows:

     1.   The  VOA  must  demonstrate that  the  funding  has  been secured
          sufficient for the  entire capital cost of  the project including
          finishing and furnishing  of the large  rehearsal hall to  public
          performance standards.

     2.   The  VOA  must demonstrate  its  on-going  ability  to  fund  the
          operation  of the  facility without  additional civic  support or
          operating debt.

     3.   Agreement  must be reached  on terms that  will form  part of the
          lease  providing  for   community  access  for   non-profit  arts
          organizations to the rehearsal hall/performance spaces and rental
          offices at rates based on recovery of operating costs.


     FINANCIAL IMPLICATIONS

     The VOA is not requesting a capital grant from the City at this time.

     During construction,  the QET garage  and restaurant would  be closed.
     The  foregone revenue to  Civic Theatres could be  as much as $300,000
     annually,  impacting the  Capital Reserve  which provides  funding for
     Civic  Theatres upgrades.  It  is possible that  construction could be
     staged in such a way as to re-open the garage before completion of the
     whole project  and reduce the loss.   This matter of  foregone revenue
     will  be addressed  more accurately  when staff  report back  on lease
     terms.


     SOCIAL IMPLICATIONS

     The development could be seen to represent a  lost opportunity for the

     City  to develop  the  property and  retain  all revenues  that  might
     result.   Civic Theatres and Cultural Affairs staff view this proposed
     development  as a "best  use" of the  site in view  of the significant
     social  and  cultural  benefits  which include;  providing  long  term
     security  for the  Vancouver Opera  Association;  providing additional
     accommodation  and  performance  facilities  for  the performing  arts
     community;    and supporting  a  valuable addition  to  the developing
     downtown cultural and entertainment district.




     CONCLUSION

     Assuming  the conditions outlined in  this report can  be satisfied by
     the Vancouver  Opera Association, staff view  the proposed development
     of an Opera Production Centre on and under the Queen Elizabeth Theatre
     Plaza as being  mutually supportive  of the VOA,  Civic Theatres,  the
     development of  the downtown  cultural/entertainment district and  the
     City's cultural facilities priorities.

     A  copy  of  this  report  has  been  sent   to  the  Vancouver  Opera
     Association.




                            *     *     *     *     *