SUPPORTS ITEM NO. 2 CS&B AGENDA APRIL 10, 1997 ADMINISTRATIVE REPORT Date: April 4, 1997 C.C. File No. 6008 TO: Standing Committee on City Services and Budgets FROM: Director of Finance SUBJECT: Tourism Vancouver - 1997 Business Plan, Budget, and Publication and Distribution Contract. RECOMMENDATION A. THAT Council approve the Greater Vancouver Convention and Visitors Bureau s (Tourism Vancouver's) 1997 Business Plan in the amount of $7,950,000 being the portion funded by the 2% hotel tax; and, B. THAT Council approve a contract with Greater Vancouver Convention and Visitors Bureau (Tourism Vancouver) for publication and distribution of tourism-related material for 1997, in an amount not to exceed $400,000 before GST, as requested, subject to an agreement satisfactory to the Director of Legal Services. CONSIDERATION C. THAT Council direct Tourism Vancouver to fund at least 50% of the additional City costs associated with APEC, taken from the Hotel Tax portion of Tourism Vancouver's 1997 business plan. GENERAL MANAGER'S COMMENTS The General Manager of Corporate Services RECOMMENDS approval of A and B, and submits C for CONSIDERATION. COUNCIL POLICY City Council must approve the business plan of the Tourism Vancouver, which details the allocation of the 2% Hotel Tax. City Council has supported tourism promotion by way of grants to Tourism Vancouver up to 1990, and thereafter by way of a contract for the publication and distribution of promotional material. DISCUSSION In accordance with Council policy, Tourism Vancouver has submitted its 1997 Business Plan and 1997 Publication and Distribution Services Contract proposal for Council's consideration and approval. The Business Plan and Contract proposal are attached as Appendix I to this report. Council will note that the Business Plan contemplates the continued receipt and expenditure of the 2% Hotel Tax. The plan also anticipates municipal contract revenues in addition to the 2% tax. As in prior years, Tourism Vancouver will conduct its business activities for the year in accordance with the approved plan and budget. Additionally, the Association will file its annual audited financial statements with the City for review by the Director of Finance in the normal manner. An analysis of Tourism Vancouver's 1997 Budget indicates the following changes from 1996. 1996 1997 PERCENT ACTUAL PLANNED CHANGE Total Budget $9,450,327 11,810,000 25.0% 2% Hotel Tax $7,532,985 $7,950,000 5.5% Other Revenues $1,917,342 $3,860,000 101.3% Tourism Vancouver is projecting a surplus of $11,797 for the 1996 business year, and is budgeting for a $150,000 payment into a stability reserve. 2% HOTEL TAX In order to recognize the lead time between the collection of the 2% Hotel Tax and its receipt by the City and Tourism Vancouver, the Association has based its business plan on the 2% tax revenues to be collected during the 12 month period of October 1, 1996 through to September 30, 1997. This collection period treatment is consistent with business plans approved in the prior years. In the past two years, Council has approved Tourism Vancouver s request to increase their budget to take up any excess of actual 2% tax revenues over the original approved budget. Any Hotel Tax funds collected in excess of the revised budget would be placed in the Hotel Tax Reserve for application to the following year s business plan. The following table shows the actual 2% Hotel Tax revenues as collected from October, 1995 to September, 1996 and compares these against the 1996 Business Plan as revised and approved by Council on November 7, 1996. 1996 2% revenues as collected $7,532,985 1996 2% revenues as budgeted 6,809,629 Net Nov 96 Budget increase 732,356 1996 reserve for 1997 $ 0 Tourism Vancouver projects 2% Hotel Tax revenues to be $7,950,000 for 1997. As in the prior years, if actual 2% Hotel Tax revenues collected are in excess of the approved budget for 1997, Tourism Vancouver will submit a revised budget for approval that takes up the excess. PUBLICATION AND DISTRIBUTION CONTRACT In the past, the City has directly contributed to Tourism Vancouver's activities by way of grants until 1990, when a contract for publications was awarded in place of a grant. Provision of services through the 1996 contract was reviewed by the City's Purchasing Division during the year, and funds were released as Tourism Vancouver successfully met all of the terms and conditions of the contract. A copy of the 1996 contract is on file in the City Clerk's office. The cost to the City for the 1996 contract was $600,000 before GST and the 1997 request is for $400,000, before GST. Tourism Vancouver's 1997 Contract Renewal Submission and analysis is presented on Schedule A in Appendix I to this report. APEC Staff and Tourism Vancouver have continued discussions regarding APEC cost sharing. Tourism s position is that these costs should not be borne by Tourism Vancouver, and that their participation be limited to the existing agreement to fund 50% of City APEC costs to a maximum of $350,000, spread over the 1996 and 1997 business years. Although Council has resolved to limit City APEC expenditures to $700,000, there may be circumstances that result in additional, unavoidable costs to the City. If Council believes that there is an obligation on the part of Tourism Vancouver to help defray these costs, given that some of the major beneficiaries of these events are the Hotel and Hospitality industries, Council may wish to extend the cost sharing agreement to include any City APEC costs to due to any unexpected increases. This option has been put forward for Council CONSIDERATION. CONCLUSION The 1997 Business Plan as submitted by Tourism Vancouver is consistent with Council Policy and with past operations. Therefore, The Director of Finance recommends approval of the 1997 Tourism Vancouver Business Plan in the amount of $7,950,000, being the portion funded by the 2% Hotel Tax. The contract for publication and distribution, as proposed, reflects the reductions approved by Council on February 20, 1997. The Director of Finance recommends approval of the contract proposal as submitted in the amount of $400,000, before GST. Representatives of Tourism Vancouver will be in attendance to answer any questions on their business plan and contract proposal. * * * * *