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. * * * * *