ADMINISTRATIVE REPORT
Date: September 25, 1995
TO: Vancouver City Council
FROM: General Manager, Corporate Services
SUBJECT: Proposed Agreement With Pacific Racing Association -
PNE Parking Rate Reduction
RECOMMENDATION
THAT Council approve the proposal put forward by the Pacific Racing
Association in 1994, as detailed in this report, which will allow
reduced parking prices for Hastings Park Race Track patrons for the
1994, 1995 and 1996 racing seasons, while at the same time maintain
City race track and PNE race track parking revenues at a level no
less than what the City and the PNE would have otherwise received
based on 1993 revenues projected into 1994, 1995 and 1996, subject
to a contract or lease amendment satisfactory to the Director of
Legal Services.
GENERAL MANAGER'S COMMENTS
The General Manager of Corporate Services supports the proposal
from the Pacific Racing Association (PRA), as it effectively deals
with the problem of high parking rates for race track patrons,
while at the same time protecting the City and the PNE from lost
revenues. This agreement only applies to those years for which the
PNE controls parking at Hastings Park. Due to staff error, this
report is late, and therefore the proposed agreement should be
applied retroactively to the beginning of the 1994 racing season.
COUNCIL POLICY
On January 10, 1994 Council approved a lease with the PRA, and also
resolved:
THAT Council accept a release from the PNE of its remaining
leasehold rights to the land to be leased to the Pacific Racing
Association in return for the PNE receiving 38% of the City's
revenue from racing in 1994 and maintaining control of the parking
contained within the released area through the end of the 1994
racing season or receiving equitable compensation for any parking
lost before that time.Also, within the report, it is noted that
parking rates are to be fair and reasonable. This was reflected in
Clause 12 of the lease between the City and the PRA which states:
"The parties agree to review the rates charged for parking at the
outset of the Term and from time to time thereafter to ensure that
parking charges are reasonable."
PURPOSE
The purpose of this report is to address the issue of providing race
track parking at reasonable rates in accordance with the intent of the
lease with the PRA. The report seeks Council approval to enter into an
agreement with the PRA to help reimburse the PNE for reduced race track
parking revenues resulting from lowered parking rates for race track
patrons. Under the proposed agreement, the City would be obligated to
share costs only if actual 1994, 1995 and 1996 City race track revenues
exceed projected 1994, 1995 and 1996 revenues, based on 1993 results.
DISCUSSION
In 1993, the status of Hastings Park, the PNE, and the race track was in
some turmoil, as the Province, the PNE, the B.C. Jockey Club, the PRA,
and the City were establishing new relationships. Council received a
report on the status of the Race Track on November 30, 1993, and
resolved:
THAT the Director of Legal Services enter into a lease with the
Pacific Racing Association for Exhibition Park Race Track; the
lease to be similar to the lease with the B.C. Jockey Club and to
be for a five-year period with a twenty-year option, subject to the
lease including a capital expenditure program with performance
targets to be approved by Council and with the intent that the
footprint of the racetrack be kept as small as possible.
During lease negotiations with the PRA, the issue of parking rates
charged by the PNE for race track customers was raised. The PRA felt
that the rates were much too high, and would hamper their efforts to
increase patronage. However, because parking is controlled by the PNE
under their agreement with the City, the City cannot directly deal with
parking rates through the PRA lease. Because of this, language was
built into the PRA lease (see policy above) that provides the PRA with
some protection against arbitrarily high rates for parking that could
adversely impact potential patronage.
City staff were generally in agreement with the PRA's assessment of the
high parking rates and the effect on patronage, and stated that the City
would consider any proposal to reduce rates, so long as City revenues
were protected. However, to reduce the rates to acompetitive level, the
PRA would have to come to an agreement with the PNE to charge a lower
rate. The PNE is in no position to forego revenues from any source, and
thus would be willing to reduce the rates only if they are compensated
for any loss of revenue. The PRA felt that the effort to promote the
track and increase patronage, combined with lower parking rates, would
generate additional revenues to the City over and above what would
otherwise be achieved. Furthermore, the PNE could be compensated out of
these additional revenues and still leave the City and the PRA better
off. Therefore, to overcome the PNE's revenue issue, the PRA put
forward a proposal that would allow for lower rates by compensating the
PNE for lost revenue.
The PRA proposal would see the PNE discount parking for race track
patrons, with the PRA paying to the PNE the difference between the
discounted revenues and the revenue that would otherwise have been
received based on 1993 results projected to the subsequent years. The
PRA also proposed that the City then reimburse the PRA for this amount,
but only up to the amount that the 1994, 1995 and 1996 City revenues
exceed the amount that would otherwise have been realized based on 1993
results projected into the subsequent years. Both the PNE and the City
did not wish to reduce revenues below the 1993 base-line level.
However, staff agreed that if the PRA proposal resulted in increased
revenues, the City stands to gain by agreeing to this arrangement, as
the City directly benefits from increased attendance by sharing race
track revenues.
Staff believe that this arrangement benefits all parties in that base-
line revenues are protected, and the PRA's marketing strategy is made
more effective. The City would only contribute to the parking revenue
shortfall if City revenues exceed projections based on 1993 results, and
therefore, will be no worse off than if no deal was made. See Appendix
I for a detailed description of the proposal.
FINANCIAL IMPACTS
This proposal was to have been presented to Council in 1994.
Unfortunately through staff error, the proposal was not brought before
Council when it should have been, as it was lost in the turmoil of
reorganization and the PNE issues in general. However, at the same time,
both the PRA and the PNE assumed that Council had approved this
proposal, and made arrangements to reduce race track parking rates in
accordance with the PRA proposal. As a result, the PNE provided reduced
parking rates in 1994 and is currently providing reduced rates, and has
billed the PRA for the 1994 parking revenue shortfall (see APPENDIX
III). The City is under no obligation to cover the parking revenue
shortfall shown in the PNE invoice to the PRA as there is no formal
agreement in place with the City, nor has Council approved any such
arrangement.The results are now in for 1994, with reduced parking rates
in place. Appendix II shows baseline calculations and the net revenue
gain to the City. The net revenue gain to the City in 1994 would be
$41,659 after offsetting the parking revenue shortfall as per the
proposed agreement. The 1994 results show that the PRA have
successfully increased revenues, which is the result of a marketing mix
that included the reduced parking rates. Therefore, the City has
already benefitted from the reduced parking rate arrangements between
the PRA and the PNE.
CONCLUSION
Consistent with the policy direction toward providing reasonable race
track parking rates noted in this report, the PRA has put forward a
proposal that is supported by all parties. Staff believe that the PRA
proposal is a fair and reasonable way to reduce the parking rates for
the race track, with all parties having adequate protection against
revenue loss. Therefore, staff recommend that the agreement proposed in
this report be approved.
* * * * *
APPENDIX I
Proposal to Provide Race Track Parking at Reduced Rates
This is to document the City's understanding of the agreement reached
concerning the pricing of parking at the PNE during the 1994, 1995 and 1996
racing season for which the PNE controls the price of parking.
The Pacific Racing Association (PRA) wishes to encourage racing attendance and
wagering by discounting the price of parking for racecourse patrons. The City
and the PNE are agreeable to this, provided that the PNE is guaranteed minimum
parking revenue from racing comparable to that which it would have received
were 1993 policies on parking pricing applied to the 1994 and subsequent
seasons, and provided that the parking arrangement does not diminish the
City's rental revenue below that which it would have received were the
situation unchanged from 1993.
The expectation for minimum parking revenue is calculated as follows:
pm=(p93/d93) x d9x
where:
pm= guaranteed minimum parking revenue for the PNE
p93= parking revenue received by the PNE as the result of racing in
1993
d93= the number of racing days in 1993
d9x= the number of racing days in 1994,1995, and 1996 respectively
We agreed to the PNE's calculation of p93, which is $611,409.
The PNE will calculate its actual 1994, 1995 and 1996 parking revenues from
racing (p9x) using the same assumptions it applied to calculate 1993 revenues,
and the PRA will pay to the PNE any positive sum calculated by subtracting p9x
from pm.
As the City may share in wagering and concession revenue resulting from
increased track attendance, the City agrees to share in providing parking
compensation (if any) to the PNE to the extent that the City's rent revenue
exceeds that which it might have expected to receive were the 1993 regimen to
apply to 1994. The City's minimum rent revenue expectation, from which
parking compensation will not be payable, is calculated as follows:
rm=(r93/d93) x d9x
where:
r m = the minimum rent revenue which the City will receive
before it will contribute to any PNE parking guarantee
r 93 = the rent revenue received from wagering and concessions
by the PNE in 1993
d 93 = the number of racing days in 1993
d 9x = the number of racing days in 1994, 1995, and 1996
respectively
The PNE's calculation of r93 which the City accepted, is $1,399,664.
Should the actual 1994, 1995 or 1996 rent payable to the City (r9x) exceed rm,
then the PRA may deduct any parking compensation payments to the PNE from the
rent payable to the City up to, but not exceeding, an amount equal to (r9x -
rm). Any incremental rental above rm which remains after the deduction of the
parking compensation shall be fully payable to the City. The PRA shall be
solely responsible for any amount of parking compensation to the PNE which
exceeds r9x-rm.
Subject to the above, the PRA and PNE are free to implement any system of
parking pricing and parking management to which they both agree, with the
assumption that this system will be designed to maximize revenue from wagering
the concessions and therefore maximize r9x.
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