SUPPORTS ITEM NO. 1 CS&B COMMITTEE AGENDA MARCH 28, 1996 ADMINISTRATIVE REPORT Date: March 20, 1996 TO: Standing Committee on City Services and Budgets FROM: General Manager of Corporate Services SUBJECT: Tourism Vancouver - 1996 Business Plan RECOMMENDATION A. THAT Council approve the portion of Tourism Vancouver's 1996 Business Plan funded from the 2% Hotel Tax in the amount of $6,809,629 ($6,360,000 projected and $449,629 carried forward). B. THAT Council approve a contract with Tourism Vancouver for publication and distribution of tourism-related material for 1996, in an amount not to exceed $600,000 before GST, subject to an agreement satisfactory to the Director of Legal Services. C. THAT Council approve the cost-sharing arrangement described in this report between the City and Tourism Vancouver in connection with the Asia Pacific Economic Cooperation summit (APEC) to be held in Vancouver in 1997, on the understanding that this arrangement and the $350,000 cost contribution ceiling will apply to the total of the hosting costs incurred by the City for the summit and not to a more restricted subset of those costs. COUNCIL POLICY City Council must approve the portion of the Business Plan of Tourism Vancouver which deals with 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. PURPOSE This report recommends approval of the portion of the 1996 Business Plan submitted by Tourism Vancouver dealing with the allocation of the 2% Hotel Tax and a fee for service contract for the publication and distribution of tourism-related material. Additionally, the report recommends a qualified approval of Tourism Vancouver's proposed cost-sharing arrangement with the City for the 1997 Asia Pacific Economic Cooperation (APEC) summit as described below. DISCUSSION In accordance with Council policy, Tourism Vancouver has submitted its 1996 Business Plan and its 1996 publication and distribution services contract proposal for Council consideration and approval. The Business Plan and publication contract proposal are attached as the Appendix 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 1996 budget indicates the following changes from 1995. 1995 1996 Percent Actual Planned Change Total Budget $7,947,829 $8,501,179 7.0% 2% Hotel Tax 5,725,000 6,360,000 11.1% 2% Hotel Tax Reserve 426,936 449,629 5.3% Other Revenues 1,795,893 1,691,550 - 5.8% The Association expects to realize a surplus of $1,015 for the 1995 business year. 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 1996 Business Plan on the 2% tax revenues to be collected during the 12 month period from October 1, 1995 through to September 30, 1996. This collection period treatment is consistent with the business plans presented in prior years. The following table shows the actual 2% Hotel Tax revenues as collected from October 1, 1994 to September 30, 1995 and compares those against the 1995 Business Plan. As indicated, the majority of the 2% Hotel Tax revenues have been taken up in the 1995 Business Plan, with the remaining funds ($449,629) carried forward to 1996. 1995 2% revenues collected $6,174,629 1994 reserve funds 426,936 Actual revenues available 6,601,565 1995 2% revenues budgeted 6,151,936 1995 2% funds available for 1996 449,629 Tourism Vancouver projects the 1996 2% Hotel Tax revenues to be $6,360,000. As noted above, these revenues have been applied to the 1996 Business Plan. PUBLICATION AND DISTRIBUTION CONTRACT The City 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. The provision of publication services through the 1995 contract was reviewed by the City's Economic Development Office 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 1995 contract is on file in the City Clerk's Office. The all- in contract amount approved by Council after GST was $618,000. With the recent closure of the City's Economic Development Office, the Director of Finance or his designate will continue to review the expenditures related to the publication contract for conformity to its terms and conditions before release of funds. Tourism Vancouver's 1996 contract renewal submission and analysis is presented in Schedule A of the Appendix. COST-SHARING ARRANGEMENT FOR 1997 APEC SUMMIT The City of Vancouver was chosen to be the host city for the upcoming Asia Pacific Economic Cooperation summit in November of 1997. The summit is expected to attract about 3,000 delegates, including foreign dignitaries and international media personnel. The summit agenda includes 3 to 4 days of meetings with senior officials, 2 to 3 days of meetings with Ministers and a one-day summit with Heads of Government.Staff have previously reported that the host City will have certain responsibilities which include security, hosting a civic reception, pageantry and coordination and regulatory assistance. Given the aforementioned responsibilities, we have estimated that the APEC summit could cost the City up to $700,000. Moreover, there are no direct revenues accruing back to the City to offset these costs. Staff have also suggested that the indirect effects of hosting the APEC summit could be significant in the area of image and increased world awareness of Vancouver as the Canadian Gateway to the Pacific Rim. Recognizing that this publicity would be invaluable in promoting Vancouver as a tourist destination, Council instructed staff to approach Tourism Vancouver to discuss a cost-sharing arrangement around the City's hosting costs. Tourism Vancouver, in consultation with its Executive, have proposed the following cost-sharing arrangement for the APEC summit: - that Tourism Vancouver will undertake to raise funds toward costs pertaining to security and related services for the APEC summit on a 50:50 cost-share basis with the City, to a maximum ceiling of $350,000; and, - that payment to the City will be in two instalments. The first instalment on December 1, 1996, in the amount of $150,000 and the balance to be paid not later than July 31, 1997. Staff have reviewed this proposal and find it reasonable provided the 50:50 cost-sharing arrangement and maximum contribution will apply to the total of the hosting costs incurred by the City for the APEC summit. CONCLUSION The 1996 Business Plan submitted by Tourism Vancouver is consistent with Council policy and past practice. I am therefore recommending approval of the 1996 Business Plan in the amount of $6,809,629 representing the portion of the plan covered by the 2% Hotel Tax. The 1996 contract for publication and distribution of promotional materials represents the same level of funding as approved by Council in 1995. Approval of the proposed publication contract is also recommended along with a qualified recommendation on the APEC cost-sharing arrangement. Representatives of Tourism Vancouver will be in attendance to speak to their 1996 Business Plan submission and to answer any questions Council may have in that regard. * * * * *