Agenda Index City of Vancouver

ADMINISTRATIVE REPORT

RECOMMENDATIONS

COUNCIL POLICY

Street Activity permit fees are reviewed periodically to comply with Council policy that: "fees are recovering the full cost of service or are equivalent to competitive charges where the fee is of a market nature."

PURPOSE

This report reviews fees and fee structures for three Street Activity programs, Sidewalk Cafes, Produce and Flower Displays and Street Vending and recommends changes where appropriate.

SUMMARY

Permit fees for Sidewalk Cafes, Street Vending and Produce Displays have not been increased for several years. This report recommends increases (shown in Appendix I) because of: inflation, increased administration costs and comparison to private property lease rates.

Also recommended are some housekeeping issues such as: changing the payment schedule for Sidewalk Cafes from 3 terms per year to 2 terms per year, changing the fee structure for Produce Displays from a flat rate to a fee per square foot and increasing the renewal deposit for Street Vending.

A draft copy of this report was sent to the Restaurant Association and Street Vending representatives for discussion purposes. Comments from the Vending community were incorporated into the final report and no response was received from the Restaurant Assoc.

BACKGROUND

Permits are required for most street activities. The various programs are administered by Engineering Services through the Street and Traffic or Street Vending By-laws or Permits and Licenses through the Licensing or Vehicles for Hire By-Laws.

The three programs being reviewed in this report were established years ago to deal with increased demand for street use and were approved as a method of revenue generation and to add life to the streets.

This report deals with fee increases and program changes for Sidewalk Cafes, Street Vending and Produce Displays, which have not been reviewed for 5 to 10 years.

DISCUSSION

In setting permit fees for these programs, a number of criteria are used to evaluate and determine the appropriateness of fees, including:

Existing (and proposed) fees for all street programs are shown in Appendix I, administration costs in Appendix II and other city's fees in Appendix III.

Administration Costs

The administration cost for all 12 street activity programs is approximately $480,000 per year, the 1997 total revenue was approximately $519,000 and the projected annual revenue with the proposed fee increases is approximately $580,000. The current permit fees are, on average, adequate to cover existing administration costs. While administration costs do not currently justify a fee increase, other factors were considered and are discussed below.

Market Lease Rates

Lease rates for commercial storefront locations throughout the city vary considerably. As the use of street space is somewhat seasonal and weather dependant it is appropriate that the rates for street space be lower than those for private indoor space. Commercial storefrontlease rates downtown range from $15.00 to $125.00 per square foot per year with an approximate average of $70.00 per square foot per year and from $20.00 to $60.00 with an average of $40.00 per square foot per year outside of the Downtown.

The rates for street space in the various street activity programs on a square foot per year basis, range from 5 to 45% of average market rates and are shown below.

Comparison to Other Street Activity Programs

The rates charged for various street activity programs converted to a per-sq.-ft. basis, as shown in this table are priced well below the lease rates for private property.

Inflation

The Consumer Price Index (CPI) has risen about 10% since 1992 (which was roughly the time of the last fee increases in the programs for which this report recommends an increase) and, therefore, accounts for approximately 10% of the recommended increase.

Other Cities

A number of other cities were contacted and their fees for various street permits are shown in Appendix III. The fees charged by other cities vary considerably, due partly to climate conditions and market property values. Vancouver's permit fees are slightly higher for sidewalk cafes and street vendors and lower for produce displays. Fees charged by other cities are supplied for information and comparison purposes only and were not used as a factor in determining rate proposals.

SIDEWALK CAFES (LARGE)

Definition: "Large" sidewalk cafes may have more than 6 seats, must have a demarcation between seating area and pedestrians [railing, planters, etc.], may apply for a liquor license and are generally geared towards full service restaurants.

Permit fees for the large sidewalk cafe program are currently based on the location within the City, the square footage occupied and the number of 4 month terms the cafe operates during the year.

Term Structure

Most restaurants (over 95%) choose to operate for two or more terms. Those who do not pay for the winter term are permitted to operate a small cafe (maximum 3 tables and 6 chairs) during that time at no additional charge. Very few have opted to minimize the permit fee by using only the summer term. Some of these restaurants miss the opportunity to operate during the spring, while others put their cafes out before July 1st and hope it is not noticed by City Inspectors. Many restaurants feel that a six month operating term would suit them better, as four months is not long enough but eight months is too long, and they do not wish to pay for unused time.

The three term structure is administratively onerous as it requires three separate billings per year and field checks of every restaurant before and after the start of each term to determine which cafes are open and whether they have paid for the term. In addition, late payment collection must be done three times each year.

Therefore, staff recommend reducing the number of terms to two per year as follows:

Summer April 1 to September 30
Winter October 1 to March 31.

This would also free up some staff resources during the busy summer season when all Street Activity programs are the busiest.

Fees
Current fees for large sidewalk cafes are as follows:

Downtown: $2.50 per sq. ft. per 4 month term = $7.50 per yr. + GST
West of Main Street: $2.00 per sq. ft. per 4 month term = $6.00 per yr. + GST
East of Main Street: $1.50 per sq. ft. per 4 month term = $4.50 per yr. + GST
Minimum Annual Fee $200.00 + GST (equal to the small sidewalk cafe fee).

Fees for sidewalk cafes were last reviewed in 1994. Since that time the demand for sidewalk cafes has increased dramatically as well as the rate of return to the operator due, in part, to the smoking by-law.

Private property lease rates and restaurant profit margins vary considerably from neighbourhood to neighbourhood and it is no longer possible to make a blanket distinction between East and West of Main Street. For example: Commercial Drive is home to many thriving restaurants while some businesses in Marpole and South Dunbar appear to be struggling. The constantly changing trends in the restaurant trade make it difficult to set rates based on the economic viability of a particular neighbourhood.

In view of the market lease rates for private property, the high demand for sidewalk space and the rate of return to the operator, staff recommend changing the fees and the fee structure as follows:

Downtown: $4.30 per sq. ft. per 6 month term = $8.60 per yr. + GST
Outside Downtown: $3.00 per sq. ft. per 6 month term = $6.00 per yr. + GST
Minimum Annual Fee $250.00 (equal to proposed small cafe fee)

Currently, owners who choose not to operate a large cafe during the winter term, are permitted to operate a small cafe (maximum 3 table and 6 chairs) at no additional charge. No change to this practice is recommended.

Application Fee

Currently, new applicants to the Large Sidewalk Cafe program are required to pay a $100.00 application fee which has been applied to the first term fee when the application is approved. There is a considerable amount of work involved in processing a new application. Staff co-ordinate approvals with other Departments (Health, Permits and Licenses, Fire, Police, Planning , etc.), arrange for any structural changes which may be required to accommodate the outdoor seating (such as installing concrete filler walks or tree surrounds), assist the applicant with amendments to proposed designs in order to meet City guidelines and arrange for the execution of a Legal Agreement between the City and the Applicant.

Therefore, staff recommend that the application fee be used to help cover administration costs and not be applied to the permit fee. This is in keeping with the practice of other cities.

SIDEWALK CAFES (SMALL)

Definition: "Small" sidewalk cafes are limited to 3 tables and 6 chairs, may not install railings or other furniture and may not serve liquor.

Most "small" sidewalk cafes use a similar amount of space (approximately 45 square feet) therefore, a flat rate fee for this program is appropriate.

The current fee for small sidewalk cafes is $214.00 per year including GST (approximately $4.75 per sq. ft.) and has not been increased since the inception of the program in 1994. There has been a steep rise in demand for small sidewalk cafe permits and staff believe the rate of return to the operator has increased since the implementation of the anti-smoking by-law.

Accordingly, increasing the permit fee to $250.00 per year including GST would bring the rate to approximately $5.20 per sq. ft. plus GST per year which is in keeping with the fees recommended for large cafes.

STREET VENDING

Historically, street vending fees have been based primarily on cost recovery, dating back to the time when vending locations were filled on a first come, first served basis and many locations remained unused through lack of demand. Demand for street vending locations has continued to increase dramatically since fees were last raised in 1994.

The program is seen by some of the business community as being unfair competition to local businesses whose overhead costs are much higher than those of street vendors.
Private property lease rates in the Downtown range from approximately $15.00 per square foot per year at Granville and Nelson to $125.00 per square foot per year at Robson and Thurlow. Current street vending rates calculated on a square footage basis are $19 for dry goods and $25 for food. On this basis, all but 2 or 3 existing vending locations are priced well below the market rate for the area.

Staff considered recommending an increase of 35 to 40% to bring permit fees more in line with market lease rates. However discussions with a number of vendors and their representatives indicated there is some justification for the discrepancy in that vendors have a number of disadvantages such as: unexpected closures due to weather, having to transport their entire operation twice each day, limited display space and product restrictions which do not apply to neighbouring stores and restaurants. In spite of this, it is still a concern that some small struggling businesses are seriously affected by the presence of a street vendor who can afford to undercut prices due to lower overhead.

Based on the above it appears appropriate to base fees on a combination of cost recovery and market rates. This report recommends a fee increase of approximately 25% as follows:

Dry Goods - Increase from $481.50 per year ($450.00 + 31.50 GST) to $600.00 per year ($560.75 plus $39.25 GST) (approximately $23.30 per square foot).

Food - Increase from $642.00 per year ($600.00 +42.00 GST) to $800.00 per year
($747.66 permit fee plus $52.34 GST). (approximately $31.15 per square foot)

Payment Schedule
Another issue to consider is the fee payment schedule. Currently, vendors who wish to renew their permits are required to pay a non-refundable $50.00 deposit before the last business day in January which is credited to the permit fee. The reason for collecting a fee at this time is to determine which locations will not be renewed, and, therefore be added to the Street Vending Lottery for new applicants. The balance of the fee is not collected until the vendor is ready to start operating, usually in April or May.

Problems with this system arise when vendors have not decided in January whether they wish to renew or not. They may pay the $50.00 fee to hold the location, but later decide not to follow through. In this case, the location either goes unused for the year while many prospective vendors were unable to obtain locations and the City loses the remainder of the permit fee - OR - allocation is done through an additional lottery or a system of alternates, which is administratively cumbersome.

Staff discussed this situation with representatives of the vending community who agreed with the need to discourage frivolous renewals, but indicated that a full fee payment at the end of January could be a hardship for some vendors whose income is limited in the winter months. Therefore, it is recommended that 25% of the permit fee ($150 for dry goods and $200 for food) be payable at the time of renewal (before the last business day in January).

Allocation of Vending Locations
There has been some discussion about rotating vendors through the existing vending locations. Staff consider that the disadvantages of such a system would out-weigh the advantages for the following reasons:
· the existing policy ensures vendors are placed a minimum of 200 feet away from a potentially competing business.
· it would be difficult to administer and would require increased staff resources.
· most vendors would be strongly opposed to continually moving locations. As with any other business, vendors build their customer base over a period of time and need to be accessible to their regular clientele. Without the luxury of a building, with walls, doors and plumbing, vendors rely on the relationships they develop with their neighbours for: the use of facilities, to watch their merchandise for brief periods and to assist with the daily opening and closing routines. These relationships take time to develop and continual moving would be extremely disruptive.
However, if Council wishes, staff could report back on the feasibility of such a policy change.

PRODUCE AND FLOWER DISPLAYS

Currently, permit fees are calculated based on the amount of sidewalk space occupied, as follows:

This structure creates substantial inequities between different sized displays. The cost per square foot ranges from $ .61 per square foot for a 650 sq. ft. display to $10.00 per square foot for a 20 sq. ft. display . It also creates added enforcement problems as businesses often apply for less space in order to save the additional permit fee, but are tempted to use additional space anyway.

Staff recommend changing the Produce and Flower Display permit fee to a flat rate of $3.00 per square foot per year plus GST with a minimum fee of $100.00 per year. This change would create a more level playing field and incorporate an overall rate increase of approximately 20% to cover inflation and increased administration costs.

Unauthorized Displays & Sandwich Board Signs

There are currently no permit programs in place for the display of merchandise other than Produce or Flowers. Nor are there permits for sandwich board signs which also proliferate on sidewalks in retail areas. Although these activities are prohibited under the Street and Traffic By-Law, the reality is that many small businesses rely heavily on these forms of advertising and the practice is generally well tolerated by the public.

There are an estimated 2200 sandwich board signs currently displayed on City property and approximately 500 businesses displaying unpermitted merchandise. The majority of these cause little or no problem. Complaints tend to be generated when a business oversteps the tolerance level of the community and include concerns regarding the size of signs or displays, obstructions to pedestrian passage and unsightliness. The tolerance level for these activities varies somewhat from area to area and is gauged by public complaints. What may be acceptable on West 4th Avenue or Commercial Drive would be less so on Robson Street or West 41st Ave.

Therefore, the current enforcement process has been geared toward safety and aesthetics. Businesses displaying reasonably-sized sandwich board signs or small amounts of merchandise (within approximately two feet of the building) have been tolerated, while safety issues and more serious sidewalk obstructions are enforced. This approach to enforcement generally works well in terms of ensuring that street activities are in keeping with the character of the neighbourhood. However, there are also disadvantages:

1. Enforcement of these activities is sometimes challenging for staff because there are no programs or permits to offer the offender,
2. Business owners who hold permits for sidewalk cafes and produce displays (which generally use larger areas of sidewalk) feel it is unfair that they pay for display space while others use the space (within two feet of their property) at no charge. (Some have refused to pay for their permits unless staff enforce with zero tolerance against all unpermitted activities),
3. It creates unrealized opportunities for generating revenue through the sale of permits,
4. Possible liability issues regarding non-enforcement of a by-law.

The main problem faced by enforcement staff occurs in areas where there are a number of different activities in the same block. A typical situation may entail a small sidewalk cafe, a produce store, a flower shop, a clothing store, a second hand dealer and 3 sandwich board signs all using similar amounts of sidewalk space. Under the current approach to enforcement, staff would visit each business and issue warnings as follows:

· the restaurant, the produce store and the flower shop would be asked to obtain a permit or remove their wares from the street allowance. Non-compliance may result in confiscation. (Permit costs range from $100.00 to $400.00 or more depending on the amount of space used).
· the clothing store, the second hand dealer and the sign owners would be asked to keep their displays within two feet of the property line or face confiscation of the offending items (there is no permit available and therefore no charge to the business).

This approach is being challenged more and more as restaurants and produce stores who must pay for a permit, question the free use of space by other businesses. Staff are faced with the difficult task of explaining these inequities.

Several options were considered regarding these unpermitted activities including:

· reporting back to Council on the feasibility of permit systems for signs and merchandise, or
·

·increasing enforcement to reduce or eliminate 2200 +/- sandwich board signs and estimated 500 unpermitted merchandise displays from City property or
· continuing with the existing enforcement process

Although staff are beginning to see difficulties with the current informal approach, for the present, most problems are resolved through the existing process. If, in the future, these activities become unmanageable or there is a rise in the number of complaints, staff will report back on the above options. For the present, it is recommended that Council endorse the existing enforcement process.

G.S.T.

GST is generally applicable wherever City property is occupied for Street Activities. For those programs where a flat rate fee is charged (Small Sidewalk Cafes and Street Vending) it is recommended that GST be included in the permit fee for ease of communication and the convenience of the customer.

FINANCIAL IMPLICATIONS

The changes recommended in this report are expected to increase revenue by approximately 10% and improve collections of outstanding accounts. No additional program costs are anticipated at this time. These increases are warranted based on inflation of approximately 10 % over the last 6 years, market value averages, administration costs and rate of return to the permit holder.

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Non-permitted Activities: Sandwich Board Signs and Merchandise Displays

APPENDIX II

PROGRAM REVENUES

PROGRAM

EXISTING ANNUAL REVENUE

PROJECTED ANNUAL REVENUE

PRODUCE

$31,000

$37,200

STREET VENDING

82,000

112,300

SIDEWALK CAFES

220,000

*245,000

CONTAINERS

90,000

90,000

OVER SIZE TRUCK PERMITS

60,000

60,000

NEWSBOXES

32,000

32,000

BUSKING

1,200

1,200

TOTALS

$516,200

$577,700

The total costs (salaries for administration, enforcement and management, benefits, supplies, services, vehicles, etc.) are approximately $480,000.

*The proposed two term structure is expected to somewhat offset the sidewalk cafe fee increase, resulting in a minimal revenue increase.

APPENDIX III

OTHER CITIES FEES

All figures are shown in Canadian Dollars.

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