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HomeMy WebLinkAboutDSD-18-019 - Creative Industry Hub Next StepsREPORT TO: Finance & Corporate Services Committee DATE OF MEETING: May 28, 2018 SUBMITTED BY: Cory Bluhm, Executive Director, Economic Development, 519-741-2200 ext. 7065 PREPARED BY: Emily Robson, Coordinator Arts & Creative Industries, Economic Development, 519-741-2200 ext. 7084 Silvia Di Donato, Manager, Arts & Creative Industries, Economic Development, 519-741-2200 ext. 7392 WARD (S) INVOLVED: All DATE OF REPORT: May 15, 2018 REPORT NO.: DSD-18-019 SUBJECT: Creative Industry Hub Next Steps ___________________________________________________________________________ RECOMMENDATION: That Council endorse the Partnership Model as the preferred operating model, as described in report DSD-18-019, whereby the City retains oversight of the creative hub, while establishing partnerships with third party organizations to support the operation of the creative hub; That that 50% of the net proceeds of the sale of 48 Ontario Street North be allocated to the creative hub, $775,000 from the Economic Development Reserve Fund be allocated to capital and operating expenses for the c Purchasing Bylaw; and further, That the Mayor and Clerk be authorized to execute contractual and/or lease agreements for the first floor of 44 Gaukel, with third party organizations to support the operations of the Creative hub, including the leasing of portions of the ground floor, with said agreements to be satisfactory to the City Solicitor. EXECUTIVE SUMMARY: This report outlines next steps for the creative hub initiative at 44 Gaukel Street, a city-owned building in Downtown Kitchener. After considering a variety of options and working with partners and creative sector stakeholders, staff recommends a partnership operating model wherein the city provides operational oversight to the project, enters into partnerships with third party organizations who will facilitate day-to-day operations and provide sectoral expertise. This approach supports affordable space for the creative industries, leverages the sectoral expertise of organizational partners, and is an effective way to manage building occupancy. *** This information is available in accessible formats upon request. *** Please call 519-741-2345 or TTY 1-866-969-9994 for assistance. 1 - 1 50% of the net proceeds from the sale of 48 Ontario Street North be allocated to initiate and develop a Creative Hub, as described in Report CAO-16- 034, and that the balance of the proceeds be referred to the 2017 budget creative hub at 44 Gaukel to leverage the momentum of current activities in the building and to maximize its potential. This investment will support the basic costs associated with maintaining the building, provide for the minor renovations needed to make the first floor of 44 Gaukel accessible and useable for tenants and the community, and offer the amenities, such as internet and security, that are necessary for occupancy. The proposed partnership approach to the creative hub at 44 Gaukel offers space and support for creative communities to flourish. economic sectors, the arts, culture and creative industries will grow and extend their positive impact when they are valued, and celebrated. The expansion of creative hub at 44 Gaukel is based on the belief that our community has what it needs to be successful and the full potential of our city is unlocked when the connections between assetsbuildings, people, resources are strong and resilient. Recognizing the importance of affordable and supportive environments for creative industry businesses (see Appendix 1: Creative Hub at 44 Gaukel Business Case, Section 4, Table 1 Consultation Findings and Policy Direction Regarding Space for Creative Industries) and in addition to maximizing the use of 44 Gaukel, staff recommends active pursuit of additional space and locations should the building become unavailable for any reason. Should the City of Kitchener not actively address the challenges of the creative sector, the health of the community and economy are at risk (see Appendix 1: Creative Hub at 44 Gaukel Business Case, Section 6). The upcoming Arts Strategy, will address the further development and optimization of existing cultural and creative spaces in the city. BACKGROUND: escribed in the economic development strategy, Make it Kitchener,and includes three objectives: be agile in the provision of services for start-ups; continue to attract entrepreneurs; and become a magnet for investment. To achieve this, Make it Kitchener identifies the need to establish a creative hub to support the growth of the creative industries. Like business incubators in other sectors, the creative hub offers collaborative programs designed to help creative industry businesses succeed through workspace, networking, mentorship, and training. Partnerships for arts and technology for the purpose of industry development have been growing since 2013 at 44 Gaukel, a 20,000 square foot city-owned former post office in downtown Kitchener. From 2013 to 2017, Conestoga College offered programs in the School been offering graduate programs in the space for the last five years. In addition, a partnership between the Accelerator Centre and ArtsBuild Ontario has facilitated the use of the second 1 - 2 floor of building for technology and creative industry practitioners since the fall of 2016. Currently, there are over 30 people working out of the second floor of the building. To continue momentum for the creative hub and Accelerator/ArtsBuild Ontario initiatives, staff has been working with creative industry stakeholders to pilot creative hub activities on the first floor of 44 Gaukel to explore how the successful model on the second floor could extend onto the first floor to maximize the use of the building. To date, the current model on the second floor has exceeded expectations--meeting the needs of both the creative and technology sectors through workshops, classes, meetings, and performances; offering opportunities for cross-sectoral tenants to collaborate; and strengthening the connections between resources for creative industry practitioners and businesses. Why focus on affordable space for creative industries now? Recent analysis of the Labour Force Survey indicates that the percent of the labour force that is comprised of creative industries locally in the Kitchener-Cambridge-Waterloo CMA is lower than both provincial and national levels, and that employment in the creative industries is actually decreasing locally (Appendix 1: Creative Hub at 44 Gaukel Business Case, Section 5). The higher percentage of labour force employment in the creative industries in other comparable municipalities indicates that there is opportunity for the region to gain a greater share of this industry. Culture already has a significant economic impact; it provides 630,000 jobs for Canadians and contributes $54.6 billion per year in economic activity. Canadian books, music, magazines, film, television, performing arts and visual arts have made a mark at home and abroad. Building on a history of innovation in animation, Canada is now a world-class leader in the video game industry and is showing early leadership in the emerging virtual reality and augmented reality industries (Creative Canada Policy Framework, Canadian Heritage, 2017). our future economic growth and our identity. The well-documented process of artists revitalizing urban cores and then being pushed out due to increased property values is a significant challenge in world-class cities, and is burgeoning in Kitchener. Supporting and expanding the role of 44 Gaukel in the creative industry sector provides affordable arts business incubation space for creative practitioners who would otherwise be forced to leave the city for more affordable spaces. Through investment in the creative hub, creative practitioners will have access to spaces where they can build their entrepreneurial skills, create, collaborate and innovate, and help generate new markets for creativity. For a full analysis of economic and community impacts, see Appendix 1: Creative Hub at 44 Gaukel Business Case, Section 7. REPORT: The creative hub at 44 Gaukel partnership model In determining how best to proceed with the creative hub at 44 Gaukel, staff considered a variety of approaches and models to achieve the purpose of the initiative: offering flexible and 1 - 3 affordable space for creative practitioners to develop their careers, practices and business, and to connect and collaborate across sectors. Staff considered 1) Re-issuing the RFP to find an independent third party operator; 2) Operating the creative hub using staff resources exclusively; and 3) Maintain current momentum by operating the creative hub in a partnership model. An overview and analysis of options considered can be found in Appendix 1: Creative Hub at 44 Gaukel Business Case, Section 3. After weighing the pros and cons of the three options, staff recommend the partnership model. A significant contributing factor in choosing a preferred approach is the success of the nd activities on the 2 floor of Gaukela partnership between the Accelerator Centre and ArtsBuild Ontario. The two organizations have been collaboratively managing the second floor of 44 Gaukel. Since the start of their partnership in the space (fall 2016), the second floor has been home to over 20 start-ups and organizations, has a current compliment of 35 people working out of the space, over 3500 hours of workshops and events, and has resulted in promising and innovative cross-sectoral collaborations. The initiative on the second floor of the building has demonstrated that subject matter experts are the best agents for successfully cultivating spaces for sectoral development. Accelerator Centre serves its members through relevant and innovative programming, tech sector expertise and has contributed great skill toward managing the facility at 44 Gaukel; and, ArtsBuild Ontario has skillfully managed creative spacesdeveloping and maintaining relationships with subtenants, providing services to subtenants and those renting the rehearsal -term workspace and facility rentals. To achieve the purposes of the creative hub and to continue the momentum of the activities on the second floor, staff recommends that a partnership model be used to operate the creative hub at 44 Gaukel. In this model, the City provides oversight to the initiative, and enters into partnerships/contracts with third party organizations to manage the day-to-day operations of the creative hub. While leases for discrete workspaces at 44 Gaukel will be held with the City, staff will partner with organizations such as Accelerator Centre and ArtsBuild Ontario to manage the operations of the facility. Further detail on this model can be found in Appendix 1: Creative Hub at 44 Gaukel Business Case, Section 3. Staff has been working with current tenants of the building to pilot a collaborative operating model wherein tenants meet on a bi- weekly basis to identify and discuss successes, challenges, and to assess interesting opportunities. The recommended approach: Facilitates a holistic approach to building operation (i.e. treating the building as a whole rather than 2 separate floors); Builds on proven working relationships with ArtsBuild Ontario and the Accelerator Centre and existing tenants; Supports sectoral capacity building; and Responds directly to stakeholder consultation findings. 1 - 4 Using this partnership model to provide expertise and insight, the first floor of 44 Gaukel will include: Flexible Space: Bookable short-term rental space suitable for meetings, events, classes, talks, rehearsals and small performances. This type of flexible space is important to support the collaborative endeavours of creative practitioners, who frequently work together on projects and require space to do this. Co-working Space: 44 Gaukel will offer open workspace where creative practitioners can access full-time, part-time, weekly or monthly memberships. Anchor Tenants: Secured offices available for lease and in true incubator fashion, include access to internet, printing, meeting rooms, and other shared amenities. Shared Amenities: Key to the incubator model is access to shared amenities such as meeting rooms, high-speed internet, copier and printer, coffee, water, office cleaning, mailbox, projector, utilities, and a community of practice. Refer to Appendix 1: Creative Hub at 44 Gaukel Business Case, Section 3 for additional details on how these space have been used and refer to Appendix 3 for photos of recent activities at 44 Gaukel, where artists, creative practitioners, academic programming and technology businesses are proving the concept of the creative hub. Outcomes The development of the creative hub at 44 Gaukel in the creative industry sector is a way of responding to the expressed needs of sector stakeholders and an economic development intervention aimed at increasing the share of the local workforce engaged in cultural work. Looking forward It is reasonable to expect that the value of 44 Gaukel may one day best serve the city through the sale and redevelopment of the site. During the next few years, the use of the space will build local sector capacity, and there is already evidence that the need for space is currently approximately 40,000 square feet, given the waiting lists for various kinds of arts creation and business development space. For this reason, staff recommends a flexible approach to future space allocation that fits with potential sale and redevelopment of the property. It is important to note that two distinct kinds of spaces emerged through various community engagement initiatives: arts and creative incubation space, and space for rehearsal and performance. Staff anticipates bringing to council recommendations for the integration of creative and cultural spaces into the redevelopment process, and strategies for optimizing existing cultural spaces and performing venues to meet the needs of the sector as part of the 2019 Arts Strategy. Staff will also work with partners to develop a plan for the future of the creative hub beyond 2023. ALIGNMENT WITH CITY OF KITCHENER STRATEGIC PLAN: The Kitchener Economic Development Strategy (Make it Kitchener), adopted in 2016 recognizes arts, cultural workers and content creators as a vibrant economic cluster in and of itself, comprising a significant segment of the labour force. Creative industries leverage innovation throughout businesses as diverse as digital media and advanced manufacturing 1 - 5 as a desirable place to live and to visit. And it is a critical component to talent attraction, retention and development. start-ups; continue to attract entrepreneurs; and become a magnet for investment. This report delivers against these objectives, specifically the establishment of a creative hub for artistsin music, film, theatre, digital media and other disciplinesthat could offer rehearsal spaces, entrepreneurial and promotional services, skills development, and event programming. The City of Kitchener Strategic Plan notes that arts, culture and the creative industries make Development goals are also served through arts and culture, adding to urban vitality. FINANCIAL IMPLICATIONS: Over the proposed five year timeline for the creative hub at 44 Gaukel, the project breaks even and is accomplished within existing funds and strategically deploys a city asset to support both economic and community development. In response to Council direction, $775,000 (50% of the net proceeds from the sale of 48 Ontario Street North) has been allocated to the creative hub in the economic development reserve fund. Existing municipal funds will support one-time minor accessibility upgrades in the amount of $70,000. Costs associated with the creative hub at 44 Gaukel include building operations such as heating and cooling, utilities, tenant management, security, cleaning and maintenance. Further detail can be found in Appendix 4 Financial Overview. While the total cost of building operations is estimated at $962,749 over five years, it is important to note that certain maintenance costs are incurred whether the building is occupied or not. The cost of keeping the first floor vacant is estimated at $40,000 to $50,000 annually. Property tax is estimated at $45,000 per annum and may be mitigated due to potential exemptions for recognized post-secondary institutions and specific cultural uses. Leasehold improvements and accessibility upgrades are estimated at $90,000. In the first year, an additional $133,000 in capital equipment purchases is anticipated. These purchases modular furnishings such as walls and desks, event tables and chairsare retained by the city as assets and can be deployed elsewhere. The City anticipates generating about $115,000 per annum operating revenue in lease rent from secure offices of varying sizes, a co-working desk area, facility and equipment rentals. Based on this model, the 5-year net operating costs of the creative hub at 44 Gaukel is a surplus of $70. 1 - 6 OPTION 3 CREATIVE HUB PARTNERSHIP MODEL 5-Year Estimated Total (2019-2023) BUILDING COSTS BUILDING OPERATIONS (HVAC, Utilities, Tenant Management, $962,749 Security, Cleaning, Maintenance) PROPERTY TAX (2017 estimate)$234,181 LEASEHOLD IMPROVEMENTS (Accessibility upgrades, minor $90,000 interior renovations) CAPITAL EQUIPMENT (Reusable modular furnishings including $133,000 walls & tables, event tables & chairs, projector) BUILDING COSTS TOTAL $1,419,930 REVENUES PROCEEDS OF SALE (50% proceeds from sale of 48 Ontario N)($775,000) EXISTING MUNICIPAL FUNDS (Corporate Accessibility, WTBI ($70,000) account) FACILITY REVENUE (leases, venue & equipment rentals) ($575,000) REVENUES TOTAL($1,420,000) NET OPERATING BALANCE ($70) Note: Revenues are entered in brackets. For further detail on the yearly breakdown of expenses and revenues see Appendix 4 Financial Overview. COMMUNITY ENGAGEMENT: INFORM council / committee meeting. CONSULT Previous community and stakeholder engagement consultation data was also considered in the preparation of this report. This includes: 1. Post RFP Interviews (2017) 2. 3.Make it Kitchener (2016) 4.Strategic Review of JM Drama (2016) 5.Arts Reboot/ ArtsTogether, Shift #2 (2015) 6.Creative Content Industry in Waterloo Region (2015) 7.City of Kitchener Strategic Plan 2015-2018 (2015) 8.(2013) 9.Music Works | Strategy and Action Plan (2012) 10.Kitchener Economic Development Strategy 2011-2015 (2011) 11.Downtown Kitchener Arts & Culture Cluster Development Framework (2006) 1 - 7 12.CulturePlan I (1996) & CulturePlan II (2004) At the April, 2018 meeting of the Arts and Culture Advisory Committee, there was general support for the approach outlined in this report. They indicated that continuing the current model will build capacity in the arts sector and support the development and growth of creative industries. ACAC will continue to be consulted as the Arts Strategy progresses throughout the rest of 2018. PREVIOUS CONSIDERATION OF THIS MATTER: FCS-17-128,P17-024 Lease of 44 Gaukel Street & the Creative hub (June 19, 2017) CAO-16-034 Options for a Creative Industry Hub (December 5, 2016) CAO-16-025Community Engagement for Creative hub Status Update (October 3, 2016) CAO-16-015 Community Engagement on Potential Arts Hub & Potential of 48 Ontario St. N (May 19, 2016) nd CAO-16-016 Animating 44 Gaukel 2 Floor for Start Ups and Arts & Culture (April 26, 2016) CAO-13-004 Kitchener Studio Project Business Case (April 22, 2013) CONCLUSION: To achieve the purpose of the creative hubthe provision of an affordable space for connection and creation, staff recommends partnering with organizations who have sectoral expertise. This approach makes the best use of assets in the community, extends the success of the second floor onto the first floor, and presents operational efficiencies. Labour force data indicates that there is a need for growth in the creative industries in Kitchener to keep pace with other municipalities, and years of creative industry stakeholder consultation has highlighted the need for affordable workspace. The creative hub at 44 Gaukel is an opportunity to ensure adequate space for the creative industry in Kitchener. The project supports the economic and community benefits identified in current municipal strategies. The project will provide a facility that addresses current usage needs and will be an investment in the future of Kitchener providing direct and indirect community benefits. The creative hub project is an investment which has considerable potential to stimulate growth in the creative industries and the community. ACKNOWLEDGED BY: Justin Readman, General Manager, Development Services 1 - 8 APPENDICES Appendix 1 Creative Hub at 44 Gaukel Business Case Appendix 2 44 Gaukel Floorplans Appendix 3 Recent Activities at 44 Gaukel Appendix 4 Financial Overview 1 - 9 APPENDIX 1 - Creative Hub at 44 Gaukel Business Case 1 - 10 Economic Development Business Case Creative Hub at 44 Gaukel 1 - 11 Table of Contents Executive Summary 5 Background 7 Current Situation 7 Opportunity 7 Project Description 9 Project Description 9 Objectives 9 Scope 9 Options for the Creative Hub 10 Stakeholders 14 Strategic Alignment 15 Environment Analysis 18 Consideration of Internal and External Factors 18 State of the Creative Industries 18 What are the Creative Industries?18 Growth in Creative Industries 19 Municipal Comparison 20 Project Risk Assessment 22 Risk Assessment & Mitigation Strategies 22 Cost/Benefit Analysis 23 Financial Impact Analysis 23 Financial Implications 23 Economic and Community Impact Analysis 24 Conclusions 26 1 - 12 Section Executive Summary 1 Creative Hub at 44 Gaukel The need for a creative hub at 44 Gaukel is driven by two key immediate opportunities: (1) Increasing demand for creative industry incubator space for collaborative and entrepreneurial development at a reasonable price in a central location; and, (2) The underutilized municipally-owned building located at 44 Gaukel Street. Through extensive stakeholder consultations, a strong consensus has emerged around the need for a place for creative industry practitioners to converge, work collaboratively and share resources and mentorship. Many opportunities were identified chief among these are spaces dedicated for creative professionals, entrepreneurs and art-enabling organizations. n action item in the Make It Kitchener Economic Development Strategy. Data from the Labour Force Survey indicates that Kitchener is falling behind other nearby jurisdictions like Hamilton and London in terms of creating, supporting and retaining creative practitioners. This is a risk in the knowledge-based economy, and in an increasingly globalized marketplace. In fall of 2017, City Council released the 48 Ontario Street North location to a private sale with a view to orient future efforts at a creative hub for Kitchener at 44 Gaukel, with direction that half of proceeds from the disposition sale of that municipal capital asset be directed to the operation of a creative hub for Kitchener. Facilitates the career success of those engaged in the creative industries by expanding the capacity for entrepreneurship, creation, networking and collaboration by delivering relevant programming; solutions, make connections, take risks, share knowledge, build dialogue, integrate, grow careers and collaborate; and, Is an adaptable, collaborative space that is flexible, creative, inclusive, accepting, open and fun These characteristics will be nurtured through a program of spaces that may include: Entrepreneurial services and professional development; Shared office (entrepreneurial services, shared reception, work space); Networking, event, workshop, classroom; Short-term space rental (potential as a revenue-generating exercise); Flexible rehearsal/performance space; Specialized studio spaces (visual arts, sound/ video recording, multi-media); Commercial tenants (revenue-generating); and, Potential for supporting retail-commercial space (music, digital design, retail, café etc.). It was noted in the consultation process that it is unlikely that one space could meet all the expressed needs, and that depending on the size of the creative hub, a particular focus on certain characteristics is a valid approach. The creative hub at 44 Gaukel project would provide a mix of dedicated secured offices, co-working desk spaces, facility venue space and exhibit space. The project will generate and support as many as 80 full-time equivalent jobs. 1 - 13 The creative hub is expected to be operational in fall of 2018. Full expression of the space as a creative hub with a mix of assets and programming is expected for early 2019. If the City does not implement strategies that seek to improve conditions in Kitchener for creative industries, it is expected the indicated downward trend will continue. Kitchener will continue to lose creative practitioners, businesses, humanizes technology and makes it understandable. Design is needed to make sense of information overload. It is why art and design will rise in importance during this century as we try to make sense of all the possibilities that digital competitiveness will be significantly hindered. Alternatives could include contracting a third party partner (e.g. Artscape) to deploy creative industry developmental programs and services. Staff continue a dialogue with Artscape, but at this time and for the foreseeable future, this is not a line of business Artscape is pursuing. Other locations were considered, in particular the City owned building located at 48 Ontario Street North. There are several reasons 44 Gaukel is a good choice (municipal-owned, under-utilized, older real estate inventory, downtown location, on public transit, a property asset of interest for a future value assessment by the city, and has been in recent use by a variety of occupants). At current there is no suitable alternative building scenario which yields as much operational and financial benefit for a creative hub. It is the recommendation of city staff that the opportunity of operating the creative hub at 44 Gaukel is the strongest option among alternatives, engendering the least risk for the city and critical partners as well as the lowest financial implication. 1 - 14 Section Background 2 Current Situation The Kitchener Economic Development Strategy (Make it Kitchener) adopted in 2016 recognizes arts, cultural workers and content creators (including music, media, film and design) as a vibrant economic cluster in and of itself, comprising a significant segment of the labour force. Arts and culture industries leverage innovation throughout businesses as diverse as digital media and advanced manufacturing design. Strengthening arts and culture activities talent attraction, retention and development. services for start-ups; continue to attract entrepreneurs; and become a magnet for investment. To deliver against these objectives, Make it Kitchener identifies the establishment of a creative hub for artistsin music, film, theatre, digital media and other disciplinesthat offers rehearsal spaces, entrepreneurial and promotional services, skills development, and event programming. As part of the development of Make it Kitchener, stakeholders identified the need for a creative hub as a mechanism to grow arts and creative industries, support innovation across other sectors such as digital media, and to provide the source for content and experiences that create urban vitality in the city. Furthermore, the creative industries are critical to a diversified economy, they provide an intensely local supply chain, and strengthen technology and other leading sectors by driving innovation. The under-representation of the creative industries in Kitchener (Hill, 2015) weakens the local supply chain for businesses relying on content, innovation, and ultimately, the need for a vibrant, magnetic community where people want to live, work, and feel a sense of belonging (Kitchener Waterloo Community Foundation, 2015). Locally there are examples of the need for space--indicated by a four-year waiting list for affordable studio space at Globe Studios and priced at approximately $12 per square foot. At the Registry Theatre, more demand is quantified where approximately 200 rentals are turned away annually, foregoing approximately $60,000 per year in revenue. Affordable space has been identified by the arts community for years, and was identified in City documents starting -use downtown arts centre (Item58), investment in live/work buildings for artists (Item 59), and in the development of new creative industries (Item 61). I n December 2016, staff recommended that 44 Gaukel be used as the location for the creative hub. Council directed staff to proceed with a Request for Proposal (RFP) to find an operator for the creative hub and the building. Council resolved that half of the net proceeds from the sale of 48 Ontario north be allocated for the creative hub (see CAO-16- 034 Options for a Creative Industry Hub).The RFP process did not produce an operator for the creative hub. Feedback indicated that as the investment from the city was unspecified (48 Ontario Street North had not yet been sold) and the term of the lease was unclear, the project was not feasible. To continue momentum for the initiative, Council directed staff to execute short-term leases with the current tenants on the first floor of 44 Gaukel (Accelerator Centre and the University of Waterloo) and return to Council with recommendations about the future of the creative hub at 44 Gaukel (see FCS-17-128&P17-024 Lease of 44 Gaukel Street & the Creative Hub). In the intervening months, staff has been working with creative industry stakeholders to pilot creative hub activities in the space and explore how the successful model on the second floor could extend onto the first floor to maximize the use of the building. Opportunity l needed to make sense of information overload. It is why art and design will rise in importance during this century as we try to make sense of 1 - 15 Creative Canada, the federal policy framework for arts, culture and the creative industries identifies creative hubs as the next generation of cultural spaces. Creative hubs will help nurture and incubate the next generation of creative entrepreneurs and small business start-ups. Creative hubs are all about bringing people togetherartists, cultural entrepreneurs and organizationsin spaces that encourage development and collaboration. arts technologiquesa hub connecting practicing artists, academics and cultural industries working in digital artists, cultural entrepreneurs and non-profit organizations together in a shared space where they can collaborate and scale- providing shared spaces for creators and entrepreneurs. an opportunity to lead and contribute to this national movement, support the growth of creative entrepreneurs, small creative business start-ups, and cultural organizations, build the local economy and contribute to the quality of life of residents. The City is a unique position to support the development of the creative industries specifically and strengthen the local economy generally. By using a City-owned asset to strategically invest in the creative industries by providing space and opportunities for the creative industries to flourish, the City will support the development of jobs and business success. Many large, world-class cities in the throes of real estate affordability crises are considering how they might reclaim space for cultural facilities and creative industries. The City of Kitchener can head off the well-documented process of artists revitalizing urban cores and then being pushed out due to increased property values by supporting and expanding the role of 44 Gaukel in the creative industry sector provides affordable arts business incubation space for creative practitioners who would otherwise be forced to leave the city for more affordable spaces. Through investment in the creative hub, creative practitioners will have access to spaces where they can build their entrepreneurial skills, create, collaborate and innovate, and help generate new markets for creativity. The City of Kitchener can recuperate some of the costs of operating the building through leases and venue rentals. There is a pipeline of creative practitioners and organizations ready to pay affordable rates for creation and flexible space. The proposed model will address needs for affordable creation and connection space, provide an opportunity for sectoral organizations to build capacity in managing a collaborative work space, and leverages the expertise of the creative community. 1 - 16 Section Project Description 3 Project Description The purpose of the creative hub at 44 Gaukel is to offer workspaces for creative practitioners to lease, flexible bookable suitable for events, classes, talks, rehearsal and performance, and a program of activities that facilitates connections between creative practitioners, supports career success and strengthens the ecosystem that supports them. In the proposed operating model, the city provides operational oversight, and enters into partnerships with third party organizations to: facilitate day-to-day operations of the creative hub; provide sectoral expertise; and manage leases and rentals of the workspace and venue spaces at 44 Gaukel. Programming and services at the creative hub are expected to evolve over time, as it is meant to be responsive to the needs of the stakeholder group, and is dependent on the mix of tenants, and rental users. Programming should be approached collaboratively by determining what is currently available in the community and where critical service gaps still exist. Objectives The development of the creative hub at 44 Gaukel in the creative industry sector is a way of responding to the expressed needs of sector stakeholders and an economic development intervention aimed at increasing the share of the local workforce engaged in cultural work. Scope The creative hub at 44 Gaukel is approximately 10,000 square feet (sf) of dedicated area on the first floor of the building. On the second floor, the Accelerator Centre and ArtsBuild Ontario operate an equal share of the same floorplate (10,000 sf) to rent to startup and small business clients and deploy respective programming. Allocation of spaces on the first floor of 44 Gaukel includes: Flexible Space: bookable short-term rental space suitable for meetings, events, classes, talks, rehearsals and small performances. This type of flexible space is important to support the collaborative endeavours of creative practitioners, who frequently work together on projects and require space to do this. Recently, this flexible space has been use for the site specific theatre production by Green Light Arts, Touch, art workshops offered by Artshine, a Sofar sounds concert, and the Creative Business Design Workshop delivered by Artscape Creative Launchpad. Co-working Space: In partnership with Treehaus Collaborative Workspace, 44 Gaukel will offer open workspace where creative practitioners can access full-time, part-time, weekly or monthly memberships. Anchor Tenants: Secured offices available for lease and in true incubator fashion include access to internet, printing, meeting rooms, and other shared amenities. Current tenants include the Critical Media Lab from the University of Waterloo, which runs graduate programs out of their space, as well as hosting academic and community events. The Critical Media Lab has hosted their annual year-end exhibitions on the main floor for the last number of years. The exhibition showcases media and data-based art and installations by graduate students. Accelerator Center is another anchor tenant. Clients located on the main floor have included Alert Labs, Bidvine, Fin|Tech, and InkSmith. Staff recommends that Artshine become another anchor tenant of the main floor. Artshine offers arts programming in schools, seniors residences, and is currently offering programming at a number of community centres. Staff proposes developing two additional secured office spaces available for lease. Shared Amenities: Key to the incubator model is access to shared amenities such as meeting rooms, high- speed internet, copier and printer, coffee, water, office cleaning, mailbox, projector, utilities, and a community of practice. Programming: City staff will be working with sectoral partners to deliver entrepreneurial services and support to creative industry stakeholders. 1 - 17 Collaborative Operating Model: Working with tenants and users, the City will manage the space and be accountable for providing custodial services, utilities and internet, security, and general maintenance of the space. Options for the Creative Hub Staff considered a number of options for establishing at Creative Hub at 44 Gaukel as follows: OptionPro ConStaff Resources & Costs Option 1: Independent -New potential -Extends the -Limited Third Party Operatorthird-party timeline for full managerial role operators may occupancyfor city staff -Re-issue RFP for respond to RFP-Splits up the including Creative Hub at -Increased operation of the -Ongoing staff st 44 Gaukel transparency and building (1and commitments nd -Clarify financial fairness2floors are would include investment from -Offers operated executing the the City opportunity for separately)lease, collecting -Specify length of sectoral capacity -Disrupts current payment, lease term buildingsuccesses and providing building -Responds momentum at 44 envelope directly to Gaukelmaintenance, and stakeholder monitoring feedback to the performance of first RFP (i.e. the the creative hub financial -Estimated staff requirements time is were not approximately compatible with 230 hours the mission of the annually creative hub)anticipated to be mix of in-kind (Economic Development staff) and compensated (FM) -Based on feedback from the previous RFP, operators will require an annual subsidy from the City of $155K-$165K to offset Property Tax and CAMs 1 - 18 -Additional leasehold improvements, such as an accessibility ramp would also be required and cost Option 2: City of -High degree of -Perceived as a -Significant Kitchener Operates the discretionary lack of trust and management role Creative Hub control over confidence in for city staff operations and sectoral capacity-Ongoing staff -City staff costs-The City may not commitments manages all -Potential access been seen as a would include tenants directly to resourcing credible operator day to day -City staff unavailable to of the creative management of manages all other hub by the space (e.g. venue rentals organizations stakeholdersmanaging -City staff (staff, financing, -In opposition to bookings, venue manages all subject matter stakeholder set up, tours for custodial, expertise on consultation prospective security, facilities facilities findings tenants, IT maintenance management (specifically that troubleshooting), etc.)the creative hub executing should not be run multiple leases by the city)with multiple -Disrupts current tenants, providing successes and services to momentum at 44 tenants, providing Gaukelfor amenities such as internet, security (either using city staff or a third-party), custodial services (either using city staff or a third- party), providing building envelope maintenance -Estimated staff time is approximately 2730 hours annually (1.5 FTE) -Staffing would 1 - 19 either have to come from existing compliment or new FTEs. -To support 1.5 FTEs, CAMs, minor renovations and acquisition of capital equipment and furnishing, and some programming, an investment of $255K to $277K is required. PREFERRED-Maintains current -Lack of -Facilitative momentum at 44 transparency as management role Option 3: Partnership Gaukelto how tenants for city staff Model -Facilitates a and partners are -Ongoing staff holistic approach selectedcommitments -City provides to building -Potentially would include oversight, but we operation(i.e. undermines RFP regular meetings enter into treating the process (i.e. with partners to partnerships/cont building as a partnering with a set direction and racts with third whole rather than party who bid on manage issues party operators. 2 separate the RFP)arising, executing -For ex: floors)-City has lessmultiple leases Accelerator -Proven working control over the with multiple Centre continues relationship with total operationstenants, providing to manage ArtsBuild Ontario building envelope internet, custodial and the maintenance & security; Accelerator -Estimated staff ArtsBuild Ontario Centre and time is continues to existing tenantsapproximately manage -Supports sectoral 455 hours offices/studios for capacity buildingannually (0.25 creative industry -Responds directly FTE) and tenants and tostakeholder anticipated to be venue rentals consultation mix of in-kind -All leases are findings(Economic held with the City -Enables leases Development with partners staff) and such as UW compensated Critical Media (FM) Lab-To support Property Tax, CAMs, fee for 1 - 20 service for partners, minor renovations, acquisition of capital equipment and furnishings, and some programming, an investment of $120 to $175K is required. The preferred approach is Option 3: Partnership Model. The preferred approach was selected for the following reasons: 1.Supports Affordable Space: Creative industries, like other economic sectors, need affordable, supportive - and an easy-to-access central location. 2.Leverages Sector Expertise: Current lead tenant partnerships have exceeded expectations by successfully and incrementally building connections across sectors, practitioners, and organizations to the benefit of the tenants and the arts and technology sectors. As subject matter experts, the lead tenants can best serve the needs of the creative and technology sectors. 3.Implements Cost-Effective Building Occupancy: The current lease agreements are recommended to be extended, including the lead tenant accountability for consolidated, cost-effective building security, cleaning and internet services. Again, the outcomes have exceeded expectations: oversight and direction by the lead tenants has minimized the efforts and cost for facilities management, and allowed economic development staff to play a facilitative role in managing the space, and provided guidance and subject matter expertise to sub-tenants. 1 - 21 Stakeholders Stakeholders are identified as follows: StakeholdersOverview of Business Requirements Primary Internal Sets policy directions in supporting the health, vitality and development of Council creative industries. Primary funding support. Support for the creative industries through the strategy, including direct support for creative Economic Development entrepreneurs, arts organizations and the Creative Hub. Staff resources to manage the total project. Facilities ManagementProvide standard city-owned facility building operation and maintenance Primary External Affordable space for work, performance and exhibit, a place to connect, to participate in programming and events, a collaborative, nurturing Creative Practitioners environment, a place to exhibit and share work, a launchpad for proof of concept Cultural Development Affordable space for programming, and central location to connect with Organizationsstakeholders Secondary External Full animation of a creative hub will attract visitors, actualization of near Public and area businesses businesses (cafes, restaurants, retail businesses) Increase in successful creative entrepreneurs, businesses and Tax Payer organizations means additional creative vitality in the city 1 - 22 Section Strategic Alignment 4 Table 1 below provides a brief overview of the consultation findings and policy directions that refer to physical space for the creative industries. Table 1 Consultation Findings and Policy Direction Regarding Space for Creative Industries SourcePolicy Direction / Stakeholder Consultation Findings Strategic economic MAKE IT START | Become a magnet for investment: Establish a development goals identified Creative Hub for artists especially in the music, film, theatre and by Make it Kitchener, 2015- digital media industries offering such things as rehearsal 2019spaces, entrepreneurial and promotional services, skills development, and event programming. Explore opportunities for pop-up retail to allow prospective entrepreneurs to test concepts and products. Raw inputfrom ArtsBuild They are not artist centric. Some Kitchener spaces are more JM Drama, 2016 , community-based, offers required amenities, supportive, and has a great atmosphere Arts Reboot/ ArtsTogether, An artist-run gallery space 2015Affordable live/work spaces Small and medium affordable rehearsal and performance spaces Film studios for prop building, green-screening, and other cinematographic purpose Sound and video editing space A black box experimental theatre for new music and interdisciplinary work Community input from Live/work studios Art centre: rehearsal space, performance space consultation for the City of Short term solution to vacancies: pop-up art galleries/art focused Kitchensmall businesses in vacant locations strategy plan update, 2015-Art hub (like 401 Richmond), art start-ups, multi-purpose art space 2019Film studio/sound stage Specialized studio space. FX/MOCAP. A want for creative collaboration being taken seriously Need a more attractive key venues in the community Lack of jam spaces for artists Create a cultural/Creative Hub. Affordable, live/work, multi-use space Rent controlled and mixed use building spaces Collaboration spaces needed City of Kitchener Strategic 2.2 | Support the attraction, retention and development of existing Plan, 2015-2018and new industries within the regional economy, working in collaboration with the economic development corporation for Waterloo Region. 2.4 | Develop and nurture a high quality of life and a powerful identify for the City of Kitchener to attract investment and a talented creative workforce. o ACTION | Invest in the cultural sector as a key driver of a creative city and the local creative economy. Creative Content Industry in Achieving a central location to maximize accessibility Waterloo Region, prepared Assuring adequate resources are committed in order that the by FAD Research Inc. facility can provide abundant programming and opportunities for 1 - 23 (funded by OMDC for CEI networking and the City of Kitchener ), May 2015 Rehearsal space is in high demand. Sustainable Creative No-term artist rental space is Spaces sessions summary, needed. April 2013Need unfinished, semi-finished spaces losing a lot of them, need more. Need space to have meetings CEI Results to Date: A Affordable mixed-use studio space Report to Stakeholders, 3-5 year opportunity December 3, 201230+ Applicants for 12 studios Retail / event space Music Works Action Plan: Networking events related to music and digital media CAO-12-034, September 17, Stakeholder engagement 2012Broaden artist-in-residence to include musicians Music business resource centre, bricks and mortar Jam space for local musicians Using vacant buildings for scene activities Raw input collected in 1.2: Build emerging cluster: arts, culture and tourism consultation with staff and 1.2.4 (staff): Support feasibility study for a potential arts centre citizens to inform the downtown Kitchener Economic 1.2.13 (symposium): Artscape type faith Development Strategy 2011- 1.2.18 (symposium): Create entrepreneurialenvironment incubator 2015 10.9 (symposium): Large arts venue Downtown Kitchener Arts & -use space is right for Kitchener. There are Culture Cluster more and more artists emerging, and small theatre groups Development Framework, December 2006 we need -arts businesses is as important as mixed use by different types of art different kinds of CulturePlan II, 2005InContinue to support and monitor the economic impact of the arts and the benefits of cultural planning: 18. Development of creative industries Investigate arts investment opportunities including new festivals, live/work spaces for artists and multi-use arts facilities: 58. Support a feasibility study for a multi-use downtown arts centre 59. Facilitate investment in live/work buildings for artists Downtown Strategic Plan 12. Identify and facilitate a project (e.g. live-work or studio space) Volume II: The focused on the development of arts space in partnership with the implementation, 2005-2007local arts community bring people downtown, such as the medical and education community, and the business and arts community. 40. Identify key sites and negotiate with interested property owners to develop art space (studio, live-work space) in the Downtown. 41. Identify affordable sites for rehearsal and performance space in 1 - 24 the downtown together with partners in the arts community. Region of Waterloo Growth Building Vibrant Urban Spaces: Management Strategy, 2003Quality of life and re-urbanization by encouraging downtown revitalization, urban amenity development, heritage preservation, mixed uses, brownfield regeneration, cultural diversity, and balanced live/work opportunities. City of Kitchener Arts, Developing a stronger cultural heritage identity for the region Heritage and Culture Master Maximizing accessibility to arts, culture and heritage opportunities Plan, 2002and information CulturePlan I (1996)D. Augment existing cultural facilities: D13. Support the creation of performance venue of 300-450 seats D14. Investigate the creation of an outdoor Amphitheatre 1 - 25 Section Environment Analysis 5 Consideration of Internal and External Factors Various different strengths, weaknesses opportunities and constraints were considered and identified regarding the creative hub at 44 Gaukel as follows: Strengths I N Make It Kitchener economic development strategy and City Plan identify arts and creative industry T as a developmental asset for Kitchener E Public community consultation has reinforced the need and demand for a creative hub R Kitchener has a unique and compelling creative industry and arts and culture scene N 44 Gaukel is a municipal-owned asset which has been identified for this use A Several arts organizations have core competencies which support the mandate of a creative hub L (e.g. ArtsBuild, ArtsShine) 44 Gaukel currently has existing rental tenants which fit with the creative hub mandate Weaknesses No existing working example of a creative hub in the area to model this one after No single definition for what a creative hub needs to accomplish: demands are many, variation among creative practitionersand uses are highly variable The lifespan of the building is unknown The open floor plan on the first floor makes it costly to create discrete and secure spaces Opportunities E X Overall, the number of artists, creative entrepreneurs and supporting organizations is growing in T Kitchener E A funnel (waiting list) of unrealized creative space users (e.g. Globe Studios, Registry Theatre) R Demand for rehearsal, performance, workshop, studio and specific creative industry uses (i.e. N dramatic theatre rehearsal space, single-use small studio spaces for visual artist entrepreneurs) A Highly competentorganizations providing programming, mentorship and capacity-building services L Threats Other communities are outperforming Kitchener in terms ofattracting and retaining creative industry and rate of growth of this industry Overall, some Ontario communities are increasing their share of creative industry while Kitchener is falling behind 44 Gaukel cannot service all the needs identified creative industry in Kitchener (e.g. more theatre performance venues, enough space to address the existing funnel) State of the Creative Industries This section also explores several key aspects of the creative industries such as defining the industries; using population and employment data to aid in understanding the state of creative industries relative to the general economy locally, provincially and nationally; as well as exploring the various community benefits associated with this creative hub project. What are the Creative Industries? For the purpose of this analysis, the creative industries are defined in line with the North American Industry Classification System (NAICS). The NAICS classification structure is also used to administer Statistics Canada 1 - 26 Labour Force Survey (LFS) estimates, which provides monthly employment estimates by industry and occupation. The classification structure of the relevant NAICS subsectors (three digit codes) that are representative of the creative industries is included in Table 2 below. Table 2 Defining the Creative Industries using the North American Industry Classification System Classification Structure 1-GOODS-PRODUCING SECTOR 7-SERVICES-PRODUCING SECTOR 51-Information, Culture and Recreation 15-Information and Cultural Industries 511Publishing Industries (except Internet) 512Motion Picture and Sound Recording Industries 515Broadcasting (except Internet) 517Telecommunications 518Data Processing, Hosting, and Related Services 519Other Information Services 71-Arts, Entertainment and Recreation 711Performing Arts, Spectator Sports and Related Industries 712Heritage Institutions Heritage Institutions 713Amusement, Gambling and Recreation Industries The codes shown in grey in Table 2 are the NAICS codes used to analyze creative industries and employment trends in this business case. These were selected to best represent the creative industries, while maintaining data compatibility with LFS estimate data. Of note, some additional NAICS industry groups (four digit codes) were identified and used to define the creative industries within the background research on creative hubs (appended to Report CAO 16-034), and are not able to be considered as part of this analysis: 3346 Manufacturing and reproducing magnetic and optical media 5131 Radio and television broadcasting 5414 Specialized design services 6115 Technical and trade schools 6116 Other schools and instruction 8112 Electronic and precision equipment repair and maintenance 8132 Grant-making and giving services As a result, the following analyses do not take into account additional employment growth related to these specific industry groups. Growth in Creative Industries Of interest for this analysis is a comparison of the proportion of creative industry workers in the overall workforce in local, provincial and national contexts. Table 3 demonstrates these trends over a ten-year time period. Table 3 Creative Industry Workers as Percent of Overall Workforce 5 year averages 5 Year Average 5 Year Average (2008-2012)(2013-2017) Canada CMAs5.0 %4.7 % Ontario CMAs5.2 %4.7 % Kitchener-Cambridge Waterloo 3.5 %3.4% CMA 1 - 27 Source: Statistics Canada. Table 282-0130 -Labour Force Survey estimates (LFS), employment by census metropolitan area based on 2011 Census boundaries and North American Industry Classification System (NAICS), three-month moving average, unadjusted for seasonality, annual (persons), CANSIM (database). (Accessed: Apr 24, 2018) Notably, the percent of the labour force that is comprised of creative industries locally in the Kitchener-Cambridge- Waterloo CMA is lower than both provincial and national levels. Another important consideration in this analysis is to determine if the creative industries in Ontario and in Kitchener have experienced an overall increase in employment. Figure 1 below demonstrates that general employment growth has outpaced growth in the creative industries both locally and in Ontario. Further, the creative industry is actually decreasing locally (as shown by negative growth in Figure 1 below), compared to modest gains in creative industry employment growth across CMAs in Ontario over the past 10 years. Municipal Comparison In addition to the above analysis that looked at a comparison of the Kitchener-Cambridge-Waterloo CMA to all Ontario relative comparison to inform where the creative industries in Kitchener stand relative to other municipalities. The trends shown in Figures 1 and 2 demonstrate that there is a need for growth in the creative industries in Kitchener to keep pace with other municipalities. This manifests a need for the provision of affordable work space to continue to attract creative industry workers to the city. Figure 1 Creative Industry Workers as Percent of Overall Workforce 2008-2017 Source: Statistics Canada. Table 282-0130 -Labour Force Survey estimates (LFS), employment by census metropolitan area based on 2011 Census boundaries and North American Industry Classification System (NAICS), three-month moving average, unadjusted for seasonality, annual (persons), CANSIM (database). (Accessed: Apr 24, 2018) 1 - 28 Figure 2 Creative Industry Workers as Percent of Overall Workforce 2017 Ontario Municipal Comparison Source: Statistics Canada. Table 282-0130 -Labour Force Survey estimates (LFS), employment by census metropolitan area based on 2011 Census boundaries and North American Industry Classification System (NAICS), three-month moving average, unadjusted for seasonality, annual (persons), CANSIM (database). (Accessed: Apr 24, 2018) 1 - 29 Section Project Risk Assessment 6 Risk Assessment & Mitigation Strategies Project Risk AssessmentProbabilityImpact Risk 1 Lack of tenants using the facility has negative financial LowMedium impact Mitigation strategy: a 15% cost contingency is built into the financial model. As a four-year pilot, financial risk will not extend beyond four years, and could conceivably be closed earlier. Risk 2 Failure to attract community programmingLowLow Mitigation strategy: there is already ample interest to aggregate and deploy programming, with future programs on the horizon. Arts and Creative Industries and Community Services have commitments to deploy joint programming in this space. Existing tenants (UW Critical Media Lab, ArtShine, ArtsBuild Ontario and more) have commitments for programming related to the creative hub at 44 Gaukel. Risk 3 44 Gaukel facility has limited lifespanMedium High Mitigation strategy: Council has indicated the long term strategy for the 44 Gaukel facility has not been fully explored. In five years, the building or lot may no longer be available as the place for the creative hub. Therefore, this pilot project has been limited to commitments (e.g. leases, service-level agreements) of four years, during which time staff will continue to explore future alternative locations. Risk 4 Lifespan of major building components is limited MediumHigh Mitigation strategy: Should the aged building components fail and require replacement, there is a significant financial and operational impact. As the longterm strategy for the building has not been decided, it would be imprudent to invest in replacing major building components (such as the boiler). To ensure that the building can be used to its full potential while it is operational, leases will include an building component failure. Risk 5 Creative hub fails to become the hub for the arts community Medium Medium Mitigation strategy: all efforts will be made for the creative hub to be a success. If the project is not successful following the pilot period, it will close. Risk 6 An alternative creative hub emerges MediumHigh Mitigation strategy: if a great place emerges for creative entrepreneurs, alignment, partnership and maximizing value to artists will bean ideal strategic response. 1 - 30 Section Cost/Benefit Analysis 7 Financial Impact Analysis Financial Implications Over the proposed five year timeline for the creative hub at 44 Gaukel, the project breaks even and is accomplished within existing funds. In response to Council direction, $775,000 (50% of the net proceeds from the sale of 48 Ontario Street North) has been allocated to the creative hub in the economic development reserve fund. Existing municipal funds from the Corporate Accessibility Fund and the WTBI account associated with 44 Gaukel will support one-time minor accessibility upgrades in the amount of $70,000. Costs associated with the creative hub at 44 Gaukel include building operations such as heating and cooling, utilities, tenant management, security, cleaning and maintenance. CAMs are estimated at $70,000 annually, and annual building operations including tenant management, security, cleaning, internet, and maintenance are estimated at $115,000 annually. It is important to note that a certain amount of costs are incurred whether the building is occupied or not. The cost of keeping the first floor vacant is estimated at $40,000 to $50,000 annually. Property tax is estimated at $45,000 per annum and may be mitigated due to potential exemptions for recognized post-secondary institutions and specific cultural uses. Leasehold improvements and accessibility upgrades are estimated at $90,000. In the first year, an additional $133,000 in capital equipment purchases is anticipated. These purchasesmodular furnishings such as walls and desks, event tables and chairs)are retained by the city as assets and can be deployed elsewhere. The City anticipates generating about $115,000 per annum operating revenue in lease rent from secure offices of varying size, a co-working desk area space, facility and equipment rentals. Based on this model, the 5-year net operating costs of the creative hub at 44 Gaukel is a surplus of $70. OPTION 3 - CREATIVE HUB PARTNERSHIP MODEL Note: Revenues should be entered as a negative number, and expenses as a positive number. (i.e. a number in brackets indicates funding is available) (2% increase per year) 201920202021202220235 YEAR TOTAL BUILDING COSTS BUILDING MAINTENANCE (HVAC, routine maintenance, utilities) 70,000 71,400 72,828 74,285 364,28475,771 ANNUAL BUIDLING OPERATIONS (Tenant Management, Security, Cleaning, Maintenance, Contingency) 115,000 117,300 119,646 122,039 124,480 598,465 PROPERTY TAX (2017 estimate) 45,000 45,900 46,818 47,754 234,18148,709 LEASEHOLD IMPROVEMENTS (Accessibility upgrades, minor interior renovations) 90,000 90,000 CAPITAL EQUIPMENT (Reusable modular furnishings including walls & tables, event tables & chairs, projector )*133,000 133,000 BUILDING COSTS TOTAL 453,000 234,600 239,292 244,078 248,960 1,419,930 REVENUES PROCEEDS OF SALE (50% proceeds from sale of 48 Ontario N)** (775,000) (775,000) CORPORATE ACCESSIBILITY FUND (35,000) (35,000) 44 GAUKEL WTBI ACCOUNT (35,000) (35,000) LONG AND SHORT TERM TENANT REVENUE*** (90,000) (90,000) (90,000) (90,000) (450,000)(90,000) FACILITY RENTAL REVENUE (events, workshops, rehearsal, meeitngs) (20,000) (20,000) (20,000) (20,000) (100,000)(20,000) EQUIPMENT RENTAL REVENUE (audio visual etc.) (5,000) (5,000) (5,000) (5,000) (5,000) TOTAL REVENUES (960,000) (115,000) (115,000) (115,000) (115,000) (1,420,000) ESTIMATED NET OPERATING BALANCE FOR CREATIVE HUB ON 1st FLOOR OF 44 GAUKEL (507,000) 119,600 124,292 129,078 133,960 (70) Notes * CAPITAL EQUIPMENT COST TO BE PURCHASED BY THE CITY (could be sourced at a lower price) ** DOES NOT INCLUDE EDR HUB ALLOCATION OF $500K *** BASED ON IDENTIFIED NEEDS FOR ARTS SPACE AS INCUBATOR HUB Note: Revenues are entered in brackets 1 - 31 Economic and Community Impact Analysis The creative hub at 44 Gaukel is an opportunity to ensure adequate space for the creative industry in Kitchener. The project supports the economic and community benefits identified in current municipal strategies. The project will provide a facility that addresses current usage needs and will be an investment in the future of Kitchener providing direct and indirect community benefits. The creative hub project is an investment which has considerable potential to stimulate growth in the creative industries. The creative hub at 44 would have many direct and indirect benefits to the community. A qualitative summary of some key benefits of this project and the impact associated with social, environmental and economic factors are highlighted as follows. BenefitsDescriptionStakeholder(s) Impacted Economic Benefits Strengthen opportunities for Removing barriers such as affordable space, will add Creative practitioners and creative practitioners net employment in the creative industries. ancillary users Job creationA creative hub at full operations capacity could Creative practitioners, arts support the equivalent of 100 full time jobs in the organizations creative sector. Inducement effects: Creative industries are regarded as inducer business Many related industries increased vitality in the types: impact modifiers suggest a rating of as much communityas 8X economic spin-off benefit. Creative industries further strengthen technological and other leading industries by driving innovation, collaboration and incubation all fundamental in economic performance. Growing and diversifying Kitchener continues to be poised to accommodate a Creative practitioners, and growing population and workforce. Creative related industries industries are critical to adiverse economy and industries contribute to the local supply chain of important knowledge-based and human driven services. The creative hub would fill a major gap in the creative sector in Kitchener. Social Benefits Increase human capital and Cultivation of knowledge-based industries and Creative practitioners, and activity expansions in knowledge and educationrelated industries Enhanced cultural vibrancy positively impacts the Enhanced place makingThe community at large Industries directly related to creative industries will Specifically-related industriesDirectly related industries receive direct positive impact effects such as trained talent, seasoned workers, mentorship, contract work opportunities and more. Environmental Benefits 1 - 32 Optimize use of the existing The creative hub should build on current assets and Creative practitioners, and building stocksuccesses: complimenting and strengthening what related industries already exists. There are accomplished creative industries entrepreneurs across the sectorby building on this momentum; the Creative Hub can support the continued development of the sector. Current users of 44 Gaukel appreciate its mid- century modern design, offbeat current post office aesthetic, and are eager to explore how its unique spaces can be used. Provision of flexible spaces for collaboration and Creative practitioners, Expanded use of the building incubation that accommodate different work space ancillary users, public and needs. Expanded use of the building will further area businesses bring more activity and vibrancy to the core and the community. Optimallocation with access to public transit and mix Creative practitioners, Downtown location of uses downtown would build urban vitalityancillary users, public and area businesses 1 - 33 Section Conclusions 8 General conclusions identified as part of this analysis are that there is a demonstrated need to support growth in the creative industry locally in Kitchener. Significant direct and indirect community benefits provide justification for City investment and provision of space for creative industry workers to foster incubation and collaboration in their industry. Stakeholder consultation initiatives over the last 20 years have consistently confirmed the need and desire for affordable and supportive space for creative work, collaboration, presentation, and connection. The creative hub at 44 Gaukel will provide affordable, incubator-style space to creative practitioners by offering office and workspace, flexible space for workshops, events, exhibitions, rehearsals, small performances, and meetings. This type of accessible space will serve to support and strengthen the creative industries specifically, and the local economy in general. The proposed partnership model will build on organizational strengths in the sector, positively impact operational efficiency at 44 Gaukel, and bring added vibrancy to the downtown and community. This project There are significant risks in not moving forward with this project, including the continued downward creative industry employment trend which will result in decreased competitiveness in the global marketplace, and the loss of vibrancy An investment in the creative hub is an investment in the future of the citizens of Kitchener. A decision to support the project will have significant positive impacts on this community, both today and for generations to come. 1 - 34 APPENDIX 2 - PROPOSED TENANT LAYOUT, FLOOR 1, 44 GAUKEL 1 - 35 APPENDIX 3 - RECENT ACTIVITIES AT 44 GAUKEL VACANT, 2012: 44 GAUKEL 2018: All photos from Instagram and have been hash tagged #44Gaukel 1 - 36 APPENDIX 4- FINANCIAL OVERVIEW Note: Revenues are entered in brackets 1 - 37