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HomeMy WebLinkAboutFCS-14-053 - CarShare Line of Credit Staff Report I r finance and Corporate Services Department wvwuukitchenerra REPORT TO: Finance and Corporate Services Committee DATE OF MEETING: April 07, 2014 SUBMITTED BY: Ryan Hagey, Director of Financial Planning 519-741-2200 Ext 7353 Debra Fagerdahl, Manager of Financial Planning PREPARED BY: 519-741-2200 Ext 7114 & Joshua Joseph, Transportation Demand Management Coordinator 519-741-2200 Ext 7152 WARD(S) INVOLVED: All DATE OF REPORT: March 25, 2014 REPORT NO.: FCS-04-053 SUBJECT: CarShare Line of Credit RECOMMENDATION: That the existing Line of Credit to The People's Car Cooperative Inc., operating as Community CarShare (CarShare) be extended subject to the following terms and conditions: • the credit limit be maintained at $30,000 • the term of the line of credit be for five years (expires April 30, 2019) • the interest rate on the Line of Credit be set at the average interest rate of the City's long term investment portfolio to be adjusted yearly • that CarShare provide yearly audited statements to the City And further that the Mayor and Clerk be authorized to enter into an agreement with The People's Car Cooperative Inc. satisfactory to the City Solicitor. BACKGROUND: People's Car Cooperative Inc. operating as Community CarShare (CarShare) is a non-profit organization with a mission to develop and promote car sharing as an alternative to privately owning a car in the Region of Waterloo. In 2002, Council granted CarShare (then known as Grand River CarShare) a line of credit in the amount of $30,000 at an interest rate of 10% with full payment required by April 30, 2009. The City of Cambridge, City of Waterloo and the Region of Waterloo also partnered with CarShare on similar agreements expiring on April 30, 2009. The intent of the initial request was to provide financial assistance so that CarShare be a self-sustaining business within three years through implementation of their business plan. In March 2009 Council agreed to extend the Line of Credit to April 30, 3 - 1 2014 at the City's short-term interest rate. The City of Waterloo and the Region of Waterloo again entered into similar financial arrangements due April 30, 2014. As this agreement is expiring, CarShare has contacted staff requesting to extend the term to April 30, 2019 and increase the amount of the line of credit from $30,000 to $50,000. They have also approached the City of Waterloo, and the Region of Waterloo with similar requests. Since 2009, CarShare has also obtained a line of credit from the City of Hamilton for $150,000. Attached to this report is the official letter from CarShare outlining their request. REPORT: City staff analyzed several years of confidential financial information and determined that the risk to the City has increased since 2009. However CarShare is currently up-to-date in making payments on their existing line of credit. The current balance on the line of credit is $7,000 and this is payable by April 30, 2014. Support of a car sharing program aligns with a number of the City's strategic directions and is an effective Transportation Demand Management tool, in that it can reduce vehicle travel, parking demand and is largely run without municipal involvement. Membership has grown from 198 in 2009 to 1,030 in 2014 with approximately one-third of membership based in Kitchener. After meeting with CarShare and analyzing past financial information and future projections, staff have identified several options and have summarized them in the table below. Staff recommendations are noted in the far right column. OPTIONS FOR COUNCIL TO CONSIDER Does Council wish to extend the line of credit term past April 30, 2014? • The partnership with CarShare will continue. Yes • Aligns with the City's strategic focus on the environment and 1 transportation demand management initiatives No • The partnership with CarShare ends. • The City is free from any financial obligation What is the maximum amount that Council wishes to apply to the Line of Credit? • Increased amount requested by CarShare $50K • Provides increased financial flexibility for CarShare • Increases risk exposure to the City 2 0 Current amount in place $30K • Provides continued financial support for CarShare • Growth may be limited in Kitchener should the other municipalities increase their credit limit 3 - 2 What term does Council wish to apply to the Line of Credit? • Extension requested by CarShare - April 30, 2019 • Increases risk exposure to the City 5 yrs. . Allows the City to reevaluate the demand for shared cars after the ✓ introduction of the LRT 3 • Shorter term option - April 30, 2016 2 yrs. • Allows the City to re-evaluate the demand for shared cars closer to LRT start up What Interest Rate does Council wish to apply to the Line of Credit? • As defined by the average interest rate of the City's short term Short investment portfolio, adjusted annually (1.56 % in 2013) Term . Interest rate is not reflective of the increased financial risk to the City Rates nor the long-term nature of the loan 4 • As defined by the average interest rate of the City's long term Long investment portfolio, adjusted annually (4.25% in 2013) Term • Interest is more reflective of the increased financial risk to the City ✓ Rates . Reflects interest rates applicable with long-term loans • Consistent with rates applied by other Municipalities Given the financial performance of CarShare over the past five years, the City may be at risk if the growth plans of CarShare do not materialize and financial performance does not meet expectations. Although CarShare has an excellent repayment history, given this increased risk, it is recommended that the line of credit be maintained at $30,000 and that the interest rate be set at the average interest rate of the City's long term investment portfolio, adjusted annually and that the term be extended to April 30, 2019. ALIGNMENT WITH CITY OF KITCHENER STRATEGIC PLAN: CarShare aligns with the City's strategic goals and policies, including: • Kitchener's TDM Plan (section 3.2.2 Support the Existing CarShare Program) • The City of Kitchener's Official Plan, Planning Around Rapid Transit Station Areas (PARTS) and City of Kitchener's Strategic Plan: Leadership and Engagement: The City of Kitchener is taking an active leadership role by supporting carsharing and engaging the public to better understand how to reduce single occupancy vehicle travel, parking demand, and traffic congestion. Quality of Life: Supporting CarShare will lead to an improvement in quality of life through reduced traffic congestion, improved air quality, and providing residents with more transportation options. 3 - 3 Environment: CarShare can reduce single occupancy vehicle travel while increasing use of sustainable mobility options. A greater transportation balance in the community will benefit the environment Diversity: The City of Kitchener is committed to providing residents with equitable access to the social, economic, and cultural fabric of civic life. CarShare can provide current and future residents of Kitchener with an affordable and accessible means of transportation. Development: The Strategic Plan specifically mentions supporting transportation alternatives and developing communities that are safe and connected. CarShare supports sustainable mobility and complements people-friendly development. Dynamic Downtown: The City of Kitchener's vision for a vital and lively Downtown will rely on more residents traveling by foot, bicycle, public transportation and by using CarShare. FINANCIAL IMPLICATIONS: None, if CarShare continues to meet the terms of the agreement. Should CarShare default on the loan and, after engaging in collection activities, the City is unable to collect the amount owing, the City would have to absorb the loan default as a cost to the City's Transportation Demand Management program. COMMUNITY ENGAGEMENT: Inform — This report has been posted publicly as part of the agenda to inform the public and a copy has been provided to CarShare. ACKNOWLEDGED BY: Dan Chapman, Deputy CAO (Finance and Corporate Services) 3 - 4 Loll %1 drl lri /, tiri<,,i January 14, 2014 Josh Joseph Transportation Demand Management Coordinator City of Kitchener 200 King St.W. Kitchener, ON N2G 4G7 Dear Mr.Joseph, Re:Community CarShare Line of Credit Agreement As you may be aware, Community CarShare(incorporated under the Co-operative Corporations Act of Ontario as The People's Car Co-operative Inc.),a local non-profit carsharing co-operative,signed a Line of Credit(LOC) agreement in 2002 with the City of Kitchener.The agreement was renewed for another five years in 2009,and the current term of the agreement is until April 30, 2014,at the City's short-term interest rate, adjusted quarterly.As the current term's end is approaching, Community CarShare would like to request a renewal of the LOC agreement, as well as an increase in the credit limit. Since the LOC term was extended in 2009,Community CarShare has expanded its service considerably. In the City of Kitchener,the CarShare fleet has grown from 6 vehicles in 2009 to 15 currently. Overall,the co-operative's fleet has more than tripled in size,going from 11 vehicles in 2009,to a current total of 37,spread across six different Southwestern Ontario municipalities. Membership has more than quadrupled during the same time frame,with more than 1000 members in the co-op. As the Community CarShare fleet grows, Kitchener residents have an improving suite of sustainable transportation options in their community,and are enabled to make transportation choices that help reduce air pollution, as well as their individual impact on the environment. Many CarShare members are able to choose to own one less car because of the access to vehicles Community CarShare provides when an occasional car is needed. Community CarShare's growth has also directly benefitted the City of Kitchener, as a CarShare vehicle is located on-site at City Nall, and the City holds a Corporate Membership with Community CarShare.This allows city employees to make greener commuting choices,as a CarShare vehicle is available for them at work.Since the first City of Kitchener employees joined as drivers in May 2011,the number of employees using the service has grown to 29. Community CarShare is seeking to have the term of the LOC agreement extended for an additional five years to April 30, 2019.As Community CarShare has demonstrated excellent payment history over the last 12 years of the LOC agreement, ($1,944 in interest paid since 2009,and principal owing to be fully repaid by end of term),the co-op is also asking at this time for an increase in the credit limit to$50,000,to further support our expanding service.This would continue to provide Community CarShare with a flexible and reliable source of capital for local fleet expansion and service improvements,and also help the City of Kitchener meet its environmental goals. To this end, and considering the significant environmental, economic,and social benefits of carsharing, please consider the following request: That Council amends the term of the current$30,000 Line of Credit agreement,signed between The People's Car Co- operative Inc. and the City of Kitchener,from April 30, 2014 to April 30,2019, and increases the credit limit to$50,000. 3 - 5 Community Cat-Share also maintains line of credit agreements with the City of Waterloo and the Region of Waterloo(also $30,000 each),from which the co-op is also seeking an extended term and increased credit limit.The City of Hamilton also provides Community CarShare with a $150,000 line of credit,with a term ending in 2022. Community CarShare is an important and complementary mode of sustainable transportation within the City of Kitchener and we look forward ko continued improvement of our service. Thank you for your time and consideration in this matter. Sincerely, Janet MacLeod Executive Director �� � �� �� ��