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HomeMy WebLinkAboutFCS-15-139 - Centre in the Square Governance Review Staff Report rTC.�r R finance and Corporate Services Department www.kitchener.ca REPORT TO: Finance and Corporate Services Committee DATE OF MEETING: November 2, 2015 SUBMITTED BY: Dan Chapman, Deputy CAO 519-741-2200 x 7347 PREPARED BY: Justin Watkins, Service Improvement Facilitator Dan Chapman, Deputy CAO WARD(S) INVOLVED: N/A DATE OF REPORT: October 6, 2015 REPORT NO.: FCS-15-139 SUBJECT: Centre in the Square Governance Review RECOMMENDATION: WHEREAS City Council adopted a new mandate for Centre in the Square (CITS) on March 30, 2015 and directed staff to review CITS governance in support of the refreshed mandate; WHEREAS the CITS Operational Review (Webb Report) recommended that governance changes should result in minimal disruption, but empower the CITS Board to assume more control over operations of the facility; WHEREAS the CITS Mandate Review (ArtsBuild Ontario Report) recommended that organizational change should be incremental and as resources allow; WHEREAS the current local board model has been identified as one of the two prevalent approaches to governance/service delivery for comparable performing arts facilities; WHEREAS it has been agreed by both the board of CITS and the boards of the two resident organizations (K-W Symphony and K-W Art Gallery) that direct appointments from the resident organizations to the CITS Board creates governance conflicts and is not in keeping with current governance best practice; WHEREAS it has been identified by the CITS Board that the increased operating allocation from the City ($1.75M) is not sufficient to fund the operation during the four- year transition period to achieve the new mandate; WHEREAS the CITS Board has requested clarification surrounding the City's role in, and responsibility for, capital renewal of the CITS; and WHEREAS the CITS Board has requested clarification surrounding the role and accountability of members of City Council serving on the CITS Board; ***This information is available in accessible formats upon request. *** Please call 519-741-2345 or TTY 1-866-969-9994 for assistance. 3 - 1 NOW THEREFORE BE IT RESOLVED THAT the Centre in the Square (CITS) continue to operate as a local board under its present structure, subject to the following governance improvements to address issues identified by its stakeholders: • THAT the current practice of cross-appointments to the CITS Board from the two resident organizations (K-W Symphony and K-W Art Gallery) be discontinued effective for the November 2015 board nominations in favour of a process whereby each organization present a list of at least three potential nominees to CITS for review as part of the CITS Board nomination process, with the final choice of two resident organization nominees to rest with CITS, said nominees to be informed and interested individuals who are not sitting KWS/KWAG board members and with no expectation of communication of information between the two organizations; • THAT a more rigorous communication process between CITS and its resident organizations (K-W Symphony and K-W Art Gallery) be detailed in the new memorandum of understanding between the organizations as outlined in general terms in staff report FCS-15-139; • THAT City Council confirm its commitment to provide transition funding to CITS, in addition to the $1.75M annual operating allocation, subject to review and approval through the annual budget process in order to facilitate the full adoption of the new mandate within the next four years; • THAT the decision making accountability of the CITS Board for facility maintenance (including capital expenditures) be confirmed, and a collaborative approach to facility/component asset management be established between CITS and the City's facilities management division as outlined in general terms in staff report FCS-15-139; and further • THAT CITS expand the existing terms of reference for CITS Board members to incorporate the Council-approved mandate, the role of the Board and Council as defined in the legislation, and specific duties of Council as it relates to their responsibility for the board-City interface as outlined in Appendix A to staff report FCS-15-139. EXECUTIVE SUMMARY: This report represents a summary of work undertaken to review the Centre in the Square (CITS) governance model. The purpose of the review was to ensure that the CITS Board is adequately empowered to act on its new mandate, utilizing a delivery model that would result in minimal disruption to CITS operations. Extensive research into the subject matter has been undertaken, in consultation with the CITS Board, the Kitchener-Waterloo Symphony (KWS) and the Kitchener-Waterloo Art Gallery (KWAG). It was concluded from this research that two models could best deliver on the CITS mandate approved by Council: transferring CITS operations to a municipal line department under a direct delivery model, or to continue as a local board. After careful consideration, it is proposed that CITS remain as a local board and that several changes be implemented to address governance issues identified by its stakeholders, including- 3 - 2 • Discontinuation of the current practice of Board cross appointments from the two resident organizations of CITS (K-W Symphony and K-W Art Gallery) effective for the November 2015 board nominations in favour of each presenting a list of at least three potential nominees to the CITS Board as part of its nomination process, with the final choice of two resident organization nominees to rest with CITS; • A more rigorous communication process between CITS and its resident organizations, detailed under the new memorandum of understanding; • Confirmation of Council's commitment to provide transition funding to CITS, in addition to the $1.75M annual operating allocation, subject to review and approval through the annual budget process in order to facilitate the full adoption of the new mandate within the next four years; • A collaborative approach to facility/component asset management between CITS and the City's facilities management division, while confirming the decision- making accountability of the CITS Board for maintenance, including capital expenditures; and • Expanding the existing terms of reference for CITS board members to incorporate the Council-approved mandate, the role of the Board and Council as defined in the legislation, and specific duties of Council as it relates to their responsibility for the board-City interface. BACKGROUND: CITS has been a core component of the community's cultural infrastructure since it was established over thirty years ago. The operations of CITS have come under increasing pressure in recent years due to changes within the cultural sector coupled with the demands of an aging facility. These challenges have been well documented in the past, in particular through the operational review undertaken by Webb Management Services in 2014. A subsequent body of work was undertaken in 2015 by ArtsBuild Ontario, which ultimately led to the adoption of a new Council-approved mandate for CITS. The new mandate provides long-term, high-level direction to the CITS Board on the City's expectations for what CITS is to do and to be. It intends to strike a balance between community and commercial programing by presenting, co-presenting or facilitating local cultural products; and by presenting and co-presenting acts and artists from outside the area, maximizing net revenues in support of the operations of the CITS. An important aspect of the new mandate includes the recognition of KWS and KWAG as founding partners and resident organizations. It also anticipates that the schedule will be rationalized to free up more prime dates from KWS to support commercial programming. As a further outcome of the ArtsBuild Ontario process, a 12-month action plan was also adopted that included direction to examine the CITS governance model. The purpose of the CITS governance review was to ensure that the approach to service delivery is aligned with the new mandate. 3 - 3 This report will address the following topics: • Section 1: Background research on governance and service delivery options • Section 2: History on the evolution of the CITS Board since 1981 • Section 3: Review of issues raised by stakeholders: o Relationship to KWS and KWAG • Financial accountability • Role of City Council • Section 4: Analysis of governance options • Section 5: Conclusions and recommendations REPORT: As a starting point for the CITS governance review, considerable research was undertaken by reviewing relevant literature on service delivery models and examining operating structures of comparable performing arts centres. This research was undertaken with due consideration for the recommendations made by the Webb Report that governance changes result in minimal disruption, but empower the CITS Board to assume more control over operations of the facility. This approach was also recommended by the ArtsBuild Ontario report, proposing that organizational change should be incremental and as resources allow. Section 1: Governance and Service Delivery Models A simple definition of governance generally offers a singular focus to the term, using words such as "authority" and "control", but also explains governance as a system of management. The Institute on Governance has offered more care in its definition, proposing that "a need for governance exists anytime a group of people come together to accomplish an end," and essentially rests on three pillars. authority, decision making and accountability. Using the definition of authority, decision making and accountability, the link between governance and service delivery comes into focus. Service delivery models vary within a broad spectrum, ranging from highly centralized to fully decentralized. Therefore, each delivery model presents governance implications as the role of municipal decision makers becomes further removed, as outlined below: • Direct delivery: The service provision is delivered through a traditional line department. This method provides the greatest degree of control for a municipal council to oversee operations and make changes to the service as needed. • Local boards: Boards are typically given a specific service to provide, and while they typically include representation from a municipal council, the Board is not overseen by council as a whole. These models also exist with different degrees of authority established by legislation or municipal by-law. • Municipal corporations: Established under provincial legislation with the municipality typically serving as the sole shareholder and exist with different degrees of authority. 3 - 4 • Public-private partnerships (P3): P3s are a contractual agreement between the public sector and a third party to jointly deliver or fund a service/project. There is typically some incentive to pursue this delivery model in order to transfer risk from one party to another. Authority and control is articulated in a contractual agreement. • Outsourcing: Outsourcing involves a contractual agreement for service delivery by a third party. Authority and control is articulated in a contractual agreement. • Privatization: Privatization involves the sale of government assets to for-profit entities. Under this model a municipality has no authority or control. CITS does not fit cleanly into this continuum as it is a corporation established through private legislation which also has attributes of a local board model. For simplicity, it will be referred to as a local board within this report even though it does not fully meet the classic definition of a local board. To assist in framing the discussion around delivery models, six comparator venues from across Ontario were identified by CITS staff to provide context from the performing arts industry. Each venue was selected based on based on size, operating model and municipal relationship. From these six facilities, five responses were received. Table 1: Service Delivery Comparison (Sample Venues, 2015) Venue Capacity Owner Model Centre in the Square 2,447 City of Kitchener Local Board The Living Arts Centre 1,315 City of Mississauga Local Board The Rose Theatre 870 City of Brampton Direct Delivery The Grand Theatre 729 City of Kingston Direct Delivery Burlington Performing Arts Centre 718 City of Burlington Local Board Oakville Centre for the Performing Arts 485 Town of Oakville Direct Delivery Out of the five facilities reviewed, three utilize a direct delivery model by the municipality. The remaining two are governed by a local board, which included representation from the municipality. Two conclusions arise from this benchmarking. • Direct delivery and local boards appear to be the dominant operating models for similar municipal performing arts facilities; and • There does not appear to be a meaningful link between venue size (capacity) and the service delivery model. Section 2: Evolution of the CITS Board The Centre In The Square Inc. as a corporation was created by a Private Member's Bill titled An Act respecting the City of Kitchener (1981, c.90), passed on November 19, 1981. The original Board was composed of three directors from council and six directors who were not councillors. A subsequent members' bill in 1983 retained the overall number of nine directors, but stipulated that the Mayor of the City must be one of the 3 - 5 nine directors. Over time, Board composition has grown to a total of 14 directors, with representation from City officials remaining unchanged. Table 2: Evolution of CITS Board Composition Legislation Barn City Lay Appointed', .Year, Composition R presentat n Establishing g Directors 3 Directors 6 Directors 1981 Legislation c.90 Private Member's g Directors 3 Directors + 5 Directors 1983 Bill Mayor Private Member's 10 Directors 3 Directors + 6 Directors 1984 Bill Mayor By-law 97-91 12 Directors 3 Directors + 8 Directors 1997 Mayor By-law 2006-182 14 Directors 3 Directors + 10 Directors 2006 Mayor Notes: Appointing directors has always been through council by-law. The current composition for lay appointments (10 Directors) includes one representative from KWS, one representative from KWAG, and two fundraising representatives. The original Bill(c.90)legislates that at least one director would be from both the Kitchener-Waterloo Symphony Orchestra Association, Inc. (KWS) and the Kitchener-Waterloo Art Gallery(KWAG). The establishing legislation from 1981 speaks extensively about the authority, decision making and accountability of the CITS Board in managing the operations of the facility. Within the legislation, it speaks first and foremost that the Board is to maintain, manage and operate the theatre in the public interest. The legislation outlines this by detailing the duties of the Board, including: • Electing a chair and vice chair annually; • Appointing a CEO (general manager/executive director); • Establishing an annual budget; • Promoting / presenting educational and cultural activities, performing arts and artistic works; • Hiring employees/agents and determining qualifications, responsibilities, duties, positions, remuneration, etc.; • Enacting by-laws and entering into agreements This is a comprehensive list of responsibilities and, under supportive conditions, affords decision making, authority and accountability to the board. The establishing legislation also contemplates representation from the arts and culture community by providing that two directors of the CITS Board be nominees of KWS and 3 - 6 KWAG. In practice, KWS and KWAG representation has been by way of cross- appointment from the KWS and KWAG Boards to the CITS Board. As indicated at the onset of this report, the new mandate for CITS envisions a continued relationship with KWS and KWAG as resident organizations although potential does exist to change the nature of the governance relationship as outlined later within this report. Section 3: Stakeholder Issues Both the Webb Report and the Arts Build Report note deficiencies with the current governance arrangement for CITS, including unclear responsibilities for capital improvements and the role of KWS/KWAG on the CITS Board. In particular, the Webb Report notes concerns by Board members regarding the degree of independence between CITS and Council. Similar concerns by CITS Board members have been conveyed in preparation of this report as well. KW Symphony and KW Art Gallery When Council approved the new mandate for CITS, it also expressed clear expectations for a renewed relationship between the CITS Board and its resident organizations going forward. A key focus point of this included negotiating a new agreement on performance dates and rates between CITS and KWS for the 2016-17 and 2017-18 seasons, in order to provide more prime-time availability for commercial productions. This has been the subject of a separate staff report. On July 7, representatives from the KWS board met with the CITS Chair and City staff. The purpose of the meeting was to discuss the current governance structure of CITS, possible design considerations in reviewing that structure, and creating opportunities to improve the relationship between CITS and KWS going forward. Overall, the discussion was received positively by both parties and focused primarily on ways of improving communication. Members from the KWS acknowledged and agreed that having a sitting member of the KWS board also serve on the board of CITS did create conflict related to fiduciary obligations. While members of KWS do not expect a sitting board member have a cross-appointment to CITS board in the future, they did express a desire to propose a slate of candidates with expertise and knowledge of the arts community for consideration by CITS. This position by KWS has since been reaffirmed in the following motion passed by the KWS Board: THAT KWS presents a slate of 2 or 3 individuals to the Centre in The Square (CITS) for review as part of the CITS Board nomination process. The final choice of one Board candidate will rest with CITS. The KWS nominations will be informed and interested individuals who are not sitting KWS Board members and there will be no expectation of reporting information between the two organizations. THAT a more rigorous communication process between CITS and the KWS be detailed in the new Memorandum of Understanding between the two organizations. 3 - 7 A similar meeting was held with members of KWAG on July 27. Overall, KWAG expressed similar concerns regarding cross-appointments to the CITS Board and communications between both parties. KWAG also supports the concept of proposing candidates to CITS Board and annual joint Board meetings for improved communications. Financial Accountability The CITS Board feels strongly that of the two lines of business it is currently involved in (facility management and programing of CITS), responsibility to deliver on arts and culture programing is its core competency. Due to various constraints and challenges identified within this report, the CITS Board has expressed concern that its budget is insufficient to achieve the mandate approved by Council. In response, Council notionally allocated an additional $350,000 in the 2016 budget to increase funding for CITS (or the KWS should it be required to mitigate the impacts of transferring prime dates from KWS to CITS). While this will serve to close a large portion of the identified gap, the board has flagged that an additional $250,000 operating shortfall is identified for 2016 due, in large part, to the fact that the transition to a new operating model is anticipated to require four years. Council's commitment to provide additional financial support to CITS through this transition period, subject to review and approval through the annual budget process, would be a significant signal to the CITS Board that it will have the means with which to execute the Council-approved mandate. The work undertaken by ArtsBuild Ontario identified a need to further clarify roles and processes related to major maintenance and capital investment activities. Staff from the City's Facilities Management Division and CITS have met to review current practices, various building assessment information and to discuss operating philosophies. Given the purpose built nature of the facility and the needs of KWS and KWAG, staff at the City and CITS recognizes the need to develop processes to include the perspectives and needs of these two resident organizations. Going forward, a collaborative approach to facility/component asset management is required although it must be made clear that the CITS Board has the ultimate decision making accountability with respect to maintenance of CITS as is clearly defined in the legislation. From the inception of CITS this has included capital expenditures. Given the age of the facility, this accountability is presenting larger and larger challenges for the CITS Board. Greater collaboration with the City will ensure that there is agreement/understanding around the future capital requirements and the related funding contributions of CITS (through ticket surcharges, grants and philanthropy) and the City (through property taxes). Role of City Council As noted above, service delivery models vary within a broad spectrum, ranging from highly centralized to fully decentralized, with the authority and control of a Council diminishing along that spectrum. Service delivery models are selected by Councils for a variety of competing reasons, none of which are necessarily addressed in a uniform fashion by municipalities. The centralized approach by its very nature offers one obvious method to service delivery — the traditional line department (direct delivery). The Kitchener Memorial 3 - 8 Auditorium and Kitchener Utilities are two examples relevant to the City of Kitchener. This method provides the greatest degree of control for a Council to oversee operations and make changes to the service as needed. Perhaps the most commonly used delivery model used outside of direct delivery is the "arms-length" local board. Boards are typically given a specific service to provide and while they typically include representation from a municipal Council, the board is not overseen by Council as a whole. Centre in the Square presently operates under a similar model, subject to the special legislation which established the corporation. Local boards were originally envisioned as a way to depoliticize certain services and for other services to be operated and overseen by individuals with specific skills and expertise. The research does not provide much insight on the origins of the common practice of appointing elected officials to local boards, presumably because local boards are utilized differently by many jurisdictions with varying degrees of authority and control. It can only be surmised that this is seen as a compromise: a way to de- politicize a particular service while at the same time providing for a channel of communication and accountability mechanism between the board and Council. Special-purpose bodies such as local boards have not been immune to criticism, particularly because of a perceived lack of accountability for the large sums of public money that are spent by them. The research suggests that one way to improve relationships between boards and Councils is to ensure that the points of accountability are well known, noting that terms of reference can be important tools. Other literature suggests that if a local board is utilized, having the right composition with the right people is critical. This supports the claim that often a struggle for local boards can be rooted in a lack of clarity in mandate, and by extension, a struggle between "acting like good business people" and acting in the public interest. This struggle has clearly been articulated by members of the CITS Board as well, often stating it does not feel that its current relationship with Council allows it to truly function as a board, and because of that, it is not adequately empowered to act on its new mandate. The number of Council representatives on the CITS Board has also been a subject of recent discussion. As an outcome of the Webb report, Council directed staff to amend the governing documents to reduce the number of City representatives on the CITS Board by half, from four to two. When it was identified that this would require Provincial amendments to special legislation, Council appointed a full slate of councillors (Mayor plus three Councillors) to the CITS Board for a one year term in 2015. Council will need to set its mind to the slate of Councillors to appoint to the CITS Board as of November 2015. Below is a comparison of City Council representation on the CITS Board vs. other local boards. It illustrates that CITS has the largest representation by Council of any local board in absolute numbers, but is at the mean when this representation is expressed as a percentage of the total board size (resulting from the fact that CITS is the largest of all of the boards). 3 - 9 Table 3: City Council Representation on Local Boards Local Board Council Representation Total Board % of Board comprised Size of Mayor and/or Councillors Centre in the' 4 (Mayor+ 3 Councillors) 14 29% Square Belmont BIA 1 (Councillor) 7 14% Kitchener 3 (Mayor + 2 Councillors) 12 25% Downtown BIA Kitchener 3 (Mayor + 2 Councillors) 10 30% Housing Inc. Kitchener 2 (Councillors) 12 17% Public Library Kitchener 3 (Mayor + 2 Councillors) 6 50% Power Corp. Mean 2.7 10.2 28% Some members of the CITS board have expressed the view that the CITS board is too large and as a result can be cumbersome/unwieldy in decision making. One suggestion that has been put forward is to consider reducing the number of Board members from 14 to 12. One of the reduced positions would be from the public appointments and the other would be from the Council representation. If supported, this would reduce the Council representation on the Board to 25% and would require amendments to the special legislation to permanently enact the change. Section 4: Governance Options for CITS Based on the above analysis and the recommendations made by the Webb Report and the ArtsBuild Ontario report, it can be concluded that two alternative delivery models are most likely best suited to deliver on the new CITS mandate: direct delivery or a local board. Given the nature of the mandate selected by Council, it is clear that either delivery model could be used for CITS operations. Both models are widely used by similar performing arts and cultural centres across Ontario, with the local board model being used at CITS currently, subject to the nuances of the special legislation which created it. From this, each delivery model was evaluated to determine which could best address stakeholder concerns involving resident organization relations, financial accountability and the role of Council, with the least amount of disruption to CITS operations. Direct Delivery Option The first option involves the disbandment of the CITS Board and the consolidation of CITS operations within a City line department. As a result, Council would become the 3 - 10 sole decision making authority of operations at CITS, with full control over the CITS mandate, determining capital improvements and managing relations with resident organizations. In doing so, however, Council also absorbs all of the risks and responsibilities associated with governing its operations. In order to retain a certain amount of expertise, under such arrangement Council could utilize an adjunct committee, composed of community representatives from the performing arts and business sectors. The primary difference under this arrangement is that such a committee would serve only to provide advice and would not provide any governance or operational oversight. Further, such a committee would not bear the weight of responsibility that the CITS Board currently carries for things such as resident organization relations, controversial programming decisions, staffing/labour management issues, etc. Another option under this model would essentially serve as a hybrid of direct delivery and a local board. This option would see the operations of CITS transferred to the City, assuming responsibility for capital investments, facility management and tenant relations with KWS and KWAG. The CITS Board would remain in place under its current composition, however, with responsibility to only provide arts and culture programming on behalf of the City. While this would create some new risk for the City by assuming responsibility for facility management and landlord-tenant relations, it would still allow Council to transfer any risk associated with arts and culture programming to the CITS Board. While it is possible that either option may not result in significant disruption to CITS operations from the perspective of patrons, it would require intensive efforts on the part of the City to transition from a local board into a line department. Since CITS was established by provincial legislation, this option would also require that the provincial government dissolve the corporation, and may result in adverse funding implications for the City under this model, including implications for grant funding, philanthropy and sponsorship, labour relations, etc. Local Board Option Opting to use a local board as the delivery model is a retention of the status quo. This model is selected in order to deliver a specific service by industry professionals with the expectation to capitalize on revenue opportunities to offset operating expenditures. This was a commonly cited rationale by subject matter experts for the use of local boards. In doing so, a municipality is able to transfer a certain amount of risk to another party because of their particular expertise and singular focus. Use of the local board also allows Council to retain some authority and control over the service, with the municipality not being involved directly in day-to-day operations. By operating as its own corporation under special legislation, CITS is also able to exploit specialized arts and culture grants, serving as an alternate source of revenue to offset operating expenses. The organization is also able to explore other initiatives more freely to offset expense such as capital campaigns and other specialized donor programs. It has also been noted previously that one of the strengths of the local board model in the case of the performing arts is that it allows for a greater degree of artistic freedom 3 - 11 and avoidance of real or perceived censorship arising from direct political influence. This is very similar to the rationale supporting the existence of public library boards. There have been many performances over the years at CITS where there was strong public opinion both in favour and in opposition to the nature of the artistic expression. The use of a local board permits the organization to explore and evaluate these opportunities with a greater degree of freedom. Perhaps the biggest perceived benefit of a local board (that has been refuted over the years however) is the need to deliver a specialized or more businesslike service at arm's length of a Council. During the reform era that saw the rise of bodies such as transit commissions and hydro-electric utilities, it was widely assumed that revenue generating and other highly specialized services required specialized expertise in staff and oversight. Many municipalities have since proven this assertion incorrect, operating many highly specialized and revenue generating services, such as Kitchener Utilities and the city's other enterprise businesses, through a direct delivery model. Section 5: Conclusions and Recommendations Based on the analysis outlined above, staff recommends retention of the local board model for CITS governance at this time. This position is consistent with the findings of the Webb Report and the ArtsBuild Ontario report which outlined that there was not a need to radically change CITS from one service delivery model to another. As noted above, each model is capable of delivering the service. That being said, despite disruptive changes within the sector that have challenged the CITS Board in recent years, there is little indication that the local board model has not served the City well over the longer time horizon encompassing the last 35 years. Through the governance review process, a series of opportunities for improvement to the current model were identified by stakeholders. By acting on these opportunities, staff believes that the CITS Board will be in a better position to discharge its Council- approved mandate with an appropriate level of authority, decision-making and accountability. Each opportunity would involve little or no disruption to CITS operations and can be initiated by the CITS Board, virtually independently of Council. The recommended improvements consist of the following: Recommendation #1 — Discontinue the process of cross-appointment from resident organization boards effective immediately CITS' enabling legislation from 1981 has always envisioned a role for both KWS and KWAG on its board of directors. The practice of cross-appointments from the Boards of KWS and KWAG to CITS, however, it is not outlined by legislation. It is proposed that going forward the practice of cross-appointments cease and for the CITS Board to receive a slate of community candidates from the boards of KWS and KWAG for consideration. One nomination would be advanced from each list by the CITS Board for Council approval. This approach is in keeping with contemporary perspectives on good governance and would strengthen the authority, decision-making and accountability of the CITS Board. This change can be implemented effective for the upcoming board nomination process in November 2015. 3 - 12 It is suggested that CITS provide KWS and KWAG with a copy of its skills matrix with specific identification of any skills gaps on the Board (e.g., financial, legal, human resources, cultural sector, youth perspective, etc.) in order that KWS and KWAG may consider putting forward nominations that can also assist CITS in addressing its skills requirements. Recommendation #2 — Strengthen relations with resident organizations through a formalized communications framework Both KWS and KWAG have agreed that communications between all parties could be improved by creating more formal relationships between the organizations. This is especially important in light of the proposed recommendation to eliminate the communications channel previously afforded through board cross-appointments. As an example, it was suggested that all parties could benefit from holding joint meetings on an annual basis to discuss strategic priorities. A communications framework was proposed by members of the KWS Board and is supported in principle by KWAG. The proposed framework would exist on four levels and should be developed in a more detailed final form during the renewal of the memorandums of understanding between CITS and its resident organizations. Table 4: Proposed Communications Framework for Resident Organizations Communication Level Nature of Relationship • Department to department communications • Informal, regular dialogue between counterparts within Operation to Operation the three organizations (CITS, KWAG and KWS) • Resolution of front-line issues • Coordinated planning • Informal, regular dialogue between counterparts • Awareness of organizational priorities, programs Executive Director to Resolution of higher-level issues Executive Director Negotiation of key agreements • Coordination of organizational strategy and planning • Management of high-level relationship • Informal dialogue on an as-needed basis, with periodic Chair to Chair "check ins" • Escalated trouble shooting • Coordination of mutual relationships to third-parties • Integration of organizational strategies • Building awareness of organizational plans, strategies and constraints Board to Board Development of joint vision where appropriate • Creation of ad hoc working groups as needed to explore issues of mutual interest 3 - 13 Recommendation #3 — Confirm the City's financial commitment to CITS as it transitions to a new mandate Council has already given budget direction for 2016 to increase annual operating support to Centre in the Square from $1.4M to $1.75M. Beyond this, Council's commitment to provide additional financial support to CITS through the transition period leading to full adoption of the new mandate, subject to review and approval through the annual budget process, would be a significant signal to the CITS Board that it will have the means with which to execute the Council-approved mandate. CITS has outlined a four-year transition plan and a potential shortfall of$250,000 in year 1 (2016) above and beyond the new $1.75M annual operating contribution. Recommendation #4 — Adopt a collaborative approach to developing asset renewal priorities and the associated financial plans, while reinforcing the ultimate decision making accountability of the CITS Board for facility maintenance, including capital expenditures The original legislation clearly outlines the decision-making accountability of the Board with respect to facility maintenance, which has to date included capital expenditures. This should be reinforced. This is only qualified by the fact that the CITS budget is subject to annual approval by City Council. As outlined in the report above, staff from the City's Facilities Management Division and CITS met to review current practices, various building assessment information and to discuss operating philosophies. Going forward, collaboration around facility/component asset management is recommended under the following approach in recognition of the fact that both CITS and the City contribute significant funds to capital renewal through the CITS ticket surcharge and the property tax levy- 1. Review and prioritize facility needs at least bi-annually through an established staff team from CITS and the City, which includes the Director of Facilities Management and the CEO of CITS. City staff will be involved in the prioritization process and the formulation of budget recommendations to the CITS Board and ultimately City Council for the following major building components, recognizing the interest of the City as major funder and asset owner. 3 - 14 Table 5: Proposed Responsibility for Funding Facility Asset Components Sole City Negotiated Based on Sole CITS Component Function • Roofing assemblies Mechanical Systems • Production/curatorial • Building envelope (eg City responsible aspects for HVAC systems, • Theatrical aspects CITS responsible for (curtains, stage, stage hydraulic seating, etc.) systems) • Artistic programming • Electrical Systems (eg needs City responsible for service to the building, CITS responsible for Sound/Theatrical Lighting) • Building Automation*** • Accessibility*** • Floor Finishes*** • Plumbing Systems*** ***in these instances, the funding responsibility/split would be dictated by the driver of the work and would be subject to negotiation. For example, the plumbing systems associated with a washroom upgrade undertaken for cosmetic/esthetic reasons would be primarily a CITS responsibility while the renewal of plumbing systems at the end of their Iifecycle would be primarily a City responsibility. This proposed approach is similar to the relationship the City has with other arms-length groups. This division of responsibility should remain flexible enough to allow CITS and the City to pursue funding (e.g., grants, sponsorship or capital campaigns and other specialized donor programs) for any capital expenditure regardless of where the funding responsibility rests. CITS and City staff have indicated that a long-term (10-year) financial projection for capital renewal will be developed collaboratively within the next six months which will form the basis for the 2017 capital budget. This projection will serve to further delineate the division of responsibility between the City and CITS. 2. CITS undertakes to consult regularly with both of the resident organizations (KWAG and KWS) regarding their ongoing needs in the facility, what upgrades and alterations they might seek, and how all proposed changes and work to be undertaken might impact on their use of the facility. 3. Establish a centralized asset data management system and plan for CITS and component assets. 3 - 15 4. Capitalize on opportunities to maximize economies of scale by pairing CITS work with existing City contracts. 5. Establish a "lead" and "supporting" organization for each ongoing asset upgrade project. Recommendation #5 — Clarify the role of Council The recommendations outlined above address, at least in part, the concerns expressed by some members of the CITS Board that the current relationship with the City limits its ability to truly function as a board, and because of that, it is not adequately empowered to act on its new mandate. To further address this issue, it is recommended that CITS expand the existing terms of reference for CITS board members to incorporate- - The Council-approved mandate - The role of the Board and the role of Council as outlined in the legislation - Specific duties of Council as it relates to their responsibility for the board-City interface Draft language in each of these areas is attached as Appendix A. ALIGNMENT WITH CITY OF KITCHENER STRATEGIC PLAN: Strategic Priority: Strong and Resilient Economy Strategy: 2.4 Develop and nurture a high quality of life and a powerful identity for the City of Kitchener to attract investment and a talented creative workforce. Strategic Action: #12 Centre in the Square FINANCIAL IMPLICATIONS: There are no financial implications associated with this report at this time. Any adjustment to CITS operating or capital funding will be considered as part of the 2016 budget process and beyond. COMMUNITY ENGAGEMENT: INFORM This report has been posted to the City's website with the agenda in advance of the council / committee meeting. CONSULT As indicated above, City staff has consulted with the CITS Board, the KWS Board and the KWAG Board in preparation of this report. ACKNOWLEDGED BY: Dan Chapman, Deputy CAO 3 - 16 APPENDIX A CENTRE IN THE SQUARE PROPOSED ADDITIONS TO BOARD MEMBER TERMS OF REFERENCE Centre in the Square as a Separate Corporate Entity The Centre in the Square (CITS) has been established as a corporation owned by the City of Kitchener under provincial legislation (An Act respecting the City of Kitchener (1981, c.90)). It operates separate from the corporate structure of the City of Kitchener, accountable to a board of directors consisting of community leaders and members of Kitchener City Council. Mandate The original establishing legislation identifies that an objective of the CITS Board is to maintain, operate and manage the theatre in the public interest. This has been reinforced by the mandate established by Council in 2015 for CITS: As a key component of civic infrastructure, the Centre in the Square is, first and foremost, a place for citizens to engage their creativity and to experience and participate in arts and culture that originates from within, and is reflective of, the community. CITS is a home for the best that the area has to offer in terms of the live and visual arts. As well, CITS responds to the desire of citizens to experience some of the best and most popular arts and cultural entertainments available, wherever they originate. Specifically, CITS will achieve success by. • presenting, co-presenting or facilitating artists and cultural organizations that create cultural product originating from within and reflective of the community • partnering with local cultural organizations in efforts to jointly promote cultural offerings, build diverse audiences and introduce cultural experiences to young people • partnering with local organizations whose primary focus may not be cultural, but that seek to include the experience of live and visual arts as part of their programs and services or that may wish to use the facilities for non-arts purposes • presenting, co-presenting or facilitating artists and cultural organizations or businesses that create or represent cultural products originating from outside the area, with a focus that includes maximizing net revenues in support of the operations of CITS CITS shall fulfill its mandate in a fiscally responsible manner and with the full knowledge and support of City Council. KWS and KWAG remain at CITS as founding partners and resident organizations. Role of the Board (Including City Council Representatives) 3 - 17 The role of the board is to operationalize the mandate. As outlined in legislation this includes: • Electing a chair and vice chair annually; • Appointing a CEO (general manager/executive director); • Establishing an annual budget; • Promoting / presenting educational and cultural activities, performing arts and artistic works; • Hiring employees/agents and determining qualifications, responsibilities, duties, positions, remuneration, etc.; and • Enacting by-laws and entering into agreements Role of City Council The legislation which established CITS defines the following as the role of Council: • Appointing the CITS Board; • Approving the purchase and sale of real property; • Appointing an Auditor who audits the books of CITS; and • Approving the annual budget of CITS Role of City Councillors Appointed to the Board Function In addition to the duties of all Board members outlined above, City Councillors appointed the CITS Board have the responsibility to reinforce the Council mandate in Board deliberations and ensure regular, open communication between the City of Kitchener and the Board of CITS. Duties of City Councillors Appointed to the Board The City Councillors Appointed to the CITS Board shall be responsible for- 1. Reinforcing the Council-approved mandate regularly; 2. Identifying and communicating policies, actions and decisions made by the City of Kitchener which may impact upon CITS; 3. Identifying policies, actions and decisions made by the CITS Board which may impact upon the City of Kitchener, and ensuring that these are communicated, as appropriate, to the City; 4. Facilitating collaboration between CITS and the City on key initiatives such as strategic planning, community engagement, new program development, financial planning, joint programming, etc.; and 5. Representing and advocating for the decisions and policies of the CITS Board to the extent possible at City Council 3 - 18 10/22/2015 CITS Governance Review Report Presentation to Finance and Corporate Services Committee November 2, 2015 CITS Governance Review Report • Background • Options • Issues • Recommendations • Next Steps 3 - 191 10/22/2015 Background • City staff have undertaken a governance review of CITS over the last six months. • Included extensive research into the subject matter. • Report has been prepared in consultation with CITS, KWS and KWAG. Background • The research established that governance essentially focuses on "authority" and "control". • From this, the link between governance and service delivery comes into focus. • Staff identified through analysis that two delivery models could best deliver on the new mandate for CITS: direct delivery and a local board. 3 - 202 10/22/2015 Options • Direct Delivery — Council would become the sole decision making authority of CITS, but would also absorb all risks associated with its operations. Two sub-options: • Constitute an adjunct advisory committee • City control of operations/CITS Board control of programming — Would require intensive efforts on the part of the City to transition from a local board to a line department. — May result in adverse funding implications for the City, including grant funding, philanthropy and sponsorship, labour relations, etc. Options • Local Board (status quo) — The City transfers some risk to CITS, although not entirely as major funder and asset owner. — By operating as its own corporation under special legislation, CITS is able to exploit specialized arts and culture grants, serving as an alternate source of revenue to offset operating expenses. — Provides a greater degree of artistic freedom and avoidance of real or perceived censorship arising from direct political influence. 3 - 213 10/22/2015 Issues • Concerns expressed by stakeholders: — Relationship to KWS and KWAG • Cross appointments • Communications — Financial accountability • Inability to balance a budget with the new mandate • Long-term capital maintenance expenditures — Role of City Council • Presence of Councillors on the Board • Number of Council appointees Recommendations • Staff recommends retention of the local board model for CITS at this time. • Despite recent challenges, there is little indication that the local board model has not served the City well over the last 35 years. • Position is consistent with the findings of the Webb Report and the ArtsBuild Ontario report. 3 - 224 10/22/2015 Recommendations • A series of opportunities for improvement to the current model were identified by stakeholders. • By acting on these opportunities, staff believes that the CITS Board will be in a better position to discharge its new mandate. • Each opportunity would involve little or no disruption to CITS operations. Recommendation 1 • Discontinue the process of cross- appointments from resident organizations — Proposed that the CITS Board to receive a slate of community candidates from the boards of KWS and KWAG for consideration. — This change can be implemented for the upcoming nomination process. 3 - 235 10/22/2015 Recommendation 2 • Strengthen relations with resident organizations — A communications framework was proposed by members of the KWS board and is supported in principle by KWAG. — Proposed framework would exist on four levels: • Operations to Operations • ED to ED • Chair to Chair • Board to Board Recommendation 3 • Confirm the City's financial commitment to CITS during the transition — Council has already given budget direction for 2016 to increase CITS's annual operating support from $1.4M to $1.75M. — Council's commitment to provide additional financial support through the four-year transition would be a significant assurance to the CITS Board. 3 - 246 10/22/2015 Recommendation 4 • Adopt a collaborative approach to developing asset renewal priorities: — Establishing legislation clearly outlines the decision- making accountability of the Board with respect to facility maintenance, including capital expenditures. This should be reinforced. — Collaboration around facility/component asset management is recommended. — This includes clarity around roles and responsibilities for capital improvements. Recommendation 4 Proposed Responsibility for Funding Facility Asset Components Sole City Negotiated Based on Sole CITS Com onent Function • Roofing assemblies Mechanical Systems • Production/curatorial • Building envelope (eg City responsible aspects for HVAC systems, • Theatrical aspects CITS responsible for (curtains, stage, stage hydraulic seating,etc.) systems) • Artistic programming • Electrical Systems(eg needs City responsible for service to the building, CITS responsible for Sound/Theatrical Lighting) • Building Automation— Accessibility— Floor Finishes' • Plumbin S stems" 3 - 257 10/22/2015 Recommendation 5 • Clarify the role of Council — It is recommended that CITS expand the existing terms of reference for CITS Board members to incorporate: • The Council-approved mandate • The role of the CITS Board and the role of Council as outlined in the legislation • Specific duties of Council as it relates to their responsibility for the Board-City interface Recommendation 5 City Council Representation on Local Boards Local Board Council Representation Total Board % of Board comprised Size of Mayor and/or Councillors CITS 4(Mayor+3 Councillors 14 20% Belmont BIA 1 Councillor 7 14% Kitchener 3(Mayor+2 Councillors) 12 25% Downtown BIA Kitchener 3(Mayor+2 Councillors) 10 30% Housing Inc. Kitchener 2(Councillors) 12 17% Public Library Kitchener 3(Mayor+2 Councillors) 6 50% Power Corp. Mean 1 2.7 1 10.2 1 28% 3 - 261 10/22/2015 Next Steps • Finalize report and recommendations. • Subject to Council approval- - Process change for KWS and KWAG appointees. — Address transition costs in 2016 operating budget. • Referred to CITS Board: — MOUs between CITS and resident organizations to address communications protocols. — 10-year financial projection for capital renewal developed for 2017 capital budget. — CITS to amend Board TOR as appropriate. Discussion 3 - 279