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Home My WebLink AboutFCS-15-167 - CITS Potential Capital Budget Acceleration REPORT TO: Committee of the Whole DATE OF MEETING: November 16, 2015 SUBMITTED BY: Dan Chapman, Deputy CAO 519-741-2200 extension 7347 PREPARED BY: Bonnie Saunderson, Senior Financial Analyst 519-741-2200 extension 7115 WARD(S) INVOLVED: N/A DATE OF REPORT: November 5, 2015 REPORT NO.: FCS-15-167 SUBJECT: Centre in the Square – Potential Capital Budget Acceleration ____________________________________________________________________________ RECOMMENDATION: THAT the City of Kitchener accelerate the timing of existing capital budget funding for Centre in the Square included within the ten-year capital forecast to an upset limit of $2,075,611 pending federal approval of the Canada 150 Community Infrastructure Program application and/or the Canada Cultural Spaces Fund application both submitted by Centre in the Square. BACKGROUND: Centre in the Square (CITS) identified a significant level of deferred maintenance and required upgrades to the building in 2012 following a thorough technical audit of the facilities. The building is owned by the City of Kitchener and operated and maintained by CITS. In the past, CITS covered the majority of capital expenditures through its reserves, in addition to the annual Capital Reserve Fund (CRF) generated from ticket sales each year and a capital contribution from the City. CITS has submitted applications for various Federal matching grant programs in order to maximize future investment in the building, specifically a $1M grant from the Canada 150 Community Infrastructure Program and a $2.1M grant from the Canada Cultural Spaces Fund. CITS has requested that Council give consideration to accelerating the timing of the existing current capital budget allocation to CITS to assist CITS in funding the local matching requirement should either/both of these applications be successful. The request is time sensitive based on indications received by CITS through recent discussions with the funding agencies. *** This information is available in accessible formats upon request. *** Please call 519-741-2345 or TTY 1-866-969-9994 for assistance. 2. - 1 REPORT: In 2015 final budget day issue paper BD01, Centre in the Square (CITS) requested advancement of future capital allocations totalling $1M to support the matching requirement for CITS’ Canada Cultural Spaces Fund application, based on what was anticipated at that time. Council approved the request which resulted in a 2015 capital budget allocation of $1,510,000 for CITS and future capital budget allocations starting in 2016 of $420,000 increased by inflation thereafter over the course of the ten-year forecast. Since that time, CITS has also submitted an application under the Canada 150 Community Infrastructure Program and is seeking support from the City to accelerate the City’s capital funding to provide matching funds should the application be successful. CITS has also revised the request of the City related to the Canada Cultural Spaces Fund based on their depleted reserve position and more recent discussions with the federal government about what funding may be anticipated. As outlined in the CITS governance review report to be ratified this date, City staff intend to work with CITS staff over the coming months to refine an asset management plan for CITS which sets out the program of maintenance work and future funding responsibility between the City and CITS. Both grant applications pre-date the CITS governance review and there is no ability to delay this report to allow the detailed planning to unfold. As such, the recommendation of this report is made in keeping with the existing capital funding model which sees CITS assume full responsibility for capital investment decisions within a fixed envelope of funding received from the City. Cultural Spaces Cultural Spaces is a federal program providing infrastructure grants for arts facilities. The priorities under this program include items which ‘green’ the facility, improve AODA standards and upgrade production-related items. Eligible CITS projects include public washroom upgrades, LED lighting conversions, roof repairs, dressing room renovations and digital tiles for a total of $4,153,750. The grant application envisioned a 50% Federal cost share ($2,076,875) and a 50% local cost share ($2,076,875). Canada 150 Infrastructure Fund The proposal to the Canada 150 Infrastructure Fund focused on key upgrades for the facility tied to the age of the building, for a total of $2,508,736. These include: 1. Theatre – Main Safety Curtain and Stage Mobile Towers 2. Exterior of the building – Railings, Doors, Windows and Bricks 3. KWAG – Lighting Upgrade 4. Roofing – Metal Sloped Roofing 2. - 2 These items are costly to upgrade and are largely original to the building. Due to the age of the building and infrastructure, they require upgrading in the next 1-3 years. The grant application envisioned a 40% Federal cost share ($1,000,000) and a 60% local cost share ($1,508,736). 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: The following is a summary of the application values for the two programs along with a calculation of the potential local share outstanding should both applications be fully successful. Project Value Federal Share Local Share Canada 150 $2,508,736 $1,000,000 $1,508,736 Cultural Spaces $4,153,750 $2,076,875 $2,076,875 Sub-Total $6,662,486 $3,076,875 $3,585,611 Less: City Capital Grant to CITS (2015) ($1,510,000) Potential Local Share Outstanding $2,075,611 The capital forecast currently provides for a capital grant to CITS in the amount of $420,000 in 2016 which is increased annually by inflation for a total of $4,613,000 over the ten-year forecast. Approximately $1,746,000 of this funding is received via Federal Gas Tax revenues, with the balance of $2,867,000 received via capital out of current. CITS is requesting that funds already allocated to the building within the City’s capital forecast be brought forward as required in order to secure matching funds at this stage in the building’s lifecycle. The amount to be accelerated ranges from $nil to $1,949,420 depending on the extent of success of the two grant applications. Until a final amount, if any, is known it is envisioned that the acceleration of funds would be handled by way of an “advance” on the provisions in the ten-year capital forecast. Advancing future capital budget allocations to CITS would create an unfinanced capital balance which would be replenished through subsequent years’ capital allocations. This could represent a commitment of up to the next five years of capital funding to CITS if all applications are fully approved. If this scenario is realized, staff may propose adjustments to the capital forecast through a future budget process to reduce the extended unfinanced balance and smooth out the cash flow to CITS. This may also be necessary to avoid running afoul of any “stacking” prohibitions on grant funding. 2. - 3 If matching funds are not secured, then the set annual amount from the City of Kitchener ($420,000 in 2016) will continue to be applied to the list of CITS priorities in keeping with the capital planning approach which is now under development. The capital request is contingent on receiving confirmation of the grant funding. COMMUNITY ENGAGEMENT: INFORM – This report has been posted to the City’s website with the agenda in advance of the council / committee meeting. ACKNOWLEDGED BY: Dan Chapman, Deputy CAO 2. - 4