HomeMy WebLinkAboutFCS Agenda - 2018-05-28Finance & Corporate Services Committee
Agenda
Monday, May 28, 2018
1:30 p.m. - 3:00 p.m.
Office of the City Clerk
Council Chamber
Kitchener City Hall
nd
200 King St.W. - 2 Floor
Kitchener ON N2G 4G7
Page 1 Chair - Councillor S. Davey Vice-Chair - Councillor D. Schnider
Consent Items
The following matters are considered not to require debate and should be approved by one motion in
accordance with the recommendation contained in each staff report. A majority vote is required to discuss any
report listed as under this section.
None
-law, delegations are permitted to address the Committee for a maximum of
5 minutes.
None at this time.
1. DSD-18-019 - Creative Industry Hub Next Steps (60 min)
(Staff will provide a 10 minute presentation on this matter)
2. DSD-18-022 - Support to Downtown Kitchener BIA - Extension (10 min)
None
Jeff Bunn
Manager, Council & Committee Services/Deputy City Clerk
** Accessible formats and communication supports are available upon request. If you require assistance to
take part in a city meeting or event, please call 519-741-2345 or TTY 1-866-969-9994 **
REPORT 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.
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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
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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
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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.
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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
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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.
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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)
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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
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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
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APPENDIX 1 - Creative Hub at 44 Gaukel Business Case
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Economic
Development
Business Case
Creative Hub at 44 Gaukel
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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
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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.
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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.
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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
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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.
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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.
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APPENDIX 2 - PROPOSED TENANT LAYOUT, FLOOR 1, 44 GAUKEL
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APPENDIX 3 - RECENT ACTIVITIES AT 44 GAUKEL
VACANT, 2012:
44 GAUKEL 2018:
All photos from Instagram and have been hash tagged #44Gaukel
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APPENDIX 4- FINANCIAL OVERVIEW
Note: Revenues are entered in brackets
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REPORT TO: Finance and Corporate Services Committee
DATE OF MEETING: May 28, 2018
SUBMITTED BY: Cory Bluhm, Executive Director, ext. 7065
PREPARED BY: Hilary Abel, Manager of Downtown Development, ext. 7064 & Paul
McCormick, Manager of Parking Enterprise, ext. 7155
WARD (S) INVOLVED: 9&10
DATE OF REPORT: May 2, 2018
REPORT NO.: DSD-18-022
SUBJECT: Support to Downtown Kitchener BIA - Extension
___________________________________________________________________________
RECOMMENDATIONS:
Staff recommend that Council continue to offer free parking options within the Downtown BIA
boundary, in support of the businesses impacted during ION Light Rail Transit construction and
delays in implementation, as follows:
a)In lieu of 2-hour free parking programs currently provided in City Garages, staff
develop a modified one time reduction (OTR) program partnership with the BIA as
described in report DSD-18-022,until December 31, 2018, or ION is operational,
whichever is later; and,
b)Weekday and Saturday evening free parking in surface lots between 5pm and 6pm be
extended until March 1, 2019; and further,
That through the 2019 Budget process, the City consider options for providing free parking in
surface lots between 5pm and 6pm to be reviewed annually as part of the annual budget
process.
BACKGROUND:
In 2016, Council approved a parking subsidy for Downtown Kitchener surface lots and garages to
encourage visitors to visit restaurants and businesses in the core during LRT
construction (INS-15-096).
3 options were approved:
2b. Extend weekday and Saturday evening parking in downtown surface lots for one extra hour
from 5pm to 6pm
3c. Provide 2 hours of free parking on Saturdays in City Hall, Duke & Ontario and Charles &
Benton garages; and,
4.Provide 2 hours of free parking on weekdays, with a one time reduction parking pass (OTR),
as distributed by participating businesses.
*** This information is available in accessible formats upon request. ***
Please call 519-741-2345 or TTY 1-866-969-9994 for assistance.
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The program costs the City (in lost revenue) $85,538.74 in 2016, and $97,803.72 in 2017. In 2015,
staff estimated the annual funding requirement for this initiative would be $77,000.The Economic
Development Reserve was used to fully fund the subsidy. 2017 lost revenues are as follows:
2b = $35,000 (estimated)
3c = $42,701.59
4 = $20,102.12
Initially, these subsidies were approved as a means of supporting downtown businesses during LRT
construction and the commencement of the new system. Downtown businesses have requested that
the parking subsidy be continued until the ION is operational. While they acknowledge construction
has finished, they have not yet experienced the resultant benefits of ION. Continuation of the parking
subsidies would provide support for Downtown businesses as they continue to work to recover from
impacts of construction.As such, staff believe it is appropriate to provide a modified version of the
parking subsidies as follows:
ProgramProposed ChangeNew Proposed Program
2b. Free parking 5pm-6pmLeave as isNone required
3c. 2 hours free on SaturdaysEliminateReplace with Modified OTR
4. 2 hours free with OTREliminateReplace with Modified OTR
A Modified OTR Program (recommendation part a) Estimated Cost $10,000
The City would continue to provide OTRs (parking passes) to participating businesses, facilitated by the
BIA, but on a 50:50 split, whereby the business covers the cost of the first hour, and the City would
subsidize the second hour. The City subsidy would be shared equally between the Parking Enterprise
and the Economic Development Reserve. As the proposed program requires a financial commitment
by the BIA membership (i.e. local businesses), it is expected that uptake would be less than the current
program. Staff estimates the financial impact to the City to be less than $10,000.
Free Parking After 5pm in Surface Lots (recommendation part b) Estimated Cost $35,000
With the growth of restaurants in the core, this subsidy supports proprietors as downtown continues to
establish a growing restaurant scene. Staff is recommending continuation of the program beyond
2018, subject to budget approval as part of the 2019 budget process and annually thereafter. While the
Economic Development Reserve offers a short-term funding source to cover the subsidy, it is not a
long-term solution. Alternative funding options, to be considered as part of the 2019 budget, could
include:
i) Covered by the tax base (ie: increase the Downtown Parking Subsidy by $35,000)
ii)Covered by the Parking Enterprise
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ALIGNMENT WITH CITY OF KITCHENER STRATEGIC PLAN:
by
encouraging a strong and resilient economy.
FINANCIAL IMPLICATIONS:
The report section of this report outlines changes to the funding allocations for each program. The
Economic Development Reserve would continue to be used to fund free parking between 5pm and 6pm
in 2018 ($35,000), while the Reserve and the Parking Enterprise would share the costs of the modified
OTR program (estimated at less than $10,000).
COMMUNITY ENGAGEMENT:
INFORM Working with the Downtown Kitchener BIA, the new changes to the parking subsidy will be
communicated to businesses in advance of any program modifications.
CONSULT Downtown businesses raised concerns over the need to continue the subsidy to City staff
Director of the BIA who generally supports the extension of modified subsidies to support businesses
recovering from construction.
CONCLUSION:
That a modified parking subsidy to support Downtown Kitchener businesses be extended, as outlined in this
report.
ACKNOWLEDGED BY: Justin Readman, General Manager
Development Services Department
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