HomeMy WebLinkAboutCAO-06-009 - Centre Block RedevelopmentReport To: Councillor Berry Vrbanovic and Members of Finance and
Corporate Services
Date of Meeting: February 6, 2006
Submitted By: KPL -Centre Block Project Committee
Prepared By: Rod Regier, Executive Director Economic Development
Hans Gross, Director of Project Administration & Economic
Investment
Ward(s) Involved: 1
Date of Report: February 1, 2006
Report No.: CAO-06-009
Subject: CENTRE BLOCK REDEVELOPMENT
RECOMMENDATION:
HERITAGE RECOMMENDATIONS:
The KPL/Centre Block Project Committee recommends that the heritage aspects of the City-
owned properties on Centre Block be dealt with as follows:
1. That the Mayfair Hotel located 11 Young Street be recognized as significant and retained in
its entirety with an understanding that there be flexibility of use in the interior of the building and
that the successful proponent for redevelopment of the Centre Block be encouraged to use
those interior features deemed significant by Heritage Kitchener in any development of that
building; and,
2. That the front fagade of 156-158 Kings Street West be retained in its entirety and the
successful proponent for redevelopment of the Centre Block be encouraged to incorporate the
remainder of the building and any interior features deemed significant by Heritage Kitchener in
any development scheme if structurally and financially feasible, and further,
3. That the two remaining buildings associated with the Forsyth building complex, being the c.
1880 Smyth residence and the 1937 Art Deco addition, not be retained in situ on the property on
the basis that they would seriously compromise the ability to achieve maximum development on
the property through the upcoming Request for Expression of Interest Proposal process, but
that the history of the buildings and property be honoured by having the architecture of the
buildings reflected in the new development on the Centre Block through the use of salvaged and
retained materials from all of the Forsyth buildings.
FINANCIAL PACKAGE RECOMMENDATIONS:
The KPL/Centre Block Project Committee recommends that the City's financial commitment to
the redevelopment of Centre Block include the following:
4. That Committee l Council reconfirms directing $32.5M from the Economic Development
Investment Fund towards the funding of a New Central Library on Centre Block, and further,
5. As outlined in the 2004 KPL Business Case, that Committee /Council confirms directing
minimum of $2.5M from the sale of #85 Queen Street North (existing library) towards the
funding of a New Central Library on Centre Block, and further,
6. That the City-owned Centre Block property and buildings identified in the Request for
Expressions of Interest /Proposal be used as an asset to leverage the financing of the new
central library on Centre Block, and further,
7. That Council support the inclusion of the Young Street right-of-way, from King Street to the
City Hall parking garage, be incorporated into the Centre Block project, and further,
8. That $5.5 M identified in the Economic Development Investment Fund for parking be
directed towards the funding of a 350-space municipal parking structure on Centre Block, and
further,
9. That the one of the following options be selected for funding the estimated shortfall of $8.5M
for the 350-space municipal parking structure on Centre Block:
a) That the City Parking Operation fund an $8.5M debenture;
b) That the developer fund the shortfall of $8.5M and be reimbursed through
the receipt of net revenue over a 20-year period including alump-sum
payout at the end of the 20-year period to cover any shortfall. In this
scenario, the City would own and operate the parking structure.
c) That the developer fund the shortfall of $8.5M and be reimbursed through
operation of the parking over a 20-year period. After the 20-year period, the
City would take over the parking operation and provide alump-sum payout
to cover any shortfall. The City would own the parking structure in this
scenario and further;
10. That the KPL Board and the City consider all options for securing and selecting a guarantor
for the $5M targeted fundraising amount to be achieved by the Kitchener Public Library Board,
and further;
OTHER RECOMMENDATIONS:
11. That in the event no viable proposals which include a library and parking structure are
received, that Council would consider reissuing a proposal call for the redevelopment of Centre
Block which excludes a library component.
BACKGROUND:
The KPL/Centre Block Project Committee is preparing an Expression of Interest /Proposal
request from private sector developers for the redevelopment of Centre Block. This report
provides recommendations that will clarify the City's position on heritage, project financing and
project process matters.
EXECUTIVE SUMMARY OF THE PROJECT:
THE NEED FOR THE REDEVELOPMENT OF CENTRE BLOCK:
Kitchener began to seriously address the deterioration of its downtown in the mid-1990s. In
1995, Council affirmed its commitment to a downtown revitalization process that centred on the
belief that it is people that create adowntown -and on the need to draw them back to the core.
Between 1999 and 2001, Kitchener City Council further accelerated the momentum around the
strategy to re-energize the city centre with its acquisition of 10 properties comprising the Centre
Block, one of downtown Kitchener's most prominent, yet problematic blocks.
Purchasing the Centre Block properties was a strategic move with one main purpose: to accelerate
the urban evolution of downtown Kitchener by increasing the likelihood of the future development of
a prominent block of land that was home to several vacant buildings and some negative uses.
Momentum for the transformation of Centre Block into a "people place" was greatly accelerated in
2004 with Council's decision to commit $32.5 million from its Economic Development Investment
Fund to building a new central library on the site. Research demonstrates that central libraries are
a powerful catalyst for new economic activities and investment in downtowns.
THE VISION FOR CENTRE BLOCK:
The City is preparing to invite Expressions of Interest from potential developers capable of
creating a dynamic urban space that attracts people and becomes known for its excellence in
architectural and urban design.
The selected developer will have an opportunity to create a landmark project at the centre of
one of Canada's fastest growing, most competitive urban economies that features the
development of a new City-owned central library as the focal point for a vibrant, cultural,
commercial and residential urban centre.
Other highlights of the redevelopment are anticipated to include: complete, high density
redevelopment of the block; construction of an underground parking structure; diverse residential
components that maximize the urban density of the site; retail and service commercial elements
that animate the streetscape and intimate public spaces and pedestrian thoroughfares.
The redevelopment of the Centre Block addresses the City's overall vision for its downtown in
several ways:
^ It is in line with the City's most basic desire - to bring people back to its downtown.
^ The library, combined with the block's other anticipated residential and complementary
commercial uses, will maximize the potential for Centre Block to act as a catalyst for
day/night activity to sustain vitality in the downtown.
^ The library component will complement downtown Kitchener's burgeoning Education and
Knowledge Creation Cluster and improve and modernize public library services for citizens.
^ The architectural quality of the development will improve the downtown streetscape and
serve as a new standard for nearby property development.
BENEFITS OF THE REDEVELOPMENT OF CENTRE BLOCK:
In 2004, Council established the Economic Development Investment Fund to support the
implementation of a new economic development strategy focused on building an Education and
Knowledge Creation Cluster in downtown Kitchener. The underlying premise was that in today's
information age, the capacity to learn, discover and innovate is the source of future productivity
growth.
Attraction of teaching and research institutions will provide additional downtown consumers who
will support investment in residential construction, new retail and consumer services and
generally support reurbanization.
Economic Benefits of Centre Block Redevelopment:
^ $59.6 million annually =total recurring economic impact by year five of the new library.
^ $19-28 million =indirect visitor impacts to the downtown (primarily increased retail spending)
from the library.
^ $33.6 million =one-time construction benefits to the local economy during construction of library.
^ $24 million =one-time construction benefits in wages and salaries due to the construction of
the library.
^ $18 million =one-time construction revenues for all levels of government.
^ $19.5 million =sustained total recurring economic impact of 300 rental residences ($9.7
million annually for 150 units) including the economic impact of the new residents
purchasing goods and services within the downtown.
^ $18.8-$40.8 million =estimated one-time apartment/townhouse construction expenditures,
supporting a temporary increase in income in the province of $22-48 million, of which $13-
29 million would be retained in Waterloo Region.
^ $14-32 million =one-time wages and salaries during the construction of the rental
residences.
THE COST OF THE CENTRE BLOCK REDEVELOPMENT:
The redevelopment of the Centre Block will require considerable public investment, a good
relationship with a private sector developer and a comprehensive fundraising strategy forthe
library component of the development.
According to the Kitchener Public Library's 2004 business case, the preliminary cost estimate
for a new central library was between $44 and $51 million (2006 dollars). That preliminary cost
estimate, which was based on information available at the time, did not include an underground
parking garage on the site.
The most recent cost estimate for the project is $58.7M (details of which are contained in the
Library report). This estimate is based on an analysis by Hanscomb Limited, input received
when the estimates were presented to the Centre Block Committee in December 2005 and
further work done by KPL staff to reduce the cost of the project. The accuracy of this estimate
is in the range of plus or minus 10 per cent. At the design and preconstruction phase of a
project typically, cost estimates are further refined and reflect a higher degree of accuracy.
This latest cost estimate includes $6.3 million for 180 parking spaces in an underground garage
on the Centre Block. The need for an underground parking garage has been added to the
project proposal after hearing from the public and after considering the site more closely in
terms of available space and urban design guidelines.
In May 2005, Kitchener City Council reconfirmed the municipal contribution to the total cost of
the new library in addition to the processed of the sale of the existing central library building and
property. Since that time, KPL has been working on a fundraising plan, and on the advice of an
independent consultant, has set a target of $5 million.
The City's approach to combining the need to build a new central library through redevelopment
of the Centre Block property is specifically aimed at finding a private sector developer. By
leveraging the municipal investment in the library, the City hopes to find a partner who will
redevelop the entire block to build a new central library.
REPORT:
1) HERITAGE:
While the KPL/Centre Block Steering Committee recognizes the history of the Forsyth building,
it is concerned that the two remaining buildings will compromise the development options of
Centre Block. The Committee recommends that the two building not remain in situ on the site
but that their history be honoured by having the architecture reflected in any new development
on Centre Block through the use of salvaged and retained materials from all the Forsyth
buildings.
The KPL /Centre Block Steering Committee recognizes the architectural feature of the Mayfair
Hotel located at 11 Young Street and the adjacent building known as 156-158 King Street West
as described in the property report prepared by Leon Bensason.
The Committee recommends that the Mayfair Hotel be recognized as significant and retained in
its entirety with an understanding that there be flexibility in the use of the interior.
The Committee also recommends that the front fagade of 156-158 King Street West be retained
in its entirety and that there be flexibility in the use of the interior.
2) PROJECT PROCESS:
The City's recently adopted Public-Private Partnership Procurement Policy Guidelines
document will be used as the general basis for the selection of a developer. Modifications to the
process have been made to reflect the unique qualities of this project.
The selection process will be carried out in four (4) steps:
Steps Timeframe
1. Advertise and receive Expressions of interest. March 24/06 to April 30/06
1. Screen the Expressions of Interest to select May 1/06 to May 15/06
primary proponents for interviews.
2. Interview primary proponents to short list to the May 15106 to June 30/06
two preferred proponents. This includes public
presentation by the proponents.
At the end of Step 3, the City and Library Board will determine whether any submissions will
result in firstly, a viable new Central Library and secondly, a viable parking structure within the
funds and assets committed towards the project by the City. A report on the findings with
recommendations will be presented for Council direction. The City will proceed to step 4 only if
these two conditions are satisfied.
4. Preparation and submission of very
detailed proposals by the two proponents; Jul 1 /06 to Jan 30 l07
review and evaluation of the proposal y
through a public process; selection of the
successful proponent
Based on the above process, it is anticipated that construction of a library could begin between
October 2007 and April 2008 with an 18 to 24 month construction period.
3) PARKING
There are two (2) public parking needs that have been identified on Centre Block in recent
studies:
^ 170 spaces for public parking
^ 180 spaces for library parking
The estimated cost of providing 350 parking spaces within an underground parking structure is
the order of $14M. The Council resolution passed on November 28, 2005 reads as follows:
"That the Feasibility Study for the Development of Short and Long Term Parking Solutions for
Downtown Kitchener be received; and,
That Site 1 bounded by Charles St. W, Water St. S, Francis St. S, and Halls Lane be considered
for approximately a 380 space above ground parking structure to address the Downtown
parking needs subject to the development of a business case and partnership agreement
satisfactory to Council; and ,
That Site 4 on the Centre Block bounded by King St W, Duke St W, Ontario St N and Young St
be considered for a below ground parking structure to accommodate library, public and other
parking needs, the development of which is a part of the Request for Proposal process for
development of the entire Centre Block subject to a business case and partnership agreement
satisfactory to Council; and,
That funding for the two structures be considered as follows:
a. $5,500,000 as allocated in 2006 from the Economic Development Investment Fund
b. Options for financing these two projects be addressed in the business cases; and,
That Transportation Demand Management (TDM) initiatives be developed for the Downtown in
an attempt to reduce the long term demand for parking, and further;
That staff be directed to review the Zoning Bylaw with respect to parking required for the
development of a new commercial and retail floor space in the Downtown. "
The Centre Block Project Committee recommends that the $5.5M identified in the Economic
Development Investment Fund for Downtown Parking Solutions be allocated toward the funding
of the parking structure on Centre Block.
To address the $8.5M funding shortfall for the construction of the 350-space municipal parking
structure, three options are available.
OPTION 1 - $8.5M City Debenture
The City Parking Operation would fund an $8.5M debenture. This will preclude the
Parking Operation from debenturing the cost of another parking structure for 10-15
years. It would also remove approximately $800,000 in annual contributions to the City's
general reserves. This revenue would have to be replaced through income from other
operating sources or through a 1 per cent tax increase. The City would own and operate
the parking structure. This option results in the lowest long-term capital cost to the City.
OPTION 2 -Developer Funded, Citv Operation
The developer would fund the shortfall of $8.5M. The City would own and operate the
parking structure and would turn any net revenue (or a guaranteed minimum payment)
over to the developer. The timeframe of this scenario would be 20 years. The City would
likely be faced with a lump sum payout at the end of the 20-year period for the developer
to recover the initial capital investment and carrying costs. In this scenario, the City has
control of the operation and can provide consistent service and pricing. The City
assumes all risk in ensuring the recovery of the capital cost.
OPTION 3 -Developer Funded and Operated
The developer would fund the shortfall of $8.5M. The City would own the parking
structure and the developer would operate the parking structure and retain the revenue
fora 20-year-period. The City would likely be faced with alump-sum payout at the end of
the 20-year period for the developer to receive the initial capital investment and carrying
costs. In this scenario, the City would want to insist on a regulated operation to maintain
consistency in service and pricing. There is the potential for receiving a lower standard
of service in this option as well as developing complexity in financial accounting. This
scenario could potentially result in the highest long-term cost to the City.
4) YOUNG STREET
The City owned properties hold frontage along Young Street, between King and Duke Streets.
Young Street therefore offers a logical point of entry into the Block either on the surface or via
underground parking facilities. It is also the main connection between City Hall and the Centre
Block and, as such, is a strategic linkage for the movement of pedestrians into and around the
Block.
The urban design of the Centre Block must accommodate and encourage this movement of
pedestrians. Opportunities also exist to integrate the existing parking facilities at City Hall and
those at Centre Block so as to improve accessibility and utilization. As a result, Young Street is
a key component of the physical infrastructure of the Centre Block, with opportunities to create
an pedestrian oriented streetscape. Developers should therefore be challenged to consider
Young Street as a critical component in the overall development plan. The Centre Block Terms
of Reference should challenge the developer to think creatively about Young Street's function in
the evolution of the block. Potential options include status quo, partial or complete
redevelopment as a pedestrian street, construction of underground parking under the street to
be integrated with City Hall, among others.
5) PROJECT FINANCING
The Terms of Reference document which forms the basis of the City's request for submission of
Expressions of Interest /Proposals will indicate the City's funding commitment towards this
project. The Committee recommends that the following sources be used to fund this project:
^ Previous commitment by Council to allocate $32.5M from the Economic Development
Investment Fund towards the construction of a New Central Library on Centre Block.
^ Allocation of at least $2.5M from the sale of the existing library at #85 Queen Street North.
^ Fundraising by the Kitchener Public Library Board with a target of $5M which the City would
fund on an interim basis while the funds are being collected.
^ The value of the City owned Centre Block property identified in the Request for Expressions
of Interest l Proposal less the property footprint required for a new central library and the
City's parking requirement
FINANCIAL IMPLICATIONS:
The City's Funding Commitment to this project is detailed in the body of the report.
COMMUNICATION:
Minutes of the KPL /Centre Block Steering Committee meetings are open to the public and
have been posted on the City's website.
CONCLUSION:
The KPL/Centre Block Steering Committee's goal is to facilitate the creation of an outstanding
development on Centre Block which will incorporate a library, parking, residential and ancillary
commercial components. The key to achieving this goal is a clear statement of the City's
commitment to the project and its expectations. The recommendation contained in this report
are designed to achieve this end.
Hans Gross, Director of Project Administration Rod Regier, Executive Director
And Economic Investment Economic Development