HomeMy WebLinkAboutCSD-05-163 - Kitchener Market Financial Update
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Community Services
Report To:
Date of Meeting:
Submitted By:
Prepared By:
Ward(s) Involved:
Date of Report:
Report No.:
Subject:
Community Services Committee
December 5, 2005
Ann Pappert, General Manager, Community Services
Keith Baulk, Director, Enterprise
all
November 30,2005
CSD-05-163
KITCHENER MARKET FINANCIAL UPDATE
RECOMMENDATION:
That, subject to 2006 capital budget deliberations, $809,000 be added as an
envelop budget to the capital forecast in 2006 to address immediate capital
requirements at the Kitchener Market as outlined in Appendix 2 to report CSD-05-
163; and further
That, subject to 2006 operating budget deliberations, $108,000 is added to the
operating budget in 2006 to address the impact of lease fee adjustments for full-
time vendors, the recruitment of a part-time contract vendor liaison coordinator,
the loss of full-time grocery vendors and salary adjustments.
BACKGROUND:
This report is intended to provide information on the status of the Kitchener Market. It provides
an overview of the current situation identifying components that are working well and areas for
continued review and improvement. The report outlines an interim work plan and financial plan
for 2006 while providing a stable framework in which to strategize a long term operating plan.
Specifically, the report focuses on the following:
The Market was a design/build project. It has been in operation of a year. Like any business, its
operation is evolving and it will take time and experimentation to establish itself as an anchor in
Kitchener's east end. While the initial construction was cost effective, as with any project there
additional capital requirements and enhancements that are being identified and refined during
the initial stages of the operation of the facility.
The Saturday Market is very successful, however, additional resources - both financial and time
are required to support the growth and future success of the overall Market project. It will take
upwards of 3 to 5 years to build the business to achieve the level of success that was
CSD Report No: CSD-05-163
2
envisioned for the new full-time component of the Market. This time frame is consistent with the
private components of the project which are also evolving.
REPORT:
Situational Assessment (2005)
Overall there are a number of successes and improvements related to the new Market:
· Saturday markets continue to have a huge following and the Farmers Market vendor
component operates at capacity.
· The covered area and new outdoor street Market have been very successful, providing an
outdoor atmosphere in the spring, summer and early fall.
· The overall building is bright, open and cheery.
· The full-time refreshment vendors provide a diverse array of excellent food offerings.
However, there are a number of issues that still need to be addressed. These issues are:
· Winter enclosure for covered area vendors.
· Energy management and electrical service upgrades.
· Solution for future use of the space formally occupied by the grocery vendors (see Appendix
1 for 'vacant area' outline).
· Revenue levels for full-time refreshment vendors.
· Wednesday Market Format.
· Market Staffing Complement.
Vendor Consultations (October - November~ 2005)
Senior staff has been involved in developing a "go forward" strategy for the Kitchener Market.
This includes the CAO and GM of Community Services who have interviewed a majority of the
outside vendors. The vendors input helped form some of the proposed directions. The strategy
was also developed based on Council's direction to bring consolidated requests for funding as
opposed to one off requests.
Interim Plan - Work plan and Financial
The following section is divided into 2 areas: Interim Strategy/Work plan 2006- 2007 and
Financial Plan (2006)
Interim Strategy/Work plan (2006-2007)
Staff has provided a summary work plan as per Appendix 3 attached. Highlights from this plan
include proceeding on:
· Operational Goals:
o Repositioning /Hiring Permanent Market Staff
o Outdoor Vendor - Further Consultation on merit of Winter Enclosure
o Address of Interim Issues - Energy Management and Wednesday market days
o Programming - Expanding interim activity in upper level vacant space
o 5 Year Planning Proposal
o Business Cases: 2006 Facility Enhancements & Long Term Tenant Recruitment
· Facility Goals:
o Phased Review of functionality of Market building
o Response to Business Case recommendations & Project Costing
CSD Report No: CSD-05-163
3
· Vendor/Community Liaise:
o Creation of a Market Committee for ongoing feedback and support
Financial Plan
The following financial plan is proposed to address the issues identified in the situational
assessment. It must be noted that following vendor consultation on the market enclosure, the
cost/benefit analysis of enclosing the outdoor space remains a point for which neither staff nor
the vendors have consensus. The Interim Work plan requires a business case evaluation of the
winter enclosure in conjunction with further dialog with outside vendors regarding alternative
options for their operations. However, to ensure that funding is considered for the 2006 budget
deliberations, staff have included the $300,000 envelop if, upon final review of the matter,
Council chooses to proceed in 2006.
1. Request for Additional Capital Fundina
Additional capital funding will be required in 4 categories over time. The 15t category is funding
to address short to intermediate term capital improvements. This is a grouping of all capital
costs that staff knows are required at this time. This approach is in alignment with Council's
directive from a previous meeting for a consolidated request for funding. Category 1 totals
$809,000 and an itemized breakdown is provided as Appendix 2. It is recommended this
request be referred to the 2006 Capital budget process for consideration.
There are 3 other categories of capital funding that will need to be addressed in the future. The
scope of these are not known at this time however it is important for committee to understand
these will need to be addressed in the future as more information becomes available. These
categories are as follows:
Category 2 - Expropriation costs - additional funding will be required to complete the
expropriation process in the future.
Category 3 - Leasehold Improvements- it is highly likely that funding for leasehold
improvements will be required when a tenant(s) is found for the upper level space
formally occupied by the grocery vendors.
Category 4 - Functional/Atmosphere upgrades - a selected functional review of the
Market will be undertaken. The review will likely include feedback from a vendor and
public consultation process. Additional capital will be required to address infrastructure
and atmospheric upgrades.
Another issue that requires clarification is the request for Transitional consulting fees outlined in
Appendix 2. This budget will be used to engage consultant(s) to develop and implement tenant
recruitment strategies and assist in the delivery of a functional assessment for leasehold or
infrastructure improvements.
2. Request for Operatina Adiustment Related to Full-time Market
There are a few issues related to the Full-time Market operation that need to be addressed as
part of the 2006 Operating budget deliberations. Lease fees for the full-time vendors were
considered during the 2005 capital budget process. In 2005, a phased implementation of lease
fees was established. Staff has had ongoing dialogue with the full time refreshment vendors
regarding their capacity to make payments for the lease fees as established during the 2005
budget process.
CSD Report No: CSD-05-163
4
It is clear that the departure of the full time grocery vendors has impacted their revenues
significantly. All the full time vendors have expressed a willingness to continue operating at the
Market with the goal of building their businesses but they have not been able to maintain
sufficient revenues to pay the lease fees.
As a result, staff is recommending forgiving the outstanding lease first in 2005 and not
budgeting for full-time lease fees in 2006 in order to allow the Market operation to evolve.
Conversely Committee could direct staff to collect the outstanding fees and bill the vendors for
2006. However it is felt this would be counter-productive to the investment strategy being
proposed in this report to improve the Market operation.
As well, a number of vendors closed their business in the full time grocery area. This has a net
impact of $15,000 relative to the 2005 budget. This loss of revenue needs to be accounted for
in 2006.
Therefore, the budget adjustments for 2006 related to the full time vendors proposed for
consideration include the following:
- full time vendor CAM free period
- loss of grocery area vendors
Total
$50,000
$15~000
$65,000
3. Reauest for Operatina Adiustment Related to Staffina
A revised approach to staffing the Market has been developed. The primary focus is the
creation of a two person full time team lead by a designated Market "General Manager" and a
Business Development Supervisor reporting to the Manager. The Business Development
Supervisor would replace the existing "Event Operation Supervisor" which has been filled
temporarily. The focus of the Business Development position is to build the downtown business
and neighbourhood opportunities, evolve rentals, market vendors and events, and oversee
imaging and packaging of the market to the broader community.
A contract, Vendor Liaison position is proposed to build and maintain vendor relations and
develop a Market Committee group that could potentially lead to a new management model in
the future. Staff is current working with HR to refine the job descriptions and establish the salary
levels. It is expected all the full time positions will be filled on a permanent basis by March 2006.
It is expected these changes will have a net impact on the budget as follows:
- Market Manager/Business Development
-2 year contract Vendor Liaison
Total
$23,000
$20 ~ 000
$43,000
As a result the total adjustment required to address the full-time vendor issues and staffing
revisions is $108,000.
Finally, has just received a significant supplementary tax bill for the Market. The Market has
always enjoyed tax- free status so staff is investigating the basis on which the bill was issued
with a goal to have the Market portion of the property declared tax exempt.
CSD Report No: CSD-05-163
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A staff team including representatives of Finance, FM, Legal, and Communications have been
involved in developing this report.
FINANCIAL IMPLICATIONS:
A comprehensive list of short-term and medium-term Market capital requirements for 2006 is
outlined in Appendix 2 to this report, with a total funding requirement of $809,000. Staff is
requesting that this allocation be referred to 2006 capital budget discussions. The draft capital
forecast as previously circulated to Council included a preliminary estimate of $1 ,000,000 for
this initiative and, if Council approves the inclusion of the $809,000 provision for the market
during budget review, excess funding of $191 ,000 will be available for other purposes.
Staff is also recommending an operating budget adjustment of $108,000 to reflect the impact of
CAM adjustments for full time vendors, the recruitment of a part time vendor liaison coordinator,
the loss of full-time grocery vendor revenue and salary adjustments. This adjustment would be
referred to operating budget discussions and be reflected as a potential "add" item.
CONCLUSION:
The new Market continues to evolve. The proposed funding requests are being referred to the
budget process for consideration. If approved, the funding will go a long way to stabilizing the
operation and providing time for the business to grow.
Keith Baulk, Director
Enterprise Division, Community Services
AP
CSD Report No: CSD-05-163
6
Appendix 2
2006 CAPITAL BUDGET REQUEST
FINANCIAL BREAKDOWN OF CAPITAL REQUEST
REFERED TO CAPITAL BUDGET PROCESS
Project/Item
Additional
Budget Amount
Winter enclosure
Energy Management programs (Lighting Upgrades)
Upgraded electrical service
Transitional consulting
Parking garage (amending agreements)
Projected project over expenditure
General contingency
$300,000 Note 1
104,000
40,000
60,000
50,000 Note 2
155,000 Note 3
1 OO~OOO
$809,000
Note 1 - $50,000 currently allocated for winter enclosure in the existing Market capital budget.
Note 2 - requirement related to segregated parking for condo residents per Barrelworks
agreement.
Note 3 - Short fall presented at the August 22, 2005 as part of the Finance and Corporate
Services Committee report on major capital projects update.
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