HomeMy WebLinkAboutCSD-07-061 - Loan for Seating Addition
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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
June 18, 2007
Keith Baulk
Project Team - Aud Seating Addition
All
May 24, 2007
CSD-07-061
LOAN FOR SEATING ADDITION
RECOMMENDATION:
That the Kitchener Rangers Hockey Club be authorized to proceed immediately with
improvements to the Kitchener Memorial Auditorium Complex Dom Cardillo seating
bowl, to add approximately 437 seats, at an estimated total cost of $1.4 million; and,
That the City of Kitchener provide project financing of up to $1.4 million to the Kitchener
Rangers Hockey Club, raised by way of a five-year debenture, with the associated
principal and interest to be repaid by the Kitchener Rangers Hockey Club on an annual
basis commencing in 2008; and,
That the Mayor and Clerk be authorized to enter into a loan agreement with the Kitchener
Rangers Hockey Club based on the conditions outlined in CSD Report #07-061, including
terms to provide the Rangers with the full value of ticket revenue for their events for the
new seats until such time as the Ranger's investment has been recovered (including
capital costs and financing charges) following which the revenue will be proportioned
based on the tenant agreement of the day; said loan agreement to be satisfactory to the
City Solicitor, and further,
That according to the City's signatory provisions, the City contract directly with the
project mason who will act as a subcontractor for the project.
BACKGROUND:
The Kitchener Rangers are a community based Hockey organization owned by its subscribers.
One of their key mandates is to provide an opportunity for citizens in the community to attend
their games and enjoy the experience. Their product makes this City more liveable!
In recent years their games have become very popular. In fact, the Rangers have had 6
consecutive seasons where the average game attendance has exceeded seating bowl capacity.
As well, nearly 600 people are currently on the season ticket waiting list.
CSD-07-061
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This demonstrates that the demand for seats is significant. In addition the recent awarding of
the Memorial Cup will put further pressure on the facility to fulfill seating requests. Because of
this the Hockey Club staff and staff of the City of Kitchener have had dialogue about the
potential of adding seats.
REPORT:
Last month City staff received a request from the Kitchener Rangers to add seats to the main
seating bowl of the Kitchener Memorial Auditorium Complex (KMAC). The Rangers indicated
that the primary purpose for the seating bowl expansion is to address the season ticket waiting
list to ensure those in the community who wish to attend an OHL game on a regular basis can
do so. A secondary purpose is to provide more opportunity for those in this community to attend
the 2008 Memorial Cup.
The Kitchener Rangers engaged a contractor to undertake an initial review of options to add
seats. They found that there is an opportunity to add approximately 437 seats (net) that can be
funded on a business case basis. The business case is based on 1 000/0 of their hockey ticket
revenue from the additional seats (regular season only) being used to finance a loan to the
Ranger's from the City of Kitchener. There is no impact on the taxpayer as the project is
completely self-funded by the Kitchener Rangers.
The Ranger proposal is based on the following recommendations:
· 437 total seats to be added, located as follows:
o 38 seats (plus 38 standing) at the north/clock end below the end suites.
o Redesigned restaurant seating totalling 90 game view seats.
o 3 additional rows along the east side for a total of 309 seats.
· A total budget of $1 .4 million which is equivalent to the loan request.
· Start July 1,2007 and target completion Dec. 31,2007.
A staff team reviewed the request by the Rangers and considered the impacts. The staff team
was comprised of representatives from the KMAC, Facilities Management, Finance, Legal, Risk
Management, Project Management, Building and Planning. In order to expedite the project, yet
ensure quality, integrity and rigour in the process, it was agreed that the following conditions
should be outlined in the loan agreement.
1. Rangers would be the primary party to engage the contractor, and enter into agreements
with the contractor.
2. The improvements would be considered a leasehold improvement carried out by the
Rangers and the City would retain ownership of the additional seating immediately upon
completion of the project.
3. The City would engage a 3rd party Architect to review the project plans.
4. Facilities Management would have one of their Project Managers represent the City's
interest throughout the process and at all project meetings.
5. The Manager of KMAC would also be involved in the project planning process and sit in on
most projects meetings to ensure the operational elements are considered during
construction.
6. This contractor engaged by the Rangers would be required to abide by the City's signatory
provisions with the project mason.
7. All costs associated with studies, design, permits and construction and any additional facility
costs associated with cleaning, current asset protection and security during construction
would be the responsibility of the Rangers.
CSD-07-061
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8. The City would provide financing of up to $1 .4 million to the Kitchener Rangers Hockey Club
to undertake the improvements, repayable consistent with the terms of the City's debenture
financing. The City would advance funds to the Rangers upon receipt of satisfactory proof
of payment for construction costs.
9. The City would obtain debenture financing for a five-year term with principle and interest to
be repaid by the Rangers commencing in 2008, up to a limit of $1.4 million.
10. The City would obtain Building Risk Insurance through the City's Risk Management
Department.
11 The Rangers would review the plans with representatives of the Grand River Accessibility
Advisory Committee.
12. The Rangers would name the City of Kitchener as an additional insured for public liability
and property damage in the amount of $5 million.
13. The Rangers and its contractor will adhere to all permits, and construction legislative
requirements, including undertaking all necessary studies to confirm same. As an example,
an exiting study is being completed that may result in the need for an additional exit
stairwell.
To further ensure project integrity, the City's Project Management Division has completed a
business case in conjunction with the Kitchener Rangers Hockey Club. The Business Case is
attached as Appendix #1 .
The City has provided loans in the past to the Hockey Club on a business case basis and the
results have been excellent. Recently the Rangers had a loan for a major building upgrade in
the amount of $ 200,000 and a loan for the video scoreclock in the amount of $800,000. All
payments have been met. Staff are confident the business case is excellent and based on the
season ticket waiting list it is expected these seats will be sold.
FINANCIAL IMPACT:
The total cost to the Rangers of undertaking the improvements to the Aud is estimated to be
$1.4 million. As such, the total amount of debenture financing required for this project is up to
$1.4 million (repayable by the Rangers). Since the Kitchener Ranger Hockey Club is
responsible for the project they assume all risks including any project over-expenditures. The
City's risk in this venture is with respect to the loan agreement between the City and the
Rangers. However, based on the fact the demand for these seats is significant and the fact the
Hockey Club has met all other previous loan payments, the risk is minimal.
The City would fund the loan to the Rangers through the issuance of a five-year debenture in a
total amount of $1.4 million. The Rangers would repay 1000/0 of the loan over the five-year time
period including interest (projected to be approximately 4.50/0 per annum) consistent with the
terms of the external debenture. The Rangers would be entitled to receive the full value of ticket
sale revenue from the new seats until such time as the investment is fully recovered at which
time the revenue will be proportioned as outlined in the tenant agreement of the day.
COMMUNICATION:
A neighbourhood open house was hosted by the Rangers and City on Wednesday June 13th,
2007. Flyers inviting the neighbours were delivered to houses on streets directly adjacent to the
construction on the east side of the facility. A total of 3 neighbours representing one residence
attended the open house. Ward Councillor John Smola was also in attendance at the meeting.
There were no concerns expressed by those in attendance.
CSD-07-061
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CONCLUSIONS:
The additional seats will go a long way in reducing the number of citizens who are unable to
attend games of this Community's hockey team. The proposal is an enterprise based funding
model so there is no impact on the taxpayer. Council's support of the recommendation will
further allow the hockey club to meet its goals and at the same time improve the KMAC to
ensure it is able to meet this community's needs for the next 5 years.
Keith Baulk
Director of Enterprise Division
AP
Community Services: The Aud
Kitchener Rangers Hockey Club
Business Case
The Aud: Seating Addition
June 2007
Table of Contents
Executive Summary.................................................................................................................... 2
Backgrou nd............................................................................................................................ ...... 4
Problem / Opportunity................................................................................................................. 5
Current Situation..................................................................................................................... ..... 6
P r oj e ct Des c rip t ion ...................................................................................................................... 6
P r oj e ct Des c rip t ion ...................................................................................................................... 6
o b j e ct i ve s .............................................................................................................................. . . . . .. 6
Sco pe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 6
Out of Scope......................................................................................................................... . . . . . .. 7
Anticipated Outcomes................................................................................................................. 7
Stake h 0 Ide rs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 7
Strategic Alignment..................................................................................................................... 8
Environment Analysis.................................................................................................................. 9
Project Risk Assessment.......................................................................................................... 1 0
Risk of Project and each Alternative (Not including Status Quo) ............................................ 1 0
Risk of Not Proceeding with Project (Status Quo) ................................................................... 1 0
Financial Analysis...................................................................................................................... 11
Co n c Ius ion s .............................................................................................................................. . 1 3
PAGE 1
Executive Summary
The Aud: Seating Addition
Purpose:
The purpose of this business case is to outline the Kitchener Rangers Hockey Club's proposal to add 437
seats to The Kitchener Memorial Auditorium Complex (The Aud), Dom Cardillo Arena primarily as it
impacts and applies to the City of Kitchener. The Kitchener Rangers Hockey Club is experiencing seating
capacity problems because their games are selling out on a consistent basis and additional seats are
required to meet the demand. The team is a community-based organization that has a mandate of
providing the Ontario Hockey League hockey experience to as many people as possible.
As well, in May 2007, the Ontario Hockey League announced that the Kitchener Rangers Hockey Club in
conjunction with The Aud would host the 2008 MasterCard Memorial Cup, which is the Canadian Hockey
League's championship series. While hosting the Memorial Cup is a prestigious honour, it also adds
pressure to the limited seating capacity.
Description:
The objective of this project is to add 437 (net) seats to The Aud, Dom Cardillo Arena by the end of
December 2007. The tight timeframe is important for two reasons:
1. Construction of the additional seats must be completed at a minimum disruption to fans who
currently attend the Ranger games. Any loss of current seating during the construction period
would compound the seating capacity problems; and
2. The City and The Rangers are hosting the MasterCard Memorial Cup in May 2008 and the project
must be completed well in advance of this event.
The Ranger proposal is based on the following features:
· 437 total seats to be added;
· 38 seats (plus 38 standing) at the north/clock end below the suites;
· Redesigned restaurant seating netting a total of 90 additional game view seats;
· 3 additional rows along the east side for a total of 309 seats;
· Total budget of $1.4 Million, which is equivalent to the loan request; and
· Start July 1,2007 and target completion Dec. 31, 2007.
PAGE 2
Advantages of adding 437 seats:
· Debt financing by the Rangers Hockey Club will result in a self funded project;
· Results in additional revenue generating seats for all events;
· Asset is upgraded;
· Ranger Hockey Club will assume the risk for the project;
· Allows more citizens to sit during Ranger Games;
· No impact to the tax base;
· City owned;
· Rangers can also apply some revenue from the MasterCard Memorial Cup organization to assist
with the costs of adding the seats.
Disadvantages of adding 437 seats:
· Some minor additional maintenance and cleaning will be required for the additional seats.
Timelines:
Task Timeline
Business case to CMT June 12, 2007
Business case to CSC June 18, 2007
Business case to Council June 25, 2007
Approximate Construction Start July 1 , 2007
Construction End/Occupancy December 31 , 2007
The additional seats will be user paid and as a result, there will be no impact on the tax base. Adding 437
seats will help The Aud continue to be one of the premier facilities in Ontario. Council's support of the
recommendation will further improve The Aud to ensure it is able to meet this community's needs for the
next five years. In addition, the project will be undertaken by the Rangers as a leasehold improvement
and they will assume the risk associated with the project. The City will provide an interest-bearing loan
through a municipal debenture.
Recommendations:
Staff recommends:
That the Kitchener Rangers Hockey Club be authorized to proceed immediately with improvements
to the Kitchener Memorial Auditorium Complex, Dom Cardillo Arena to add approximately 437
seats, at an estimated total cost of $1.4 Million;
That the City of Kitchener provide project financing of up to $1.4 Million to the Kitchener Rangers
Hockey Club, raised by way of a five-year debenture, with the associated principal and interest to
be repaid by the Kitchener Rangers Hockey Club on an annual basis commencing in 2008;
That the Mayor and Clerk be authorized to enter into a loan agreement with the Kitchener Rangers
Hockey Club based on the conditions outlined in report CSD-07-061 including terms to provide the
Rangers with the full value of ticket revenue from the Ranger events for the new seats until such
time as the Ranger's investment has been recovered (including capital costs and financing
charges), said agreement to be satisfactory to the City Solicitor; and further,
That the City contracts directly with the project mason according to the City signatory provisions.
PAGE 3
Background
The Aud: Seating Addition
In its current form, The Kitchener Memorial Auditorium Complex (The Aud) has been a cornerstone of the
regional community for more than 50 years. Kitchener's first auditorium was located at Charles and
Queen until 1938 when it was converted to a dance hall. From 1938 to 1951, Kitchener did not have its
own ice surface which forced groups to use ice in Galt and Waterloo.
After World War II, it was decided that an auditorium would be built in honour of those who served in the
war and the East Avenue building was officially opened in 1951. At the time, The Auditorium was the
fourth largest facility of its kind in Ontario.
In 1988, construction finished on an addition to the Auditorium which featured twin Olympic ice pads, a
teaching theatre, a fitness centre, viewing lounges, change rooms, banquet facilities and meeting rooms.
The facility was renamed the Kitchener Memorial Auditorium Complex to reflect the larger building and the
original intent of constructing a war memorial.
The original auditorium arena was renamed in 1994, the Dom Cardillo Arena in honour of Kitchener's
longest serving mayor. In 1998, another addition was built to provide a permanent home for the Kitchener
Rangers Hockey Club.
In 2003, the City invested $8 million into the Complex by improving parking lots, concession areas,
expanded concourse areas, new suites, restaurant and media amenities.
The Aud has been able to host numerous sports events such as World Junior Figure Skating, ball
hockey events, NHL, minor and junior hockey training camps, Jiu Jitsu World Championships, curling
bonspiels as well as entertainers (Bryan Adams, Pearl Jam, Hilary Duff, Harlem Globe Trotters) and
trade shows (Home and Garden, Computer and Dog Shows) etc.
However most people associate the Aud with its main tenant - The Kitchener Rangers. The hockey club
has become very successful averaging standing room only crowds for more than six consecutive years.
In May 2007, it was announced that The Aud and the Kitchener Rangers would host the 2008 MasterCard
Memorial Cup.
PAGE 4
Problem / Opportunity
Description:
The Dom Cardillo Arena is the home of the Ontario Hockey League team, The Kitchener Rangers, and
encompasses total seating for up to 5,826 people for hockey. Over the last several years, the seating
capacity has proven to be inadequate. By adding 437 seats to the arena, the Rangers and other
events will be able to increase attendance primarily by serving the season ticket waiting list.
The Rangers have had six consecutive seasons where the average game attendance has exceeded the
arena capacity and over 500 people are currently on the season ticket waiting list. This demonstrates the
demand for seats is significant.
The Kitchener Rangers engaged a contractor to undertake an initial review of options to add seats. They
found that there is an opportunity to add approximately 437 seats (net) that can be funded through the
additional revenue generated by the seats. The business case is based on the Ranger's assuming full
responsibility for repayment of the costs of construction (including interest), which they will fund with 1000/0
of the regular season hockey ticket revenue from the additional seats. Therefore, there is no impact on
the taxpayer, as the project will be funded by the Rangers with ticket revenues.
Project Team/Role
Director, Enterprise
Manager, The Aud
Chief Operating Officer, Kitchener Rangers Hockey Club
Finance
Legal
Facilities Management
Risk Management
Project Administration
Building and Planning
PAGES
Project Description
The project will add 437 seats to The Aud, Dom Cardillo Arena, thereby allowing more citizens to attend
OHL hockey games.
Project Description
Rangers' management initiated the request of adding 437 seats to The Aud, Dom Cardillo arena. There is
a waiting list for season tickets and the Rangers' management believes that the additional seats can
easily be filled. By filling the seats on a consistent basis, new ticket revenue will be generated that will
fund 1000/0 of the capital cost. After the loan has been repaid, the revenue will be split on the same basis
as applies to the profit sharing agreement of the time. The Kitchener Rangers will be responsible to
assume all construction and financing costs, which they will recover over time through the ticket revenue.
Objectives
The objective of this project is to add 437 (net) seats to The Aud, Dom Cardillo Arena by the end of
December 2007. The tight timeframe is important for two reasons:
1. Construction of the additional seats must be completed at a minimum disruption to fans who
currently attend the Ranger games. Any loss of current seating during the construction period
would compound the problem of the shortage of seating; and
2. The City and The Rangers are hosting the MasterCard Memorial Cup in May 2008 and the project
must be completed well in advance of this event.
The timeframe is tight because The Aud and The Rangers are hosting the 2008 MasterCard Memorial
Cup in May 2008, which is the Canadian Hockey League's championship series. The new seats need to
be installed and completed at a minimum disruption to fans who attend the Ranger games who will likely
attend the MasterCard Memorial Cup games.
Scope
Project Components:
Timeframe:
Department/Organization:
Function:
437 additional seats
Construction end by December 2007
CSD, Facility Management, Kitchener Rangers Hockey Club
Address citizen based waiting list for tickets
PAGE 6
Out of Scope
Other renovations to The Aud.
Anticipated Outcomes
Immediate:
More seating for Kitchener Ranger games including 2008 MasterCard Memorial Cup
in May 2008 and other events;
More revenue generated to finance the additional seats.
Stakeholders
Stakeholders: Overview
Primary - Internal
City Council Approvals
Finance Debenture funding and loan agreement with Kitchener Rangers
Legal Agreements
Purchasing Tenders
Inclusion Services Design
Facilities Management Construction management
DTS, Fire Site plan approval, building permit
Primary - External
Kitchener Rangers staff & players Require City to pay Rangers the price of the seats sold for other events (price
of Rangers game)
Ranger fans More fans will able to view Ranger and MasterCard Memorial Cup games
Secondary - Internal
CSD Clean and maintain seats
Secondary - External
Other rental groups May be required to close for some construction
Future Promoters More seats available for events, surcharge for new seats until costs are
recovered
Neighbourhoods adjoining to the Unencumbered by noise from construction at The Aud, parking
Aud
PAGE?
Strategic Alignment
The addition of seats to The Aud will not financially affect any other projects as there is an agreement with
the Rangers management for debt payment and the seats will be user paid.
Goal level of Impact Explanation (if required)
The Corporate Plan High Community confidence and trust in the City of Kitchener.
The City is maintaining and improving its assets.
An organization that clearly understands and anticipates
public needs and priorities. More seating is required for the
Ranger games and other events.
Plan for a Healthy Kitchener High Strategic Direction #4 - We will work in partnership with
community members, agencies and providers to promote
well-being and a healthy community. The City is working in
partnership with the Kitchener Rangers Hockey Club.
Region's Growth High Goal #2 - Building Vibrant Urban Places through: creating
Management Strategy safe communities, respecting diversity of cultures and
encouraging new investment in existing urban areas. The
addition of seating to The Aud is a direct investment in
Kitchener's urban area.
Leisure Facilities Master High Recommendation 4 - To realign arenas / ice surfaces to
Plan reflect contemporary operational, locational and market
trends and requirements.
To develop a balanced strategy for the renewal and
upgrading of existing leisure facilities, including park
sites, as well as the introduction of new leisure resources
to reflect population growth, emerging residential
development patterns and market trends.
The market demands more seating for the Ranger games
and other events. The Aud needs to be renewed and
upgraded so that more people can enjoy The Aud and
the services it provides.
PAGE 8
Environment Analysis
The Kitchener Rangers Hockey Club is a community-based organization that has a mandate of providing
the OHL hockey experience to as many people as possible. The Club is experiencing problems because
their games are selling out on a consistent basis. Additional seats are required.
As well, in May 2007, the Ontario Hockey League announced that the Kitchener Rangers Hockey Club in
conjunction with The Aud would host the 2008 MasterCard Memorial Cup. While hosting the MasterCard
Memorial Cup is a prestigious honour, it also adds pressure to the limited seating capacity.
The Rangers approached the City with a proposal to increase the number of reserved seats so that more
fans are able to view the games. The additional seats will serve this community by allowing more hockey
fans to view the Ranger games.
In addition to more seats being available for the Ranger games, the seats will also be available to
promoters of other events. It is anticipated that the additional seats will be filled for other events based on
capacity and a surcharge will be applied for these events until the debt is paid back.
The benefits of adding seats to The Aud are:
· Will be debt financed with the Rangers Hockey Club assuming all costs as a self-funding project;
· Results in additional revenue generating seats for all events;
· Remain competitive with other venues in Ontario;
· Asset is upgraded;
· Ranger Hockey Club will assume the risk for the project;
· No impact to tax base;
· City owned;
· Allows more citizens to attend Ranger Games; and
· Rangers can also apply some revenue from the MasterCard Memorial Cup organization to assist
with the costs of adding the seats.
The disadvantages of not completing the renovation are:
· Waiting list is not reduced;
· Working relationship with The Rangers may become strained; and
· The Aud is not upgraded.
The additional seats will not change The Aud's market position through the lens viewed by event
promoters or organizers. These seats do not make a large enough impact to change its competitive
position in hosting concerts or major events where capacity is an issue. It may help rationalize the
business case to host those events that may be at the fringe of our current seating capacity.
To ensure that the community is in favour of the increase in seats, a public consultation will be held at The
Aud in June 2007.
PAGE 9
Project Risk Assessment
Possible Alternatives:
1. Additional seating is added to The Aud, Dom Cardillo arena
2. Status Quo - no extra seating is added to The Aud, Dom Cardillo arena
Risk of Project and each Viable Alternative (Not including Status Quo)
Project Risk Assessment
Probability Impact
Risk 1 - Rangers Hockey Club does not honour the Low High
debt repayment
Prepare financial business case, review Ranger's credit
Risk 1 - General Mitigation Strategy worthiness and history with City in similar undertakings,
negotiate longer payback term
Risk 2 - Construction does not finish on time Low Med
Risk 2 - General Mitigation Strategy Continue with interim construction operating I
procedures
Risk 3 - Extra seats not sold Low Med
Risk 3 - General Mitigation Strategy Longer pay back for Rangers, reduced annual revenue
Risk of Not Proceeding with Project (Status Quo)
Project Risk Assessment Status Quo
Probability I Impact
Risk 1 - Aud does not get updated High I Med
Risk 1 - General Mitigation Strategy No solution I
Risk 2 - Ranger fans unable to attend games and High I High
playoffs
Risk 2 - General Mitigation Strategy No solution
Risk 3 - Ranger Hockey Club dissatisfied with decision High I Med
Risk 3 - General Mitigation Strategy Strained future contract negotiations,
relationships
Risk 4 - No new revenue is generated High I Med
Risk 4 - General Mitigation Strategy No solution
PAGE 10
Financial Analysis
The City's capital investment philosophy provides for debt financing for projects, which have a business plan
showing revenues generated over a reasonable pay back period covering the capital cost and interest of the
project. The Aud seating addition is an example of a major capital project that can be implemented under
this policy. The facility now more than 50 years old and has been continuously upgraded to satisfy the
needs of the community. The current seating capacity is no longer able to address community demand.
Renovations such as adding 437 seats will help address the current demand and keep The Aud as one of
the premier facilities in Ontario.
The total budget for this project is $1.4 Million, including a contingency of $130,000. This is based on
an estimate obtained by the Kitchener Rangers on June 7, 2007. Since the Kitchener Ranger Hockey
Club is responsible for the project, they assume all risks including any project over-expenditures or
lack of ticket revenue to support the loan from the City. The City's risk in this venture is with respect to
the Ranger's ability to make annual payments sufficient to meet the obligations of the external
debenture. However, based on the fact the demand for these seats is significant and the fact the
Hockey Club has met previous loan payments, the risk is minimal.
The City would provide a loan to the Kitchener Rangers by taking out a five-year debenture in a total
amount of up to $1.4 Million in the fall of 2007. The Rangers would repay 1000/0 of the loan over five
years including interest (projected to be approximately 4.50/0). Annual loan payments are estimated to
be $320,000 per year, ($1.6 million over the term of the loan). If the debt is a serial issue, which is the
most likely scenario, the April payment will be interest only and the October payment will be principal
plus interest. If it is an amortizer, both payments will include principal and interest, so the annual cost
would be marginally lower due to the earlier payment of principal.
The revenues anticipated from the additional seats should be sufficient to offset the debt service costs
over a six-year period as indicated by the following conservative estimates:
Anticipated Revenues
2008 $302,284
2009 $239,801
2010 $253,818
2011 $267,835
2012 $281 ,852
2013 $295,869
Total $1,641,459
PAGE11
These amounts assume the following:
· One hundred percent of revenue generated from their events for the new seats will be
retained by the Rangers until such time as the costs associated with the seat addition,
$1 .4M plus interest has been recovered by the Rangers.
· Season ticket price and walk up ticket prices will increase at their annual rate of $1
per season. This has been the rate used in each of the past three years. Although
the rate will remain constant, the actual percentage increase will decrease each year.
· The 38 seats located at the North end will be treated as Premium seats and include a
$5 surcharge per game, $170 per year.
· For the purpose of this analysis, no revenues have been deemed to been received
from non-Ranger events due to their uncertainty.
· Additional revenues, even with the sharing formula in place, will be experienced
during the playoffs. These revenues have not been included in the cash flow
analysis.
· A capital charge of $76,500 will be assessed against the MasterCard Memorial Cup in
2008, forming part of the revenue for the project in that year.
The Rangers organization is comfortable in agreeing to the repayment of the debenture over the five-
year period as outlined above. The revenue generated from the additional seats allows the
renovations to be paid by the user and provide for further improvements to the facility without any
financial cost to the taxpayer. It will also allow the Rangers to help contribute to the community and
repay the debenture without placing financial pressure on the Rangers organization.
The Rangers will fund any cash flow deficiency (e.g. the difference between annual revenues and debt
service costs) from operations/reserves over the term of the agreement until their costs are fully
recovered through ticket sales. The maximum temporary cash flow shortfall is estimated to be
approximately $200,000. The Ranger's are confident that this amount can be internally financed by
the hockey club until it is recovered through ticket revenues.
PAGE 12
Conclusions
Conclusions
The significant current demand and hosting the MasterCard Memorial Cup adds a sense of urgency to the
addition of seats at the Aud. The advantages of generating new revenue and using that revenue to
upgrade a City asset through debt financing are very compelling benefits to the renovation.
The addition of 437 seats will go a long way in reducing the number of citizens who are unable to attend
games of this community's hockey team. The proposal is an enterprise based funding model so there is
no impact on the taxpayer. Council's support of the recommendation will further improve The Aud to
ensure it is able to meet this community's needs for the next five years.
Alternative Business & Operational Risk Assessment Impact
Impact
User paid seats
Project Increase number of available Low Increase size of venue
seats at The Aud Generate new revenue
Renovation to keep The Aud competitive
No increase in size
Status quo No change in number of seats High No new revenue generated
No renovation to keep The Aud
competitive
Staff recommends:
That the Kitchener Rangers Hockey Club be authorized to proceed immediately with improvements to the
Kitchener Memorial Auditorium Complex, Dom Cardillo Arena to add approximately 437 seats, at an
estimated total cost of $1.4 Million;
That the City of Kitchener provide project financing of up to $1.4 Million to the Kitchener Rangers Hockey
Club, raised be way of a 5-year debenture, with the associated principal and interest to be repaid by the
Kitchener Rangers Hockey Club on an annual basis commencing in 2008;
That the Mayor and Clerk be authorized to enter into a loan agreement with the Kitchener Rangers
Hockey Club based on the conditions outlined in report CSD-07-061, including terms to provide the
Rangers with the full value of ticket revenue for the new seats until such time as the Ranger's investment
has been recovered (including capital costs and financing charges) said agreement to be satisfactory to
the City Solicitor and further;
That the City contracts directly with the project mason according to the City signatory provisions.
PAGE13