Report
to/Rapport au :
Corporate Services and Economic Development Committee
Comité des services organisationnels
et du développement économique
and Council / et au Conseil
Submitted by/Soumis par : Ned Lathrop, Deputy City Manager/Directeur
municipal adjoint,
Planning and Growth Management/Urbanisme et Gestion de la croissance
Contact
Person/Personne ressource : Rob Mackay, Manager/Gestionnaire,
Strategic Projects/Projets stratégiques
(613) 580-2424 x22632, Rob.Mackay@ottawa.ca
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SUBJECT: |
PUBLIC-PRIVATE PARTNERSHIP (P3)
PROJECT - ORLÉANS ARTS FACILITY AND TOWN CENTRE |
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OBJET : |
PROJET DE
PARTENARIAT PUBLIC-PRIVÉ (PPP) – CENTRE DES ARTS D’ORLÉANS ET CENTRE
D’ACTIVITÉS |
REPORT RECOMMENDATIONS
That the Corporate Services and
Economic Development Committee recommend that Council authorize staff to enter
into negotiations with Orléans Town Centre Partnership for the design, build,
finance, maintenance and ownership with reversion back to the City at the end
of the operating term/transfer and maintenance of the Orléans Arts Centre
facility; the transfer/ownership, operation and maintenance of the Orléans
Client Service Centre building with the provision of a long-term lease to the
City; and the ownership and development of the City-owned Orléans Town Centre
lands.
RECOMMANDATIONS DU RAPPORT
Que le Comité des services organisationnels et
du développement économique recommande au Conseil d’autoriser le personnel à
entamer les négociations avec le Partenariat du Centre d’activités d’Orléans en
vue de la conception, de la construction, de l’entretien et du droit de
propriété financiers avec réversion à la Ville à la fin du mandat
d’exploitation du Centre des arts d’Orléans; du transfert/droit de propriété, de
l’exploitation et de l’entretien de l’édifice abritant le Centre du service à
la clientèle d’Orléans avec l’offre d’un bail à long terme à la Ville; et du
droit de propriété et de l’aménagement des terrains du Centre d’activités
d’Orléans appartenant à la Ville.
BACKGROUND
On
October 26, 2005 Council directed staff to proceed to Stage 2 of the
procurement process for the development of an Orléans Arts Centre facility and
the Orléans Town Centre land using a P3 approach. Stage 2 of the process involved the release of a Request for
Proposals (RFP) to an approved shortlist of four qualified respondents. The RFP was issued by Supply Management
Division and distributed to the shortlisted Respondents on 19 December
2005. The RFP closed on 23 March 2006,
with the City receiving proposals from two of the four short-listed
Respondents. Proposals were received
from:
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Orléans Town Centre Partnership, Toronto
(includes: Forum Leasehold Partners
Inc., Aecon Buildings, Johnson Controls Inc./BLJC and Lemay & Doyle
Architects); and
-
Morguard Plenary Consortium, Mississauga
(includes: Morguard Investments
Ltd., Plenary Group Canada Ltd., PCL Constructors Canada Inc. and ema
Architects)
An
evaluation committee was established to review and score the two
proposals. Through an extensive review,
in accordance with the prescriptive process stipulated in the procurement
document, the proposal submitted by Orléans Town Centre Partnership was found
to meet the objectives of the City's RFP, and provided best value to the City.
DISCUSSION
The evaluation team was facilitated by Supply Management Division, and included representatives from the Strategic Projects Division, Cultural Services, as well as representatives from Real Property Asset Management, Financial Services, Planning and Infrastructure Approvals, and an external representative with expertise in P3 financial modelling. An independent Fairness Commissioner was retained to oversee the process to ensure that the evaluation was conducted in a fair, transparent and consistent manner.
At
the outset of the evaluation process, City subcommittees consisting of the
appropriate staff subject matter experts (SME's), along with Supply Management
and the Fairness Commissioner, were struck to evaluate each of the technical
and financial components of the proposals.
The two subcommittees scored the proposals against a set of
pre-determined evaluation criteria.
Representatives from the subcommittees also formed part of, and advised,
the Executive Evaluation Committee who confirmed and finalized the scoring of
the two proposals.
The
proposals were rated on the degree to which they met the evaluation criteria
for each of the five components of the RFP.
These relate to (1) the design and development of the Orléans Arts
Centre, (2) the design and development of the Town Centre land, (3) the
operations and maintenance of both the Orléans Arts Centre and the Client
Service Centre building, and (4) the overall Business Plan. The fifth component consisted of a scored
presentation given by each Respondent team after the close of the RFP. The interview provided each Respondent with
the opportunity to present their submission and give clarification to the
Executive Evaluation Committee. The
results of this extensive evaluation process assigned the higher overall score
(out of 100 points) to Orléans Town Centre Partnership (OTCP) who were able to
demonstrate best overall value for the City.
Summary of Proposal by Orléans Town Centre
Partnership
1. Design and development of the Orléans Arts
Centre (OAC): The proposed design
consists of a 2.5 storey, 86,000 square foot building, whose exterior design is
in keeping with the City's policies and guidelines. The 500 seat theatre met the City's desired acoustic quality and
functional layout requirements.
However, certain circulation, flow, adjacency and accessiblity elements
of the floor plan and building specificiations were not completely
satisfactory, and will need to be revised.
In addition, the City will request written confirmation that specialized
equipment, furnishings and fittings, as well as unique requirements of the
program spaces are as indicated in the RFP.
Going forward, staff will address these matters with the Proponent
within the proposed fixed price and building envelope.
2. Design and development of the Orléans Town
Centre: OTCP's proposal clearly met the
City's objectives for the Town Centre and provided evidence of the ability to
cause at least $170 million worth of construction on the Town Centre land
within Phase 1 of their proposed three-phase development plan (by 2009). This would be through the construction of a
hotel, senior's residence and some residential development. Through negotiations, the City will ensure that
suitable performance requirements are in place to encourage OTCP to complete
this work by 2009. The road pattern and
vehicular access to the Arts Centre as proposed may be subject to modification
through negotiation.
3. Operations and Maintenance of the Orléans
Arts Centre (OAC) and Client Service Centre (CSC): Orléans Town Centre Partnership proposes the use of Johnson
Controls Inc./BLJC for the operations and maintenace of both buildings. A point of negotiation will relate to the
mechanical components proposed for the OAC, and achieving assurance that the
proposed lifecycle arrangement will result in the City receiving a quality
building that will retain its value long after the term of the partnership
agreement, when the building reverts to City ownership. As indicated in the RFP, the Client Service
Centre is transferred to the P3 partner in perpetuity.
4. Business Plan: The proposed financial structure results in a net annual operating cost to the City that is in line with the costs that were identified by staff in the June 2005 Council Report. Similar to past P3 projects, the City will be required to guarantee the OTCP loan to ensure the best financing rate possible. The City will also need to enter into Municipal Capital Facilities Agreements for each of the OAC and CSC buildings in order to exempt OTCP from realty taxes, as well as from development charges on the OAC building. During the 25-year term of the agreement, the City is to pay rent on the OAC that includes the cost of financing, plus operations and maintenance costs of the facility; rent on the CSC is to be a standard office lease.
Because
construction is to begin in early 2007, the Respondent's proposals were
submitted in 2007 dollars, and incorporate a reasonable escalation for
construction costs. Despite this, the
annual cost proposed by OTCP is still within range of the annual cost estimate
highlighted in a June 2005 Council report.
The
June 2005 Council report indicated that the Arts Centre could be constructed in
the price range of $25M to $27M by using a P3 approach. With the contribution of the City's offsets,
including its vacant land and Client Service Centre building, the net cost
would be reduced to between $10M and $13.5M.
The staff report recommended that the net cost of the Arts Centre be
paid through a lease to own approach by converting the net capital cost of $10
to $13.5 million into annual payments over 25 years. The City's annual cost estimate (2005 dollars) was as follows:
Loan
repayment on Net Capital Cost of OAC ($10 - $13.5
million)....................$725K to $1M/yr
plus
Building
maintenance, life cycle costs, and incremental
rent.........................$1.3M/yr to $1.8M/yr
on
OAC and existing Client Service Centre building
TOTAL...................................................................................................................$2
to $2.8M/yr
In
addition, the net operating budget for arts programming and staffing is
estimated to be $450K/yr.
Timelines and Next Steps
Following
Council's approval of the Orléans Town Centre Partnership as the Preferred
Partner, the Strategic Projects Division will form a negotiation team to
develop a partnership agreement related to the construction of the Orléans Arts
Centre, the transfer of ownership of the Client Service Centre building, and
development of the Town Centre land.
Selection
of a preferred partner does not automatically imply that negotiations will be
successful. Issues related to the
modification of the proposal and contractual agreements require review and
negotiation. The City will need to
conduct a due diligence process to further verify the information and
assumptions made by the respondent in their proposal. The firm of KPMG has been retained to assist the City with this
process. Negotiations will focus on
achieving the best value for the City within an acceptable risk structure.
While
the City is committed to the process and has full expectations of entering into
a successful partnership, it will only proceed if there is a strong sense that
a successful and positive partnership can be formed between the City and the
Orléans Town Centre Partnership.
Failing this, the City will have the option of entering into
negotiations with the second ranked Respondent, Morguard Plenary Consortium.
It
is anticipated that negotiation of the partnership framework will run from June
through August, 2006. This will allow a
report to be presented to Committee and Council in September 2006 to confirm
the structure and business terms of the partnership agreement.
A
public meeting will be held in the community prior to the completion of the
negotations stage, and will be organized by OTCP in conjunction with City
staff. Staff will report the outcome of
the public consultation as part of its September 2006 report to Committee and
Council.
Following
this, the legal elements of the agreement are anticipated to be finalized, with
a formal partnership agreement being entered into by the end of this year. Construction of the Arts Centre would begin
in 2007, with completion of construction and occupancy planned for the fall of
2008.
CONSULTATION
Following the work of the Executive Evaluation Committee, the Ward Councillor was consulted and informed of the recommended Preferred Partner. The City's Orléans Arts Centre program partners (Arts groups) have been informed of the results of the RFP evaluation process, and the recommended Preferred Partner.
FINANCIAL IMPLICATIONS
In June 2005, Council authorized staff to proceed with the proposed public-private partnership framework for the development of the Orléans Arts Centre and Town Centre. The June 2005 staff report outlined the results of the Public Sector Comparator (PSC) which compares the overall cost of the project using a P3 approach against the cost of the project using a traditional public-sector approach. The report indicated that the Arts Centre could be constructed at a lesser price by using a P3 approach. The complete financial implications to the City will be spelled out in a subsequent report targeted for September 2006, following negotiations with the preferred proponent.
For the purpose of this report, there are no financial implications.
SUPPORTING DOCUMENTATION
DISPOSITION
The Strategic Projects Division, in coordination with Cultural Services Division will implement the recommendations as directed by Council.