12. RIDEAU CANOE CLUB LOAN
GUARANTEe
GARANTIE DE PRET AU CLUB RIDEAU CANOE
COMMITTEE RECOMMENDATIONS
That Council:
1.
Increase the
capital project authority for the expansion and renovation of the Rideau Canoe
Club (RCC) facility by $0.516 million, from $1.782 million to $2.298 million.
2.
Fund the
additional $0.516 million requirement from donations ($46,000) and cash
reserves ($120,000) held by RCC, with the remaining balance $350,000 financed
by RCC through borrowed funds and;
3.
Authorize
the City Treasurer on behalf of the City, to enter into a loan guarantee
agreement with a financial institution, selected by the RCC and satisfactory to
the City, in providing financing to a maximum of $350,000.
Recommandation DU Comité
Que le Conseil :
1.
Augmente de 516 000 $,
pour les porter de 1 782 000 $ à 2 298 000 $, les dépenses
d’immobilisation autorisées pour le projet d’agrandissement et de rénovation
des installations du Rideau Canoe Club (RCC);
2.
Finance les dépenses additionnelles
de 516 000 $ au moyen des dons (46 000 $) reçus par le RCC et
des réserves (120 000 $) qu’il possède, le reste, soit
350 000 $, étant financé par le RCC au moyen d’un emprunt;
3.
Autorise la trésorière municipale à
conclure, au nom de la Ville, une entente de garantie d’emprunt avec une
institution financière choisie par le RCC et jugée satisfaisante par la Ville,
relativement à un financement devant porter sur un montant maximal de
350 000 $.
Documentation
1. Corporate Services and Economic Development Committee report dated 19 January 2010 (ACS2009-COS-PRC-0014)
Report to/Rapport au :
Corporate Services and Economic Development
Committee
Comité des services organisationnels et du développement économique
and Council / et au Conseil
19 January 2010 / le 19 janvier 2010
Submitted by/Soumis par : Steve
Kanellakos, Deputy City Manager/Directeur municipal adjoint,
City
Operations/Opérations municipales
Contact Person/Personne ressource :
Dan
Chenier, Acting General Manager/directeur générale intérimaire
Parks and
Recreation & Cultural Services Department /
Services
des parcs, des loisirs et de la culture
(613) 580-2424 x 23666, Dan.Chenier@ottawa.ca
SUBJECT:
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OBJET :
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That the Corporate Services and Economic
Development Committee recommend Council:
1.
Increase the
capital project authority for the expansion and renovation of the Rideau Canoe
Club (RCC) facility by $0.516 million, from $1.782 million to $2.298 million.
2.
Fund the
additional $0.516 million requirement from donations ($46,000) and cash
reserves ($120,000) held by RCC, with the remaining balance $350,000 financed
by RCC through borrowed funds and;
3.
Authorize
the City Treasurer on behalf of the City, to enter into a loan guarantee
agreement with a financial institution, selected by the RCC and satisfactory to
the City, in providing financing to a maximum of $350,000.
Que le Comité des services organisationnels et du développement
économique recommande au Conseil :
1.
D’accroître de 516 000 $,
pour les porter de 1 782 000 $ à 2 298 000 $, les dépenses
d’immobilisation autorisées pour le projet d’agrandissement et de rénovation
des installations du Rideau Canoe Club (RCC);
2.
De financer les dépenses
additionnelles de 516 000 $ au moyen des dons (46 000 $) reçus
par le RCC et des réserves (120 000 $) qu’il possède, le reste, soit
350 000 $, étant financé par le RCC au moyen d’un emprunt;
3.
D’autoriser la trésorière municipale
à conclure, au nom de la Ville, une entente de garantie d’emprunt avec une
institution financière choisie par le RCC et jugée satisfaisante par la Ville,
relativement à un financement devant porter sur un montant maximal de
350 000 $.
On June 26,2009 the Federal and Ontario governments provided the City of Ottawa with a list of approved recreational infrastructure projects (RInC) based on the Council approved list as submitted in March. Furthermore, City Council report ACS2009-CMR-FIN-0032 approved the financing of the City portion of RInC projects. The list of approved capital projects and financing included the Rideau Canoe Club.
The Rideau Canoe Club, at 804 Hogs Back Road occupies land owned by the National Capital Commission and operates from a City-owned facility. The programming is run by the Club on behalf of the City, with City forces responsible for major repairs and lifecycle replacement of the facility. Due to the ever increasing demand for programming, the Club identified a need for a major expansion The total project cost submitted to RInC for the expansion and renovation was $1.8M based on one-third share from each partner; municipal, provincial and federal. RInC confirmed $1,782,000 for the project, with each partner paying $ 594,000. 00 Unbeknownst to the City at the time of submission, all of the soft cost (permits, fees, consulting etc) were not fully comprehended in the project estimate prepared thus leaving a financial gap of $516,000, in order to meet the real budget requirement of $2,298,000. The original capital project was submitted under Parks and Recreation's Major Capital Community Partnership and as a result, the group had already begun their fundraising efforts to cost-share on a 50-50 basis and have therefore planned for major fund raising activities. Donations in the amount of $46,000 (received) plus $120,000 (received) for the Club's cash reserves will leave project funding requirement in the amount of $350,000. The loan guarantee being sought is to a maximum rather than the fixed $350,000 since it is the Club's intention to continue fund-raising efforts and will not necessarily require the full loan amount.
The Rideau Canoe Club Board approved the following motion:
" The Board of the Rideau Canoe Club agrees to provide the sum of $120,000 to the project on January 8, 2010, from reserve funds, and to take out a loan of up to $350,000, amortized over a period of 10 years or more, with the assistance of the City of Ottawa which will provide the necessary security, to attain additional funding for the new club facility. The loan is to be in place no later than March 31, 2010."
As the facilities are City-owned, and as a not-for-profit, the Club has no real assets that a financial institution would recognize as collatoral. The proposed loan guarantee will allow for a reduced interest rate and assist the Club in being able to repay the loan in a shorter period of time. The Club will be approaching three (3) Financial Institutions to secure term sheets from each in order to ensure best value for the Club.
With the City's loan guarantee, for example one of the institutions have quoted to the Club, a fixed five year term at 4.76% amortized over ten years, which translates into a principal and interested blended payment of $3,656.87 for 120 months, or $ 43,882.44 per year,
To mitigate risk, the loan guarantee agreement with the Club, will contain provisions that the Club submit quarterly financial statements and will pledge as security for the City's guarantee, its assets including canoes and training equipment. In the event of default, ownership of the assets and/or any cash reserves of the Club would be transferred to the City.
The loan guarantee option is an example of how the City can both support and empower a community-based organization to take accountability for its longer-term programming and success. While the proposed guarantee required the City to assume credit risk, the Club's longstanding existence and track record for fulfilling its financial and service obligations, coupled with the mitigation clauses proposed to be contained in the loan guarantee agreement, renders the accommodation of the request as a reasonable risk to the City. This represents a good business decision in support of a City supported recreation program.
There
are no specific rural implications associated with this report.
Staff have met on several occasions with members of the Board of Directors, and the Board's Construction Sub-Committee. The Ward Councillor is aware and supportive
It is permissible for the City to provide assistance to the Rideau Canoe Club by way of a loan guarantee as the Club is a not-for-profit organization. There is some legal risk to the City in that if the Club defaults under the loan, the City will be responsible for repaying to the bank the then-outstanding balance under the loan. Typically, under a loan guarantee a bank does not have to exhaust its efforts to collect from the borrower before seeking to collect the outstanding amount from the guarantor. As noted in the report, the Club's assets include canoes, training equipment and some cash reserves. Consequently, there is some security that can be pledged to the City to help it recover some funds to reimburse itself in the event of a default under the loan by the Club but the actual dollar amount in such case is currently unknown.
There is no direct cost to the City providing a loan guarantee to the Rideau Canoe Club. There is a potential liability in the event of the Club defaults on the loan, as the City would then be responsible for the loan repayments to the bank. Based on current borrowing rates, it is estimated that the annual debt servicing costs would be approximately $44,000 per year.
The Parks, Recreation and Cultural Services Department would have to identify a source of funds from within their operating and/or capital budgets to continue the repayments in the event of a default. The proceeds from the loan to be guaranteed by the City will be applied to costs incurred for the expansion and renovation of a City owned facility.
N/A
The Parks, Recreation and Cultural Services Department, in partnership with Finance and Legal Services will negotiate a loan guarantee agreement with the Club and a major financial institution, as well as an agreement between the City and the Club.