For Action

2021 Operating Budget for the Coach Terminal Inc. (TCTI)

Date: February 10, 2021 To: Toronto Coach Terminal Inc. Board of Directors From: Treasurer

Summary

The attached report presents the 2021 Toronto Coach Terminal Inc. (TCTI) operating budget for approval.

Recommendations

It is recommended that the Board approve the 2021 Operating Budget for the Toronto Coach Terminal Inc. with revenues of $696,700 and expenses of $280,100, resulting in a net profit of $416,600 as set out in this report.

Financial Summary

The lease agreement with Greyhound and Coach Canada Toronto Operations Ltd. (GACCTO) for the use of the 610 and 130 Elizabeth Street properties as an inter-city bus terminal, will conclude in 2021 and GACCTO has verbally advised they will not be seeking a further extension. As a result, TCTI will no longer have its primary revenue stream (approximately $1,394,000 on annual basis) effective July 7, 2021.

Discussions with CreateTO and the City of Toronto (“City”) regarding the future use of the property are ongoing. These plans will be the subject of an update to the Board of Directors prior to GACCTO lease expiry. Staff has requested that upon the - transfer of the 610 Bay Street and 130 Elizabeth Street properties the remaining loan balance between TCTI and the TTC (anticipated to be approximately $4 million) be repaid and responsibility for any environmental liabilities associated with the property be assumed.

Equity/Accessibility Matters

With the conclusion of the GACCTO lease, it is anticipated that inter-city bus service will be moved to the new Bay Street bus depot the details of which is currently being determined by GACCTO.

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Decision History

On an annual basis, the budget of TCTI are presented on a non-consolidated level are presented for approval.

In June 2020, the TCTI Board of Directors approved the extension of lease for up to one year. http://www.ttc.ca/About_the_TTC/Subsidiaries/Toronto_Coach_Terminal_Inc/2020/June _17_2020/Meeting_of_Directors/Reports/3_GACCTO_Lease_Extension_and_Rent_Ab atement_Request.pdf

Issue Background

TCTI Operating Budget

Effective July 8, 2012, TCTI entered into a lease agreement with Greyhound and Coach Canada Toronto Operations Ltd. (GACCTO) for the use of the 610 Bay Street and 130 Elizabeth Street properties as an inter-city bus terminal. The lease included the entire terminal, retail space, lockers, and parking facilities. Since that date, the terminal has been solely operated by GACCTO. The TCTI’s operations have one primary source of revenue, namely the lease. Over the life of the lease, TCTI’s expenses are limited to depreciation (which is a non-cash expense) and loan interest expense payable to TTC. The lease term under the initial lease and successive extensions will expire on July 7, 2021.

On June 17, 2020, TCTI Board approved a further extension of the lease of up to one year, based on the same terms and conditions of the existing lease, with an early termination provision, subject to the approval of CreateTO and the City of Toronto in a form acceptable to TTC General Counsel. However, on December 1, 2020, TCTI Management was notified that GACCTO will not be opting to extend the lease beyond July 7, 2021.

Discussions with CreateTO and the City of Toronto (“City”) regarding the future use of the property are ongoing. Plans for the future use of the property will be the subject of an update to the Board of Directors prior to GACCTO lease expiry. On October 29, 2019 City Council identified the 610 Bay Street and 130 Elizabeth Street properties as an asset that is underutilized, with an opportunity to unlock value and address City needs and City building objectives, such as affordable housing, employment uses and community infrastructure.

TCTI Loan

Rent payments for the lease of 610 Bay Street and 130 Elizabeth Street from GACCTO are the only source of revenue to TCTI. TCTI uses the rent paid by GACCTO to pay off the loan that was provided by TTC on December 17, 1991 in the amount of $13.6 million.

2021 Operating Budget for the Toronto Coach Terminal Inc. Page 2 of 5 The loan was used to fund the final dividend declared by Metro Toronto Coach Terminal Incorporated (renamed in 1998 to TCTI) to the TTC. The loan accrues monthly interest at the prime rate and has a balance of approximately $4.5 million. Due to the expiry of lease, TCTI will not have the means to fully repay the loan balance to TTC, as shown in the following table:

$000s as at Dec 31, 2021 Amount Projected loan balance 4,545 TCTI Projected Cash on Hand – Dec 31, 2021 Dec 31 2020 Cash on Hand 1,531 GACCTO 2020 Deferred Rent, to be paid in 2021 465 GACCTO 2021 Rent 697 TCTI Projected cash on hand Dec 31, 2021 2,693 Projected Loan Balance, net of projected cash on hand 1,852

Assuming GACCTO makes all remaining scheduled payments then the loan balance net of cash on hand is anticipated to be approximately $1.9 million at December 31, 2021. TCTI will require funds to fully repay any remaining loan balance when the properties are transferred. Additional funds between $1 to $2 million will need to be retained to support future advances to TCTI’s subsidiary, the Toronto Transit Commission Insurance Company Limited (TTCICL). While all claim costs are ultimately paid by the TTC and the City of Toronto, in accordance with TTCICL’s license, cash and securities in an amount of not less than one month’s operating expenses must be maintained by TTCICL.

Comments

2021 TCTI Operating Budget

TCTI’s budgeted net profit for 2021 is expected to be $416,600, representing a $628,300 or 60% reduction relative to the 2020 budget. This decrease is primarily driven by a $697,300 decrease in revenue and a $50,000 provision for any emergency maintenance or basic utility expenses after the lease expiry, offset by a $70,300 decrease in depreciation expense and $49,000 decrease in net interest expense. The changes are further explained below.

Lease Revenue

In October 2018, GACCTO exercised their second option to extend the lease effective July 2019 for a 2-year period until July 7, 2021 and will not be extended past this date. As a result, the annual lease revenue is expected to decrease by $697,300 in 2021 and will now total $696,700.

2021 Operating Budget for the Toronto Coach Terminal Inc. Page 3 of 5 Certain subtenants of GACCTO may be interested in continuing their tenancies after the GACCTO lease expiry. TTC and the City will work together to continue to generate revenue where possible until the property is required by CreateTO. Given current uncertainties on these arrangements, there is no related revenue included in this budget.

Property Taxes

City property taxes are currently levied to the tenant, GACCTO. It is anticipated that TCTI will be exempted to pay the remaining portion of the 2021 property taxes after the lease expiry on July 7, 2021 as the operational management will be transferred back to TCTI.

Depreciation

Adjustments to 2020 depreciation expense were made to reflect the useful life of all assets ending on July 7, 2021. As a result, on a budget to budget basis, depreciation expense has decreased by $70,300.

Net Interest Expense

The net interest expense is expected to decrease by $48,800 due to lower than expected prime rate of interest of 2.25%, compared to the 2020 budget of 3.45%.

Maintenance and Utility Expenses

GACCTO is responsible for the operation and maintenance of the terminal are part of their lease obligation. While the broad intention would be to transfer the property to CreateTO upon expiry of the lease, a $50,000 provision for emergency maintenance and basic utility costs has been added to this budget to cover requirements which could arise during any potential interim period.

Budget Summary

$000s JAN 1 to JUL 8 to Total 2021 JUL 7 DEC 31 Revenues 697 - 697 Expenses 3 52 55 Cash Flow From 694 (52) 642 Operations Depreciation 136 - 136 Operating Profit 558 (52) 506 Interest Expense (Net) 45 44 89 Net Profit 513 (96) 417

2021 Operating Budget for the Toronto Coach Terminal Inc. Page 4 of 5 $000s 2021 2020 BUDGET BUDGET CHANGE Revenues 697 1,394 (697) Expenses 55 5 50 Cash Flow From 642 1,389 (747) Operations Depreciation 136 206 (70) Operating Profit 506 1,183 (677) Interest Expense (Net) 89 138 (49) Net Profit 417 1,045 (628)

Contact

Alex Cassar, Treasurer, Toronto Coach Terminal Inc. Tel: (416) 393-3647 Email: [email protected]

Signature

Alex Cassar Treasurer, Toronto Coach Terminal Inc.

Attachments

There are no attachments included in this report.

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