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BRAMPTON CITY COUNCk...... patp-June 23^2&iii Report "omptonca Flower City City Council Corporation of the City of Brampton

Date: June 22, 2012

File: M25 - PA Sports Centre Subject: Request for Capital Improvements to the PowerAde Centre

Contacts: Mo Lewis, Commissioner of Financial and Information Services (Tel: 905-874­ 2250) and Dennis Cutajar, Commissioner of Economic Development and Communications (Tel: 905-874-2698)

OVERVIEW • Staff is seeking Council authority to participate in the Lease and License Agreement ("Agreement") discussions currently underway between PA Sports Centre ("Operator") and the Brampton Battalion Hockey Club Ltd. ("Club") in order to reach a revised lease that is acceptable by the two parties and the City. • The current Agreement between the two parties expires on August 14, 2013. The 2012-13 Battalion pre-season, regular season and playoffs will be played in the PowerAde Centre. • The current Agreement includes an option for a 5-year extension that must be exercised by the Club on or before August 14, 2012. • On June 15, 2012, the City received a copy of a letter from the Club addressed to the Operator requesting specific capital improvements to the PowerAde Centre. • This letter states that the Club will not extend the Agreement under the current terms and conditions. • Further, this letter requests the Operator to advise the Club on whether the City is prepared to work with the Operator on the necessary capital improvements at the PowerAde Centre, and if so, to provide a detailed proposal of capital improvements by August 1,2012. • Given the time sensitivity of this matter, staff prepared this report for Council consideration. • The capital improvements represent an opportunity for the City to continue to invest in modernizing the PowerAde Centre to attract high calibre sporting teams and events to Brampton, thereby demonstrating the City's ongoing commitment to sports excellence and sports tourism. • Since its inception in 1998, the Club has attracted more than 1.2 million spectators to the PowerAde Centre. The 1.2 million visits at the PowerAde Centre represent total spending of approximately $80 million1 in the region, mainly in sales at private transportation (operation) and in food and beverage at restaurants/bars.

Ontario Ministry of Tourism and Culture, "Tourism Regional Economic Impact Model (TREIM)", 2012 1 X4>-\-2.

RECOMMENDATIONS

1. That the report from Mo Lewis, Commissioner of Financial and Information Services and Dennis Cutajar, Commissioner of Economic Development and Communications, dated June 22,2012, to the Council meeting of June 27, 2012, re: Request for Capital Improvements to the PowerAde Centre, be received; and

2. That Council affirm its desire to retain the existing OHL Junior A Hockey Team (Brampton Battalion Hockey Club) in Brampton by directing staff to work with PA Sports Centre Inc. on negotiating terms and conditions, acceptable to all parties, related to the requested capital improvements at the PowerAde Centre; and

3. That staff be directed to report back to Council on the status and outcome of the negotiations between PA Sports Centre Inc. and the Brampton Battalion Hockey Club Ltd.

BACKGROUND

Origin of Report

On June 15,2012, the City of Brampton was copied on a letter from the Brampton Battalion Hockey Club Ltd. (the main tenant in the spectator bowl at the PowerAde Centre) addressed to PA Sports Centre Inc. (the manager and operator of the PowerAde Centre facility). A copy of this letter, along with a May 28 letter from PA Sports Centre, can be found in Appendix 1.

Chronology Related to Lease and License Agreement Discussions

The following table includes a chronology of recent milestone dates related to communications on the Lease and License Agreement between the Operator and Club.

December5,2011 Operator and Club Meet to Discuss Renewal May 23,2012 Operator Meets With City to DiscussCapital Improvements May 28,2012 Operator Sends Letter to Club Confirming Deadlines Related to OHL Lease and License Agreement and Understanding of Capital Improvements Required byClub (See Appendix 1) June 15,2012 Club Sends Letter to Operator Responding to May 28,2012 Letter, including Identification of Capital Improvements required at the Facility (See Appendix 1) June 22,2012 Staff Received Capital Cost Estimates from the Operator, dated June 22,2012 (included this Report) June 27,2012 This Staff Report Prepared for Council Consideration. X6-K?

CURRENT SITUATION

Looking Ahead to Key Deadlines: Lease and License Agreements

On May 23, 2012 City staffwas advised by PA Sports Centre Inc. ofthe deadlines guiding the current Lease and License Agreementbetween the Club and the Operator. The key deadlines are as follows:

1. August 14,2013: Date on which the 15-year term of the current Lease and License Agreement between the Brampton Battalion Hockey Club and PA Sports Centre Inc. expires. The Club is scheduled to play the 2012-13 season at the PowerAde Centre starting in the fall 2012 and ending in the spring 2013.

2. August 14,2012: Last date on which the Club can provide written notice to the Operator of its intention to extend the Term for a further five (5) years.

3. August 1, 2012: As previouslystated (letter of June 15, 2012), the Club has requested a detailed proposal outlining necessary capital improvements at the PowerAde Centre.

Sports Excellence. Sports Tourism

The Brampton Sports and Entertainment Centre (now known as the PowerAde Centre) opened in 1998 and the project was delivered by a private-public partnership. The facility includes four ice surfaces with the main bowl seating approximately 5000 spectators.

The project financing was delivered by multiple sources: namely, private investment; the City of Brampton; and debt financing provided by a chartered bank guaranteed by the City of Brampton.

Although the (OHL) continues to be a significant source of revenue for the PowerAde Centre, in recent years PA Sports Centre Inc. management has broadened the Centre's revenue base by increasing the quantity and quality of non-OHL spectator events.

The hosting of spectator events continues to be a focus for the Centre in order to expand its revenue base. These events include cultural concerts, trade shows, rock concerts and non­ traditional sports such as mixed martial arts. These types of events generate significant facility rental revenue as well as food and beverage capture. PowerAde staff advised that they intend to continue expanding the range of events held at the Centre in order to diminish reliance on OHL game attendance. The Ministry of Tourism decided last year to add Brampton to the Regional Tourism Organization (RTO) area 5 which includes Mississauga and Toronto. This will increase X6-I-H opportunities for the Operator to host more spectator events. Under the RTO #5, all Brampton property and facilities are included in the Toronto tourism network for marketing and promoting venues such as conventions, trade shows and other special events.

The City has invested in the PowerAde Centre to maintain it as a modern and attractive asset in Brampton's sports tourism inventory. Today, it is recognized as a premier facility for hosting major sports events.

In addition to the OHL Battalion Hockey team, the facility has hosted several important events over the years including a training camp and exhibition game for Team Czech during the Men's IIHF World Junior Championships held in Ottawa several years ago.

The 2015 Pan Para Pan American Games also recognized the quality of the facility by selecting it as a host venue for the prestigious event of amateur wrestling (the sport was later rescinded and relocated to another venue to maximize the benefit of a combative sports cluster at one location).

The City continues to be focused on building sports excellence capacity, and fostering a dynamic and attractive sports tourism industry in Brampton that generate positive economic impact opportunities.

• The PowerAde Centre is a major asset and resource in the City's sports inventory.

Economic Benefit of the Brampton Battalion Hockey Club

In 1996, the OHL announced that an expansion franchise was awarded to establish the Brampton Battalion in Brampton, Ontario.

In 1998, the Brampton Battalion Hockey Club played its inaugural season as a new, privately owned, Ontario Hockey League Major Junior A (Tier I) franchise. The team has made its home at the PowerAde Centre since its inception in 1998.

Over the past fourteen years, the Battalion has had a positive impact on and off the ice. The team has made the playoffs twelve of its fourteen seasons, is a four time Central Division Champion (Emms Trophy) and in 2008-09 it was the Eastern Conference Champion (Bobby Orr Trophy).

The Battalion is tied in the OHL lead for having the highest number of players, thirty-five, selected in the NHL Entry Draft since 1999. The Club was tied with the for top spot in the OHL 14-1-5

Of the thirty-five Battalion players selected by NHLclubs, six were drafted in the first round including: (Avalanche), (Canucks), (Avalanche), (Wild), (Islanders) and (Blue Jackets).

Off the ice, the team gives back to the Brampton community through various successful programs including the Tim Horton Scholastic Player Awards; CN Community Ticket Program; The Home Depot Coach of the Game Program; Adopt A School Program; Elementary Hockey School Tournament.

Based on reported statistics2, between 2000-01 and 2009-10 average attendance at Brampton Battalion home games has ranged from a low of 2,090 to a high of 2,734 spectators. During this same time-frame the OHL average attendance has been between 3,273 and 4,073 per game.

Since its inception in 1998, the Battalion has attracted more than 1.2 million spectators to the PowerAde Centre. The 1.2 million visits at the PowerAde Centre represented total spending of approximately $80 million3 in the region, mainly in private transportation (operation) and food and beverage at restaurants/bars.

In addition, the business operation of the team creates direct and indirect impacts in the regional economy by its payroll and non-labour expenditures. As a private company the financial statements of the team are not available publicly.

Finally, the Battalion generates positive earned media for Brampton in the form of its marketing and media activities as well as by games which are broadcast via various media channels including Rogers Cable 10 and national TV broadcasters. The team also represents one of twenty OHL teams playing in one of the strongest NHL player development programs in Canada along with the WHL and QMJHL

• The OHL represents a strong national and international sports brand, and serves as an important highlight on Brampton's sports tourism resume.

2Deloitte and Touche LLP, City ofCatharine's Spectator Facility Feasibility Study, 2011 3Ontario Ministry ofTourism and Culture, 'Tourism Regional Economic Impact Model (TREIM)", 2012 ICM-&

Financial Operations - PowerAde Centre

In February 2011, Council approved staff recommendations to restructure the mortgage and to apply key revisions to the Loan and Priorities agreement between the City and PA Sports Centre Inc. The revised mortgage was critical to allow the PowerAde Centre to generate positive cash flow and become self-sustaining. As a result of this restructured mortgage, 2012 will be the first year the City of Brampton has not made a financial contribution toward the operations of the facility.

• In May 2012, the Operator presented the City with the first loan guarantee fee representing approximately $135,800 for 2010 and 2011. In addition, the Operator presented a payment of approximately $37,527 representing a 2010 reconciliation refund.

The City will continue to invest in the repair and replacement costs of the facility to ensure it is in good repair when the ownership reverts to the City of Brampton in 2034. City staff will continue to report to Council annually regarding the financial performance of the PowerAde Centre as it relates to the amount of cash flow generated, the amount applied to the second mortgage and the amount of the outstanding balance of the second mortgage reported in the City's financial statements.

PA Sports Centre and the Brampton Battalion Hockey Club Ltd

The relationship between PA Centre and the Battalion is guided by a Lease and License Agreement. On September 17,1997, the Operator entered into a Lease and License Agreement with the Club for a term of 15 years starting with the completion of construction of the facility. In general terms, fees payable to the Operator under this agreement include minimum rent, common area fees, percentage of media and gate revenues for each OHL hockey regular season and playoff game. A percentage of other revenues, including net advertising profits, net parking profits, suite and club seat revenues, and food and beverage revenues during OHL events are shared by the Operator with the Club.

The right to extend the term of the lease for an additional five (5) years on or before August 14, 2012 is held by the Club.

On June 15, the Club submitted a letter to the Operator that identified the following principles:

1. The Club will not extend the lease under the existing terms, covenants and provisos

2. The Club identified specific facility improvements, they are: I&-1-7

a. Team Dressing Room/Training b. Administrative Offices c. New Video Board in the Spectator Bowl d. New Sound System in the Spectator Bowl e. New Lighting in the Spectator Bowl f. New Spectator Seats in the Bleacher Zone

3. The Club also requested to know whether the City is prepared to work with PA Sports Centre on the capital improvements noted in item #2 above.

4. If the City is interested, the Club requested that a detailed proposal be submitted by the Operator to it by August 1,2012.

5. Lastly, the Club stated in their letter that "if those improvements meet expectation, we would present you with several changes to the existing lease, including but not limited to minimum annual revenues from food and beverage, suite licenses, advertising and supplier fees".

City staff has not spoken with representatives of the Club. In reviewing the Club's letter, staff has assumed that the terms contained within it represents sound principles for negotiation. Therefore, staff prepared this report in that positive context.

Other Matters

Staff is in the process of preparing additional reports for future Committee of Council or Council meetings related to PA Sports Centre Inc., including: Operating revenue analysis related to the proposed kabbadi facility; the status of the lease associated with the 'Phase 2' park lands adjoining the PowerAde Centre; and the Current Year End Financial Statements for the PowerAde Centre operations.

CORPORATE IMPLICATIONS

Financial Implications

1. Capital Improvements to Facility Requested by Club (excluding Video Board)

On June 22, 2012, PA Sports Centre provided staff with order of magnitude capital costs related to the improvements requested by the Battalion. 16-1-8

CAPITAL COST ESTIMATE:

1 Dressing Room Renovation $75,000 2 Office Expansion $50,000 3 Training Area Relocation/Expansion $75,000 4 Design/Engineering/Permits $25,000 5 Gallery Speakers $5,000 5 Contingency $20,000 TOTAL $250,000 Source: PA Sports Centre Inc., June 22,2012

The City has sufficient funds in the approved budget to invest in these capital improvements. In addition, the $170,000 loan guarantee fees and reconciliation refund received by the City from the Operator, pursuant to the amended loan guarantee agreement, can also be re invested in these facility improvements. Loan guarantee fees payable to the City in 2011 ($71,574) and 2010 ($64,227) have been received.

2. Video Board

PA Sports Centre Inc. has estimated the cost of the video board to be on the order of $800,000 to more than $1 million. Staff's position on this request by the Club is that a business case, separate from the capital improvements identified above, should be explored in support of this purchase.

The business case analysis would include initial capital outlay, operating expenses and operating revenues mainly in the form of license fees and advertising revenue for OHL games and non-OHL events. More time is required to undertake this business analysis. This will be an item for discussion between the City and the Operator.

3. Revenue Sharing with Club

The Club suggested in its June 15 letter that it wishes to discuss revenue sharing associated with various business streams at the facility during OHL events, including food and beverage, suite licenses, advertising and other items. Staff believes that any further revenue sharing agreements between the Club and Operator should be negotiated by the two parties recognizing that annual operating deficits at the facility would negatively impact the City.

Any additional financial implications that may arise beyond those identified in this report shall be reported to Council at a future meeting or during the 2013 budget cycle. Next Steps

Should Council approve the recommendations in this report, the following activities shall be undertaken:

1. Staff advises the Operator in writing of Council's June 27 decision. The Operator will then formally advise the Club.

2. Staff assists the Operator in the development of a proposal including capital improvements to the facility.

3. Operator submits a proposal to the Club by August 1, 2012.

4. Club reviews the proposal and determines its decision to exercise its option to extend the Lease and License Agreement for an additional Term on or before the August 14, 2012 deadline.

5. Staff advises Council of the decisions made by the Operator and the Club.

CONCLUSION

In conclusion, this report recommends that Council direct staff to participate in the Lease and License Agreement discussions currently underway between PA Sports Centre Inc and the Brampton Battalion Hockey Club Ltd, with respect to specific capital improvements requested by the Club. Original Signed By

Mo Lewis Commissioner of Financial and Information Services

Original Signed By

Dennis Cutajar Commissioner of Economic Development and Communications

Appendix 1: Correspondence X&-MO

APPENDIX 1

10 XCM-ll BRAMPTON BATTALION HOCKEY CLUB LTD. EST. 1998

June 15,2012

Mr. Brian Soye Vice President RealStar Group

Re: OHL Lease and License Agreement

Dear Brian,

This confirms receipt of your letter to Scott Abbott dated May 28, 2012, regarding the OML Lease and License Agreement.

I have reviewed the contents of your letter with Mr. Abbott and he's asked that I respond on his behalf.

1) The Battalion will not extend the lease under the same terms, covenants and provisos.

2) During our meeting at my office on Dec. 5, 2011, we discussed several concerns regarding the facility, and those were not limited to the team dressing room and administrative offices.

1also stated that in our opinion the facility required a suitable videoboard, along with a new sound system and new lighting in the Spectator Bowl. I should have added that the bleacher zone requires a proper portable section with normal spectator seats.

We suggest that you advise us at your earliest convenience whether the City is prepared to work with PA Sports Centre Inc. on the necessary capital improvements. If the answer is affirmative, we ask that you provide a detailed proposal to us by August I, 2012.

If those improvements meet expectation, we would present you with several changes to the existing lease, including but not limited to minimum annual revenues from food and beverage, suite licenses, advertising, and supplier fees.

If you have any questions, please contact me directly at (905) 874-2393, ext. 102, or via email meriflmabattaliunhockev.com.

Regards,

Mike Griffin President

C. Scott Abbott, Owner, Brampton Battalion Hockey Club Ltd. Mayor Susan Fennell, City of Brampton Mo Lewis, Commissioner, Financial & Information Services, City of Brampton

?575 KENNEDY ROAD SOUTH • BRAMPTON, ONT • I.6W 4T2 PHONE: (90S) B74 2393 • FAX: (905) H7 •• 2394 Ifc-M2 PA SPORTS CENTRE INC.

May 28.2012

Brampton OHL Hockey Club Ltd. 141 Adelaide Street West, Suite 1003 Toronto, Ontario M5H 3L5

Attention: Mr. Scott Abbot

RE: OHL Lease and License Agreement made as ofSeptember 17,1997 between PA Sports Centre Inc. andBrampton OHL Hockey Club Ltd. (the "Lease")

Dear Mr. Abbot:

As we approach thecommencement of the Brampton Battalion's fifteenth season atthe PowerAde Centre this coming fall, wewish toconfirm the following with respect totheLease:

1. Pursuant to Section 3.1(2) ofthe Lease, the Term ofthe Lease will expire on August 14,2013; 2. Pursuant toSection 3.6 ofthe Lease, you may opt to extend the Term for a further five (5) year period by providing notice tousinwriting by orbefore August 14,2012.

In previous discussions with Mike Griffin, heindicated that the decision to exercise the option torenew theLease might be positively influenced byacommitment to(i) expand and/or renovate theBattalion dressing room and facilities and (ii) provide additional office space within the complex for the Battalion's use. We have explored options with respect to expansion of the dressing room and have identified various physical constraints that make expansion unviable. However, we are prepared, with the cooperation and support ofthe City ofBrampton, toconsider renovations tothe existing dressing rooms and expansion of theexisting office space occupied by Battalion administration.

We are looking forward todiscussing with you at your earliest convenience your specific needs and requirements with respect to the Leaserenewal option.

Sincerely,

PA Sports Centre Inc. sole General Partner of PA SportsCentre Partnership Per:

Brian Soye copy: Mayor Susan Fennell Mo Lewis Mike Griffin