Firstontario Centre CM17008 City Wide NOTE

CITY OF HAMILTON CITY MANAGER’S OFFICE Strategic Partnerships and Revenue Generation Division

TO: Mayor and Members General Issues Committee COMMITTEE DATE: April 5, 2017 SUBJECT/REPORT NO: FirstOntario Centre (City Wide) (CM17008) WARD(S) AFFECTED: City Wide PREPARED BY: Ryan McHugh (905) 546 2424 Ext. 2725 SUBMITTED BY: John Hertel Director, Strategic Partnerships and Revenue Generation

SIGNATURE:

RECOMMENDATIONS (a) That the BBB Architects (BBB) FirstOntario Centre Arena Renovation Study, attached as Appendix “A” to Report CM17008, be received; (b) That staff be directed to manage the lifecycle renewal of the FirstOntario Centre with the funds in the Council approved capital budget and report back to the General Issues Committee if any critical unfunded capital needs arise in the future; (c) That staff be directed to further investigate the future requirements of a sports and entertainment venue in the city by engaging community stakeholders, industry experts and comparator municipalities and report back to the General Issues Committee; and, (d) That staff be directed to conduct the appropriate due diligence in the event that staff receives an unsolicited proposal outlining an opportunity to secure private investment in a FirstOntario Centre upgrade or replacement within the framework of the Procurement Policy.

EXECUTIVE SUMMARY The FirstOntario Centre (formerly Copps Coliseum) was built in 1985, as a sports and entertainment facility with a capacity of 19,000 for concerts and 17,400 for hockey. The facility is currently operated by Spectra Venue Management (formerly Global Spectrum) along with the FirstOntario Concert Hall (formerly Hamilton Place), as outlined by their Management Agreement with the City of Hamilton.

Under this agreement, the City of Hamilton has provided operating subsidies totalling $10,014,667 since the agreements commencement in March 2013. In addition to this

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The venue hosts an average of 75 performances and events (including sporting events) annually and requires the use of the arena’s upper bowl approximately 8 to 12 times in a given year. As a 31 year old facility, without the modern amenities that would be required to secure an anchor tenant that could fully utilize a 17,400 seat arena, the facility is projected to be underutilized for the foreseeable future.

In late 2016, the City hired Golden Horseshoe Enterprises Inc. for a fee of $50,000, to raise $240,000 in private sector funding that was used to cover the cost of a report by BBB Architects (BBB) and its subsidiary group, Stadium Consultants International (SCI) attached as Appendix “A” to Report CM17008. The scope of this report included a comprehensive assessment of the state of the facility and outlined two renovation options that could be implemented in the event that the City wished to modernize the aging facility:

Option 1: Consists of a partial-upgrade to the existing facility with remodelling of key areas with an estimated cost of $68 million. This option would greatly extend the life of the existing facility, adding amenities such as modern boxes and concessions to the lower bowl (see page 6).

Option 2: Consists of a complete transformation of the FirstOntario Centre into an NHL quality professional sports and entertainment facility with an estimated cost of $252 million (see page 7).

Staff views the BBB study as a valuable tool in accessing the condition of the FirstOntario Centre and providing insight into the scope of work, time frames and cost that would be required to modernize the building into a first class professional sports and entertainment facility. However, based on the cost of the proposed renovations and the uncertainty of whether Hamilton could attract a tenant that could fully utilize a modern 18,000 seat arena, staff recommends that the City does not move forward with either renovation option at this point in time. Instead, this study would act as a valuable planning tool that gives the City an understanding of the investment required to become “NHL ready” should an opportunity arise in the future.

Staff would continue managing the lifecycle renewal of the FirstOntario Centre with the approved capital budget, prioritizing capital needs that relate to health and safety and legislative compliance. This recommendation would also have Council direct staff to conduct further research into the future requirements of a sports and entertainment

This analysis would be done in concert with the development of the Downtown Secondary plan and considerations for the awarding of the renewal of the Spectra contract after completion of the current agreement at the end of 2018. This internal investigation would look to evaluate potential alternatives through the lens of financial sustainability, economic growth and cultural impact, as outlined in the Council approved 2016-2025 Strategic Plan, Economic Development Action Plan, Hamilton Tourism Strategy and Cultural Plan.

FINANCIAL – STAFFING – LEGAL IMPLICATIONS Financial: Under the existing Management Agreement between the City of Hamilton and Spectra (formerly Global Spectrum) the operating and capital costs associated with the FirstOntario Centre and the FirstOntario Concert Hall are allocated as follows:

Description Spectra (Formerly Global Spectrum) The City of Hamilton is responsible for all Capital costs while Spectra Capital vs. is responsible for all Operating Costs as outlined in the Management Operating Costs Agreement. Any utility costs above the 2011 actual utility cost of $1.2M will be Utilities paid by Spectra. Net Contribution City will cover the first $1.4M in losses, and Spectra will cover the from City of next $500k in losses. Additional losses will be covered by the City. If Hamilton to losses are less than $1.4M, Spectra will retain the first $450k as their Managers on management fee, and additional savings will be split between the City full Operating of Hamilton (70% to the City, 30% to Spectra).

The City of Hamilton has provided the following operating subsidies over the life of this agreement:

Agreement Year Subsidy of Subsidy of Utility Total Net Operating Operating loss Cost Subsidy 2016 $1,400,000 $1,216,000 $2,616,000 2015 $1,400,000 $1,216,000 $2,616,000 2014 $1,400,000 $1,216,000 $2,616,000 2013* $1,166,667 $1,000,000 $2,166,667 Total $5,366,667 $4,648,000 $10,014,667 *Prorated for 10 months

Despite providing Spectra operating subsidies of $10,014,667 since the commencement of the agreement, the City has still realized $1,900,000 in operating savings over the previous HECFI funding model. The City of Hamilton has also benefited from a one-time

$500,000 payment for capital improvement upon execution of the agreement in 2013. During the life of the agreement, the City of Hamilton has made capital expenditures from the Council approved capital funding envelope totalling $3,580,000 in the FirstOntario Centre, broken out as follows:

Agreement Capital Description Year Expenditures Roof replacement (section), Acrylic Safety Glass for Rink, 2016 $740,000 Elevator Compliance, Overhead Door Replacement, Domestic Water Pump Replacement Roof repair, Escalator and Elevator Compliance, Vertical 2015 $56,000 Transportation Study 2014 $448,000 Roof replacement (section), Exterior Door Replacement 2013 $2,336,000 Refrigeration Plant Replacement, Washroom Renovation Total $3,580,000

In 2017, Council approved the continuation of annual block funding of $800,000 for lifecycle renewal at the Hamilton Convention Centre, FirstOntario Concert Hall and FirstOntario Centre. As a facility entering its 32nd year of operation, the FirstOntario Centre has many critical capital components that are quickly approaching end of life.

Staffing: None

Legal: None

HISTORICAL BACKGROUND The FirstOntario Centre (previously Copps Coliseum) was built in 1985, as a sports and entertainment facility with a capacity of 19,000 for concerts and 17,400 for hockey.

In 2013, Council approved Report CM11013(e) that directed staff to execute a Management Agreement between the City of Hamilton and Global Spectrum Facilities Management L.P. The execution of this Management Agreement named Global Spectrum Facilities Management L.P (now Spectra) the exclusive operator of the City of Hamilton’s Copps Coliseum and Hamilton Place facilities (replacing HECFI).

In late 2016, the City hired Golden Horseshoe Enterprises Inc. for a fee of $50,000, to raise $240,000 in private sector funding that was used to cover the cost of a report by BBB and its subsidiary group, SCI, attached as Appendix “A” to Report CM17008. This report was funded by local “city builders” including Ron Joyce, the Carmen's Group, FirstOntario Credit Union, LIUNA and Fengate Capital and provided an in-depth analysis of the condition of the facility and detailed project plans outlining two renovation options. The report also outlined various concepts that would supplement an arena renovation with complementary convention space.

POLICY IMPLICATIONS AND LEGISLATED REQUIREMENTS

Not applicable.

RELEVANT CONSULTATION Internal Departments Consulted:  City Manager’s Office: Strategic Partnerships and Revenue Generation  Corporate Services: Finance and Administration, Procurement  Planning and Economic Development: Real Estate, Economic Development, Planning  Public Works: Facilities Management and Capital Projects

External Resources Consulted:

 Golden Horseshoe Enterprises Inc.  BBB Architects: FOC Renovation Report  Spectra: 2015 and 2014 Annual Reports

ANALYSIS AND RATIONALE FOR RECOMMENDATION Spectra by Comcast Spectator, is a world leader in hosting and entertainment, partnering with over 300 clients at 400 global properties. Spectra’s expertise is embodied within three divisions: Venue Management, Food Services and Hospitality and Ticketing and Fan Engagement. According to Spectra’s latest Annual Report, their mission is to provide world class, diversified and quality entertainment to the people of Hamilton and its surrounding areas. The Spectra team at Core Entertainment representing FirstOntario Centre, FirstOntario Concert Hall and the Studio recognize their fiscal responsibility to establish realistic, yet aggressive revenue goals. Spectra is committed to providing exceptional service to their clients and guests, making every event a memorable and successful one.

Under Spectra’s management, the total annual attendance and total number of annual performances and events at FirstOntario Centre are as follows:

Total Attendance Year Performances/Events (Including Comps) 2016 385,318 75 2015 342,924 75 2014 379,476 78 2013* 377,511 73 * Includes two months HECFI

In 2016, leading concert industry publication Pollstar Magazine, ranked FirstOntario Centre as of one of the top 200 arenas in the world in their yearend review. Pollstar

Magazine bases their rankings on tickets sold for concerts and family shows held in a given arena (excludes sporting events). FirstOntario Centre jumped up in the rankings from 134 in 2014 to 108 in 2016, ranking 10th among Canadian Arenas:

# of Canadian World Concert Arena Venue City Tickets Rank Rank Capacity Sold 1 9 Air Canada Centre Toronto 19,800 702,516 2 20 Bell Centre Montreal 15,000 571,770 3 43 Rogers Arena Vancouver 19,000 368,129 4 50 Casino Rama Rama 5,000 331,004 5 74 Centre Videotron Quebec City 20,396 223,032 6 78 Rexall Place Edmonton 13,000 202,893 7 82 Canadian Tire Centre Ottawa 20,041 197,457 8 86 Budweiser Gardens London 9,000 176,290 9 102 MTS Centre Winnipeg 16,345 153,872 10 108 FirstOntario Centre Hamilton 19,000 145,040 Note: The above figures exclude hockey and other sporting events.

The venue hosts an average of 75 events annually and required the use of the arena’s upper bowl approximately 8 to 12 times in a given year. This is consistent with the findings of KPMG’s 2011 “Independent External Review of HECFI’s Operations”, which concluded that the facility “is far too large to support the current hockey franchise and is larger than necessary for all but a handful of entertainment events. The operating costs associated with the building do not reflect its revenue potential given the market mismatch.”

The BBB report provided an in-depth analysis of the condition of the facility and detailed project plans outlining the following two renovation options:

Option 1: Consists of a partial-upgrade to the existing facility with remodelling of key areas with an estimated cost of $68 million.

Scope:  Refreshed existing main concourse, public washrooms and food and beverage concessions. Public Concourses  New partial upper concourse with new finishes and direct access to the upper seating bowl.  New comfortable upholstered arena seats in floor and mid- Seating Bowl level suites seating sections.  6 New “Floor Suites” located on Event Level, each with 12 prime seats in rows 3 and 4. Hospitality Areas  New “Titanium Club” and “Director’s Lounge” located at Event Level with optional seating section dedicated to Titanium Club

serving the best seats in first 8-10 rows.  New Club Lounge with private bars and washrooms with direct access to the Club Seating Section in the lower seating bowl (2,400 capacity).  17 Mid-Level Private Suites, with bar/buffet facilities and either 14 or 16 person capacity each.  New Concourse Level Restaurant (refreshed ‘Gibsons’).  New ‘Home’ Hockey Club Locker Room and related Team facilities.  New ‘Visitor’ Hockey Club Locker Room.  Improved and expanded Operations, Loading and Storage Back of House areas.  Reorganized and renovated Food and Beverage Operations, Prep, Storage and Service areas.  New level 1 and level 2 kitchens.  New and renovated media areas for TV, radio, written press Media and camera locations.  Improved mechanical/HVAC/dehumidification system to meet professional facility standards for temperature and humidity.  Increased electrical capacity to meet industry norms.  Replace ice rink slab and dasher board system. Technical  New ‘LED’ system with increased event lighting levels to meet professional sports and TV broadcast lighting requirements.  Enhancement of sound system equipment and installation.  Improved rigging capacity for concerts.

Estimated Construction Cost (Including HST): $68 million Estimated Construction Timelines: 20 months

Option 2: Consists of a complete transform of the FirstOntario Centre into a NHL quality professional sports and entertainment facility with an estimated cost of $252 million.

Scope:  Atrium Style Lobby with feature stair, escalators and elevators Main Entrance to all levels. Lobby  Major ticketing area within the main lobby.  New street level retail store.  New Lower Concourse with new finishes throughout and direct access to the lower seating bowl. Public Concourses  Public Washroom facilities with improved ratios, above building code requirements.  Food and Beverage and Bar amenities throughout concourse

areas.  New Upper Concourse with new finishes throughout and direct access to the upper seating bowl.  New ‘Back of Bowl’ areas in upper seating area.  New comfortable upholstered arena seats in lower seating bowl, suites and lounge areas. Seating Bowl  Sightlines comparable with Industry standards.  Accessible seating positions to meet code requirements.  New capacity for over 18,000 spectators.  6 New “Floor Suites” located on Event Level, each with 12 prime seats in rows 3 and 4.  New “Titanium Club” and “Director’s Lounge” located at Event Level with optional seating section dedicated to the best seats in first 8-10 rows.  New Club Lounge with private bars and washrooms with direct access to the Club Seating Section in the lower seating bowl (2,400 capacity).  28 Mid-Level Private Suites, with bar/buffet facilities and either 14 or 16 person capacity each. Hospitality Areas  6 Group Suites at mid-level with bar/buffet facilities, 36 person capacity each.  New Lounge Club with private bar and washrooms (178 capacity).  2 new Mini-clubs with bar/buffet facilities, 36 person capacity each.  New Suite Level Restaurant with view of the on-ice action with 534 dedicated seats.  New Group Sales/Party Deck incorporated into upper seating bowl with back row bars.  New ‘Home’ Hockey Club Locker Room and related Team facilities.  New ‘Visitor’ Hockey Club Locker Room.  Improved and expanded Operations, Loading and Storage areas to be consistent with professional league building Back of House requirements.  Reorganized and renovated Food and Beverage Operations, Prep, Storage and Service areas to be consistent with professional league building hospitality/service requirements.  New level 1 and level 2 kitchens.  New and renovated media areas for TV, radio, written press Media and camera locations will meet industry requirements.  New NHL rated mechanical/HVAC/dehumidification system. Technical  Increased electrical capacity to meet industry norms.

 New NHL rated ice rink slab and dasher board system.  New ‘LED’ system with increased event lighting levels to meet Professional Sports and TV Broadcast lighting requirements.  New “state of the art” centre hung video/score board.  Substantial upgrading or replacement of sound system to ‘latest technology’.  Improved rigging capacity for concerts.

Estimated Construction Cost (Including HST): $252 million Estimated Construction Timelines: 43 months

ALTERNATIVES FOR CONSIDERATION

Alternative 1 – Listed as Option 1 in Appendix “A” to Report CM17008 Financial: Consists of a partial-upgrade to the existing facility with remodelling of key areas with an estimated cost of $68 million.

Staffing: This alternative would require the issuance of an RFP, which could be drafted and issued by existing City staff.

Legal: This alternative would require extensive consultation with the City’s Legal Services Division.

Due to the urgency of other competing budgetary needs, staff does not recommend moving forward with this alternative at this point in time.

Alternative 2 – Listed as Option 2 in Appendix “A” to Report CM17008 Financial: Consists of a complete transformation of the FirstOntario Centre into an NHL quality professional sports and entertainment facility with an estimated cost of $252 million.

Staffing: This alternative would require the issuance of an RFP, which could be drafted and issued by existing City staff.

Legal: This alternative would require extensive consultation with the City’s Legal Services Division.

Due to the urgency of other competing budgetary needs, staff does not recommend moving forward with this alternative at this point in time.

ALIGNMENT TO THE 2016 – 2025 STRATEGIC PLAN Economic Prosperity and Growth Hamilton has a prosperous and diverse local economy where people have opportunities to grow and develop.

APPENDICES AND SCHEDULES ATTACHED

Appendix “A” – FirstOntario Centre Arena Renovation Study (BBB Architects).