Financial Advisory City of St. Catharines Spectator Facility Feasibility Study Original Issue: April 30, 2010 Updated: April 25, 2011 Table of Contents 1. Introduction .................................................................................................................... 1 2. St. Catharines Market Overview ........................................................................................ 4 3. Ontario Hockey League ................................................................................................... 11 4. Market Support for an OHL Team and Spectator Facility in St. Catharines .............................. 21 5. Comparative and Competitive Facility Assessment .............................................................. 25 6. Assessment of Facility Locations ....................................................................................... 37 7. Financial Assessment ...................................................................................................... 45 8. Economic Benefits .......................................................................................................... 57 9. Risk Assessment ............................................................................................................. 64 10. Conclusions and Recommendations ................................................................................... 66 Appendix A – General Assumptions and Limiting Conditions ......................................................... 69 Appendix B – 20 Year Forecast ................................................................................................. 71 © Deloitte & Touche LLP and affiliated entities. City of St. Catharines Spectator Facility Feasibility Study 1. Introduction Background / Purpose of the Report The City of St. Catharines (the “City”) has commenced a process to investigate the opportunity to construct a new 5,000-seat Spectator Facility in its downtown core (the “Project” or the “Facility”). Currently, the Ontario Hockey League’s Niagara Ice Dogs (the “Ice Dogs” or the “Team”) play out of the 3,145-capacity Gatorade Garden City Complex, a venue which is physically too small, from a seating capacity perspective, and does not contain the range of revenue generating features which would enable the Team and building to operate profitably. Because of its configuration and amenities, this facility is also not generally considered to be a suitable venue for the range of mixed entertainment and event uses which are currently being programmed into other 5,000+-seat multi-use spectator facilities. As such, the City has identified the need for a new sports and entertainment facility (with a minimum seating capacity of 5,000 seats in order to meet OHL criteria and allow the venue to be eligible to host Memorial Cup championship games) to not only secure the long-term tenure of the Niagara Ice Dogs, but also to expand the range of entertainment, cultural and business events which could be brought into the City. In going forward to realize this facility, the City issued a Request for Expressions of Interest to prospective developers / builders and facility managers in April 2009. As a result of this process, four proponents were selected to receive a subsequent Request for Proposals document to prepare their bid for the design, build, financing, maintenance and operation of a St. Catharines Spectator Facility. However, the expected financial contributions of the various parties differed, necessitating that the City take a more pragmatic examination of the overall viability of the project. As a result, the City retained Deloitte to evaluate the feasibility of the Project such that a private developer and the City could develop, design, construct, finance, market, operate and maintain the Facility on a municipally-owned site within the downtown core of the City. Specific elements to be considered as part of this review included the following: • Defining St. Catharines’ market area; • Analyzing current and projected market demographics; • Analyzing competitor facilities; • Identifying users and forecast usage levels; • Determining the potential financial impact on the City’s capital and operating budgets; • Outlining potential funding sources; • Estimating the economic impacts for the City; and • Evaluating, at a high level, project risks. Updated Report - April 2011 The original draft report was issued in April 2010 to the City of St. Catharines for their review and consideration. In April 2011 the City of St. Catharines had requested that certain information be updated or that additional information be added to the report. These requests included: • Documenting the preferred site selection • Providing additional commentary regarding the useful life of the asset • Providing full 20 year forecasts for the operations of the spectator facility • Other minor grammatical or format changes. Deloitte and the City of St. Catharines had decided in order to maintain transparency related to the changes to the draft report to update the report in a manner that the material changes are clearly identified in the body of the report. Deloitte has provided two issue dates for this report to reflect the updated nature of the report. © Deloitte & Touche LLP and affiliated entities. City of St. Catharines Spectator Facility Feasibility Study 1 Scope of Review The scope of our review included the following tasks: • Held a preliminary meeting with City of St. Catharines staff to acquire background information, as well as other information describing the Gatorade Garden City Complex / Jack Gatecliff Arena, the City of St. Catharines, and potential locations for the new Facility; • Held a preliminary meeting with representatives of the Niagara Ice Dogs to obtain background information on the team and aspects of its operations; • Researched and obtained information on the operations of various OHL hockey clubs; • Researched and obtained socio-economic data profiling the greater St. Catharines region, and socio-economic data profiling other centres with teams in the Ontario Hockey League; • Completed a market assessment of the St. Catharines area; • Reviewed the local and broader regional population base; • Evaluated the operations of comparable and competitive facilities; • Assessed potential locations for the Facility; • Developed a five-year proforma budget for the Facility; • Estimated the Facility’s total capital costs; • Quantified the Facility’s economic impact; and • Prepared a preliminary risk assessment. Report Structure Including this introductory section, the Report is divided into ten sections: • a description of the St. Catharines market; • a description of the Ontario Hockey League, including teams, buildings and attendance figures, etc.; • an assessment of the market potential for St. Catharines; • an assessment of comparable and competitive facilities; • an assessment of potential locations; • a financial assessment; • a high level assessment of the economic benefits associated with a spectator facility; • a high level risk assessment; and • our overall conclusions, opinions and recommendations Restrictions and Limitations The intended use of this Report is as a high level examination of the St. Catharines market and its ability to support a new 5,000-seat Spectator Facility. In completing aspects of this Study, Deloitte relied upon certain information provided in confidence which cannot be wholly disclosed. The reader should note that the Study utilizes various assumptions (some of which are included in Appendix A) which are based on a set of economic conditions and / or possible courses of action that are reasonable and appropriate in Deloitte’s judgment, are consistent with the purpose of this assignment, but which may not materialize as set out therein. These hypotheses represent plausible circumstances, but need not be, and may not be fully supported. Since future events are not subject to precise projections, some assumptions will not materialize in the exact form presented by our analysis. In addition, other unanticipated events and circumstances will occur that will influence the future outcome and performance of a new 5,000-seat Spectator Facility in St. Catharines. Therefore, actual results achieved in future operating periods will vary from the analysis of prospective market and financial conditions set out therein. While there is no recourse to predicting these matters with certainty apart from informed and reasoned judgments, it must be stated that future events will lead to variations in a team’s and building’s operational performance which could materially alter results. Deloitte does not warrant that actual results achieved will be the same, in whole or in part, as those shown in the Projection. The Projection is based on hypotheses and there is a significant risk that actual results will vary from the results projected. © Deloitte & Touche LLP and affiliated entities. City of St. Catharines Spectator Facility Feasibility Study 2 This Report has been prepared at the request of the City of St. Catharines, for advice and use in evaluating the local / broader regional market support for an approximate 5,000-seat Spectator Facility. This Report has been commissioned to provide the City with the basis for determining an appropriate go forward strategy; our Report is not intended to be used for any other purpose. We do not assume any responsibility or liability for losses incurred by the City of St. Catharines, its employees or by any other