Prior to establishing this new model for Casa Loma, the City received a share of the revenue from operations and also received property taxes. The new financial arrangement recognizes the need to put additional funding back into Casa Loma to bring it into a state of good repair and to implement the new Strategic Vision. The City contributes to this in 3 ways – first, by capping the payments to the City; second, by committing to use the funds for exterior restoration; and third, by forgoing property tax revenue and retaining that money in Casa Loma for implementing the Strategic Vision.
Under the terms of the Agreement, KCCL is to pay $800,000 to the City annually payable quarterly as a share of Casa Loma revenues. Council has committed to using these funds from Casa Loma toward the exterior restoration work. These funds are deposited into the City's Casa Loma Capital Reserve Fund (CLCRF) and used to pay for the exterior restoration work. The City's capital program totals $33 million, funded partially from the CLCRF and partially from debt. In addition, the City applied for a tax exemption for Casa Loma and no longer receives property tax payments. Capping the City's share of Casa Loma revenue at $800,000 and foregoing the property tax revenue results in approximately $375 thousand less revenue for the City than in an average year prior to the Agreement. The City intended that these forgone revenues would be retained by Casa Loma and used toward the interior restoration work to implement the Strategic Vision. The Management Agreement requires that all Casa Loma net revenues, all ticket surcharges, and the property tax equivalent be deposited into the Casa Loma Improvement Fund (CLIF). The CLIF is to be used each year for the much-needed interior restoration to implement the Strategic Vision. City's Exterior Restoration to Casa Loma From the $800,000 due to the City for 2009, Casa Loma still owes the City $160,000. At the request of Casa Loma, the City agreed to defer this payment until July 2010. The first quarter 2010 payment of $120,000 has been received and another $200,000 is due at the end of June 2010. The City has spent over $16 million from 2003 to 2009 for exterior restoration work on the main building. The Economic Development and Culture 10 Year Capital Plan (2010 to 2019) includes another $17.35 million gross for Casa Loma, funded by $9.193 million or 53% debt and $8.157 million or 47% from the CLCRF. This includes another $4 million to complete the restoration of the main building and funding to restore the remaining buildings and structures such as the stables. Completion of this work is dependent on securing $6.430 million in future contributions from Casa Loma ($800,000 per year). If these contributions are not made, the City's ability to complete the planned restoration work will be threatened and the ongoing integrity of the castle and other buildings affected. Casa Loma's Strategic Vision The Management Agreement outlines the interior restoration work that KCCL has committed to completing in the first 5 years. The plan is that KCCL will invest approximately $4.4 million in 2 phases - $1.6 million by July 1, 2010 and another $2.8 million by 2013. The intent was that Casa Loma would draw from the CLIF each year the funds necessary to complete the planned interior restoration. However, in the first 2 years of operation, Casa Loma has had to use these funds to supplement shortfalls in operating revenue. Current budget projections show that a total of approximately $1 million should have been accumulated and used for improvements by the end of 2010 and $1.5 million by the end of 2011. Because the CLIF is being used to support operating shortfalls, the desired improvements are not being carried out and the balance available for improvements will only be $335,000 by the end of 2011. Although these shortfalls do not affect the City directly, they will affect the future maintenance and attractiveness of the site, and resultant financial viability. Thus, the City has committed to its plan for exterior restoration, whereas KCCL's Strategic Vision is not being implemented due to financial and management difficulties. As a result of the present financial situation and projected revenue shortfalls, it is recommended that the Deputy city Manager and Chief Financial Officer undertake an audit of Casa Loma operations and finances. The Deputy City Manager and Chief Financial Officer has reviewed this report and agrees with the financial impact information. |