|Report – Casa Loma Governance and Operations
Casa Loma Governance and Operations – Attachment 1
|Confidential Attachment – 1 Litigation or potential litigation, including matters before administrative tribunals, affecting the municipality or local board|
|(June 11, 2010) Report from the City Manager|
|The City Manager recommends that:
1. The General Manager of Economic Development and Culture initiate the dispute resolution process under the Management Agreement respecting all matters where the Kiwanis Club of Casa Loma has not met its obligations, including the requirements to submit by the dates currently agreed to by the City, all payments, reports, and interior restoration plans satisfactory to the City’s Chief Corporate Officer.
2. The General Manager of Economic Development and Culture notify the Kiwanis Club of Casa Loma that the City requires a written commitment by the end of July 2010 that the following actions will be undertaken:
i. a joint staff working group be established, meet regularly and work with a management consultant as necessary to resolve the operational and financial issues outlined in this report;
ii. the Board meet monthly for the balance of their term;
iii. a financial plan satisfactory to the Deputy City Manager and Chief Financial Officer be developed by the Kiwanis Club of Casa Loma by September 30, 2010 demonstrating its ability to meet the obligations of the Management Agreement; and
iv. the further actions outlined in the Confidential Attachment be agreed to;
3. The Deputy City Manager and Chief Financial Officer undertake an audit of Casa Loma operations and finances including how the Casa Loma Improvement Fund is managed to ensure that funds are being used as anticipated by the Management Agreement and that Casa Loma has the organizational and financial capacity to fulfill the terms of the Agreement; and
4. If the General Manager of Economic Development and Culture is not satisfied that progress on Recommendations 1, 2, and 3 will result in moving toward implementation of the Strategic Vision, the appropriate City staff, in consultation with the City Solicitor, take steps to terminate the Management Agreement and recommend an alternative way of managing Casa Loma.
|Casa Loma is a key asset of the City of Toronto and was managed for 70 years by the Kiwanis Club of Casa Loma (KCCL). The castle needed a facelift, new programming, and a new approach to integrating this grand estate into the surrounding neighborhood. The City began a 10-year restoration plan for the Casa Loma main building exterior in 2003. When its previous license was about to expire, KCCL proposed and Council adopted a Strategic Vision for Casa Loma, that included renovating the interior, rejuvenating the visitor experience, and introducing new programming and visitor amenities including food services. In the spring of 2008 Council approved the Management Agreement between KCCL and the City. The Agreement took effect on July 1, 2008 and requires KCCL to implement the Strategic Vision and to meet certain financial, planning and physical improvement obligations.
A joint Casa Loma Board was established in accordance with the Management Agreement to direct the operations of the estate administered by staff who are employees of KCCL (Board and staff together referred to as Casa Loma). The City appoints half of the voting members of the Board and 4 ex officio non-voting members. The Mayor appoints the Chair of the Board from among the members on the advice and recommendation of the President of KCCL. The Board is not a City board nor is it a separate legal entity from KCCL, but rather a committee of KCCL as KCCL retains the responsibility for meeting the terms of the Agreement. This is a unique governance model that is a hybrid between a private enterprise and a public sector board and is not subject to the usual requirements of a public sector entity. Council’s objectives are met through the terms of the Agreement rather than any direct authority over the Board.
Entering into the Management Agreement, it was understood and expected that implementing the Strategic Vision would require a higher level of activity and a higher standard of performance than in the past. Nevertheless, in its first 2 years of operation, Casa Loma has missed a number of important deadlines, has not been able to make all of the required payments due to the City, and is far behind the schedule outlined in the Management Agreement for implementing the Strategic Vision. Casa Loma has advised that the recession and changes to tourist visits to the City have had an adverse impact on its operations and finances and therefore Casa Loma has had to draw from funds intended for enhancement of the estate to meet operating obligations. However, this situation was well known at the time that KCCL developed the Strategic Vision and committed to these financial obligations.
Over the past two years City staff have sought to provide assistance to Casa Loma including authorizing extensions to deadline dates; suggesting that Casa Loma look at alternative income opportunities, including recommending grant opportunities, and offering to assist with preparation and submission of applications; proposing the establishment of a staff work group to help Casa Loma address the challenges; and attempting to arrange governance training for the Board. The Mayor has also advised KCCL of the City’s concerns over the slow progress toward achieving the Strategic Vision, concerns that governance practices do not meet the standard that the public would expect in operating a City facility, and the City’s growing lack of confidence that Casa Loma can improve the situation. KCCL has not acknowledged that any significant action is necessary.
The Management Agreement lays out a process for conducting a review of the governance model at the end of 3 years of operation (July 1, 2011). The mechanisms for monitoring progress and holding the Casa Loma Board and KCCL accountable for implementing the Strategic Vision have worked effectively in bringing these problems to light at an early stage. After 2 years it is evident that the current model is not working to enhance Casa Loma as an attraction and there are indications that KCCL is not able to deliver the full extent of the obligations laid out in the Agreement. This report recommends a course of action to be undertaken immediately to prevent the situation from growing worse.
|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 â€“ 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.