New YMCA Building in Downtown Core and City Needs

Recommendation:
That the November 17, 2003, Community Services Department report be received for information.

Report Summary

This report provides information Council has requested prior to the 2004 – 2008 Capital Priorities Plan deliberations beginning December 1, 2003.

Previous Council/Committee Action

  • At the November 17, 2003, Community Services Committee meeting, this item was postponed to the December 3, 2003, Community Services Committee meeting as the first item of business.
  • At the September 8, 2003, City Council meeting, the following motions were passed:
  1. That the July 31, 2003, Corporate Services Department report be received for information.
  2. That the $4 million contribution being requested for the new YMCA building in the downtown core be considered in the 2004-2009 Capital Priorities Plan.
  3. That Administration provide a report to Community Services Committee including:

a)the cost benefit analysis of the potential impact of the new YMCA building on the City’s recreational facilities serving the downtown core specifically the Kinsmen Fieldhouse and Commonwealth Stadium facilities;

b)an outline of the benefits the City as a whole received from the programs and subsidies provided by the YMCA (for example membership subsidies, grants, after school programs, low income housing, etc.);

c)a thorough community consultation process with those that would use the new YMCA and/or other organizations affected by the YMCA development;

d)an analysis of the total subsidies the YMCA received from the City in forms of exemptions from such items as property and business taxes, land leases and whether the City should re-examine the tax free status of the YMCA facilities or part of the facilities that relates to the services that are also provided in the private sector;

e)the results of any recent market analysis and exit polls at City facilities by Administration;

f)the opportunities and recommended options for revenue sharing that have been explored with the YMCA.

  • At the September 8, 2003, City Council meeting, the following motions were passed:
  1. That the Terms of Reference (Attachment 1 of the September 4, 2003, Community Services Committee report) to assess the key factors impacting the proposed YMCA 10 Year Capital Development Plan, be approved.
  2. That Administration be directed to carry out the work proposed in the Terms of Reference and report back to the Community Services Committee before December 1, 2003.

Report

The consulting firms of Deloitte & Touche Corporate Finance Canada Inc. (Deloitte) and Community Services Consulting Ltd. were retained by Administration to undertake the work outlined in the terms of reference approved by Council
(Attachment 1). This work was completed to respond to the questions asked by Council at the September 8, 2003, meeting. The reports prepared by the consultants are included as Attachments 2 and 3.

a)Impact on Existing Recreational Facilities.

It is anticipated that the new City Centre YMCA facility will have a negative impact on attendance and revenue at the City’s recreational facilities serving the downtown core (specifically Kinsmen Sports Centre and Commonwealth Fitness Centre).

  • For Kinsmen, the impact is estimated at a 10% – 15% loss of user base equating to a revenue decrease in the range of $200,000 - $300,000 per year.
  • For Commonwealth, the impact is estimated at a 13% – 21% loss of user base equating to a $65,000 - $105,000 revenue decrease per year.
  • Further analysis by Deloitte (included in Attachment 2) with two private fitness centres operating in the downtown core also indicates that these facilities will likely experience user base and revenue losses.
  • Based on the fixed nature of the majority of the costs associated with operating a fitness facility, it is expected that there would be little opportunity to reduce costs to compensate for the projected revenue decreases.

b)Benefits to the City as a whole from the YMCA.

The programs and services offered by the YMCA provide benefits to the citizens as a whole through opportunities for involvement in physical activity, programs and community involvement.

  • Health and wellness through physical activity is provided through four Membership Centres serving 19,151 members. These are the current City Centre YMCA opened in 1908 and currently serving 1,235 members, Jamie Platz opened in 1990 and currently serving 4,809 members, William Lutsky opened in 1997 and currently serving 8,198 members and Castledowns opened in 1998 and currently serving 4,909 members. In 2002, these centres had direct revenues of $9,272,939 and direct expenditures of $8,889,594 for a net contribution of $383,345.
  • The YMCA Opportunity Fund provides financial assistance for those who wish to participate but cannot afford the full fee. At September 2003 month end, 23.9% of the 19,151 members were financially assisted (4,573 members). At the City Centre facility the number of financially assisted members was 347 (28.1%). On average, the YMCA subsidizes each financially assisted member by approximately 70 – 80 percent. The Opportunity Fund notional contribution for 2003 is estimated at $921,000.
  • Children or youth comprise 42.1% of the total YMCA membership (8,063 child/youth members). At the City Centre, this drops to 13.7%
    (169 child/youth members) although the YMCA 2002 member satisfaction survey indicates that 39% of City Centre members have children at home. While there is some potential to increase the number and percentage of children/youth at a new more child-friendly facility, the YMCA projects that children/youth will make up 35% of a new City Centre YMCA. This is inconsistent with the socio-economic profile of the downtown catchment area (see Section 3 of Deloitte report – Attachment 2).
  • In addition to the facilities and amenities provided for members the Membership Centres offer programs for the entire community. In 2002, there were approximately 7,500 non-member program registrants and 2,100 children participated in summer daycamps.

The YMCA also offers programs and services that are not exclusively tied to Membership Centres.

  • The YMCA operates 14 day-care and out-of-school care centres throughout Edmonton with space for approximately 500 children. In 2002, these centres provided care for 1,150 different children. In 2002, YMCA childcare had revenues of $1,721,089 and expenditures of $1,841,209 for a net cost of $120,120.
  • The YMCA has operated safe, short-term accommodation in Edmonton since 1908. Up to 116 men and women stay every night. In 2002, 1,600 different men, women and children stayed at the YMCA for a total of 38,220 bed nights. The budget for housing has not been separated prior to 2003. In 2002, the revenue from housing was $520,956 and the expenditures were $448,035 for a net contribution of $72,921.
  • The YMCA Enterprise Centre opened in 1987 and provides leadership, self-reliance, employment, and education support services to youth and young adults. Last year 3,200 Edmontonians participated in programs at the Centre. The main programs are the YMCA Kids’ Club and Kids’ University, YMCA Time Out, Learning at the Y, the Youth Transition Program and the Family Ties Program. In 2002, the revenues for the Enterprise Centre were $1,275,797 and the expenditures were $1,292,160 for a net cost of $16,363.
  • The Downtown Community Outreach Program provides the delivery of various youth and social programs including the YMCA Tobacco Free Program funded by AADAC and in partnership with the City Centre Education Project, and the YMCA Diabetes Prevention Program, funded by Health Canada

Community involvement opportunities are also offered through the YMCA.

  • There are approximately 700 volunteers who contribute to the YMCA on an ongoing basis. Approximately 16,000 hours were volunteered in 2002.

c)Community Consultation.

Two sectors of the community were identified as being affected by or potential users of the YMCA. The sectors were agencies providing recreational or social services to inner city communities and private fitness centres operating in the downtown core. The consultation processes for these two distinct groups were conducted separately.

Peter Faid of Community Services Consulting Ltd. facilitated two focus groups for recreation and social service agencies. The results of these focus groups are included as Attachment 3. In addition, groups that did not attend the sessions were invited to respond to the focus group questions. Responses received are compiled in Attachment 4.

  • The consultation process for the community was limited in terms of the number of participants and further discussion with community leaders and organizations would be warranted.
  • There was concern expressed that the process was being pushed too quickly, and as well it was judged to be very difficult to assess the merits of one proposal when there may be other alternatives available if a more planned approach had been taken.
  • The community organizations identified:

-That more affordable long-term housing and secure short-term housing is required in the inner city.

-That there is a need for additional family oriented activities, programs and suitable green spaces in the downtown communities.

  • The YMCA is well respected in the community, although its work with the inner city populations was perceived to be a relatively recent development.
  • Concern was expressed about access to a new City Centre YMCA for residents of the inner city communities because of cost, transportation, location, and a perception that the facility would not be welcoming.
  • There was difficulty reconciling the development of a fitness centre intended to attract the ‘at work’ population and a facility that is open and available to families living in the inner city.

Deloitte contacted 12 private fitness centres operating in the downtown and downtown fringe. Each facility manager was asked to respond to a series of questions regarding their club and their thoughts on the potential opening of a new City Centre YMCA. A summary of responses is included in Appendix B of the Deloitte report (Attachment 2).

  • The private fitness centre consultation process revealed concerns shared by many of the businesses regarding the potential development of the new City Centre YMCA. The two centres most concerned about the potential opening were Club Fit Downtown and World Health Centre Club. The owners of these facilities indicate that the negative impact on their facilities would potentially force them to cease operation in the downtown core. A more detailed analysis and discussion regarding these two clubs is provided in the Deloitte report (Attachment 2)

d)Subsidies received by the YMCA from the City.

  • The properties owned or leased by the YMCA with the exception of one parking lot are presently exempt from taxation. The estimated total annual value of this exemption should the properties be fully taxable is approximately $534,000 (combined municipal and school tax levy). Attachment 5 provides an overview of the property assessments and levies.
  • In 1999, the Community Organization Property Tax Exemption Regulation (COPTER) was enacted by Alberta Municipal Affairs whereby all new applications for exemption would have to meet new requirements. All pre-existing exempt properties were grandfathered until such time that the municipality could complete a review of these properties. Assessment and Taxation Branch indicates that this review is planned in 2004 for implementation in the 2005 taxation year.
  • Should this review conclude that programs offered by the association no longer qualify for an exemption the YMCA will become liable for property taxes on a portion of their property as well as for a business assessment and tax. Not knowing the areas of operation that may be affected by this change it is not possible at this time to provide a potential property or business tax impact for the various YMCA properties.
  • Deloitte completed a review of contractual agreements between the City and the YMCA dating from 1954. A synopsis and summary of the agreements is included in Attachment 2. Since 1954 the City has contributed 5.24 hectares of municipal land, $1.2 million in opportunity cost (forgone earnings on interest free loan), and $8.2 million in funding to the establishment of YMCA community recreation facilities.
  • Discussions with other Canadian municipalities indicate that such agreements between municipalities and YMCA organizations are common, though the specific details or formulas differ.

e)Results of market analysis and exit polls.

A number of research projects and exit polls have been completed since 1999. Deloitte reviewed the previous market studies and exit polls. The result of their review is included in Attachment 2.

Additional exit polls were conducted by Deloitte to assess the impact on attendance and revenue at four fitness centres (two city operated and two private centres). The findings were as discussed in response to question (a) of this report.

In addition to the existing research results Deloitte was asked to provide a population and socio-economic analysis of the downtown catchment area and complete an analysis of the downtown fitness market. The complete results of these analyses are included in the Deloitte report and are summarized below.

  • The estimated current total potential number of fitness memberships in the catchment area is in the range of 11,000 – 15,000. The current fitness club membership in the catchment area is reported as approximately 12,200. Based on the high end of the estimated range of current potential fitness memberships it appears there may be an existing unmet market of up to 2,800 potential memberships. However, given that existing clubs are reporting to be at 64% capacity (current member capacity is reported as 19,060) fitness opportunities are presently available to fulfil this unmet market.
  • If the existing downtown YMCA is excluded there are approximately 11,000 reported members and a reported capacity of 16,000. This may suggest that a new City Centre YMCA could attract up to 4,000 members from the catchment area without negatively impacting the membership base of other centres. However, this assumes that the new YMCA would attract the unmet market which current facilities (including the existing YMCA) have not been able to do.
  • With population and employment growth it is estimated that the market size will increase to a range of 13,000 to 18,000 memberships by 2025.

f)Revenue Sharing Options

The Community Services Department and the YMCA have met on a number of occasions and have reached agreement regarding the YMCA’s payment of the outstanding balance on the current revenue sharing arrangement.

Agreement has also been reached between the YMCA and the Department regarding revenue sharing should the City provide funding for the development of the new City Centre YMCA facility. In essence it has been agreed that a revenue sharing formula would be developed and specified in the funding agreement. The formula would focus on attendance impacts in a specified target market (the downtown, at work, adult market) and that decreases in the attendance figures for this market at Kinsmen and Commonwealth (based on trend analysis) would be multiplied by a predetermined discounted dollar value to calculate the revenue share. It was also agreed that this revenue sharing agreement would be for a term of 3 years, which is the estimated time for the balancing of the impact on the City facilities.

Further to this the Department and the YMCA have agreed to develop and include in the agreement a set of principles to guide the ongoing working relationship to best meet the needs of the community.

Background Information Attached

  1. Terms of Reference – Analysis and Assessment of the YMCA 10 Year Capital Development Plan.
  2. Review of YMCA 10-Year Capital DevelopmentPlan – Deloitte & Touche.
  3. City Centre YMCA Development – Summary of the Discussion from the Focus Groups – Community Services Consulting Ltd.
  4. City Centre YMCA Development – Summary of the Responses from agencies that did not attend the focus groups.
  5. 2003 Exemptions on Property held by Young Men’sChristian Association.

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Attachment 1

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