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TO: |
Mayor and Members of Council |
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FROM: |
Andy Taylor, Commissioner of Corporate Services Barb Cribbett, Treasurer |
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PREPARED BY: |
Mark Visser, Manager of Strategy,
Innovation & Investments, Corporate Services |
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DATE OF MEETING: |
2003-Sep-22 |
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SUBJECT: |
Markham Little Theatre |
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RECOMMENDATION:
THAT Council approve an interest free loan with an upset limit of $200,000 to the Markham Little Theatre (MLT) for the construction of a workshop, storage and rehearsal facility at the Markham Museum site, conditional upon the approval of the building design, security provisions, and the completion of a parking study;
AND THAT the Markham Little Theatre repay the loan with equal annual payments beginning September 30, 2004 over the next 15 years;
AND THAT the Mayor and Clerk be authorized to execute a loan agreement with the Markham Little theatre in a form satisfactory to the Town solicitor.
BACKGROUND:
MLT has been fundraising for many years for the construction of a new facility that was expected to cost over $500,000. At June 30, 2003, MLT had cash and cash equivalents of approximately $238,000.
Over the past five months, the MLT Building Committee and George Phillips, Manager of the Markham Museum, have been engaged in consultation concerning the proposed location of a MLT workshop, storage and rehearsal space on the Museum site.
The most recent plan is for MLT to utilize the Implement Building on the Markham Museum site, thereby lowering the initial required funding. The estimated cost of renovating the Implement Building is $384,000. Once the building is completed, MLT will turn the building over to the Town and will be leased back rent-free to MLT on a long-term basis.
At the September 8, 2003 Finance & Administrative Committee meeting, Mr. John Storey, Chair, MLT Fundraising Committee, provided an update on the Markham Little Theatre’s fundraising activities as well as asking the Town for an interest-free loan to an upset limit of $200,000 to make up the funding shortfall and expedite construction plans on the Markham Museum site.
The loan would be contingent upon MLT meeting certain provisions. The main concern for the Museum is that the design of the building be consistent with the Museum image. The security of the site is also a concern, which may necessitate that an automated gate on the north side of the Museum grounds be included as part of the building design costs. Additionally, a study would need to be undertaken to determine the effects on the available parking.
While the Town is prepared to loan MLT $200,000, it must be noted that if the renovation of the Implement Building exceeds the combined available funding of $438,000 ($238,000 + $200,000), then MLT must fundraise for the difference.
Repayment of the loan will be made in equal annual payments beginning September 30, 2004. If MLT borrows the full $200,000, the total minimum
annual repayment would be $13,333.33.
The
$200,000 loan will remain as an account receivable on the Town’s financial
records. Repayment of the loan will
extinguish the receivable. Should MLT
not be able to meet their annual repayment obligations, the Town’s receivable
would become an expense to the Town, and would require funding. Under this circumstance, the Town reserves
the right to terminate the lease.
Based
on MLT’s Financial Statements, it appears they will have the ability to repay
this amount. By normalizing their
Statement of Operations from the past three fiscal years (i.e. removing the
rent, occupancy costs, and interest income), MLT would have earned an average
net income of $32,950 annually (see appendix 1); more than enough to make the
minimum required payments.
FINANCIAL CONSIDERATIONS:
From
the Town’s vantage point, although the principal amount of the loan will be
repaid over a 15-year time frame, the Town will be foregoing the interest it
would otherwise earn on a $200,000 investment.
Assuming a 4.5% average interest rate, the Town would be foregoing an
average of approximately $7,300 in interest per annum.
ATTACHMENTS:
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Barb Cribbett, Treasurer |
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Andy Taylor, Commissioner of Corporate Services |
Q:\SHARED\2003FinAdminCtteeReports\0374
Markham Little Theatre.doc
