Economic and Fiscal Analysis of Northlands Redevelopment (Version 1)

Transcription

1 Economic and Fiscal Analysis of Redevelopment (Version 1) Study findings are reflective of current project planning and are subject to revision following input and review by City officials. Submitted to By Nichols Management and Economic Consultants Suite 2401, Avenue NW, T5J 0H8 (780) Date March 3, 2016

2 Table of Contents Executive Summary Introduction Background Overview of Redevelopment Plan Study Purpose Fiscal Impact Analysis Methodology Data Results Additional Considerations Economic Impact Methodology and Data Results Cumulative Impact of Redevelopment LIST OF TABLES Table E1: Summary of Economic Impacts of Redevelopment (Provincial)... 2 Table E2: Summary of Economic Impacts of Redevelopment (City of )... 3 Table 3.1: Annual Economic Impact of Current Operations Table 3.2: Annual Economic Impact of Out of Town Visitors Related to Current Events Table 3.3: Annual Economic Impact of Future Operations (No Redevelopment) Table 3.4: Impact of Redevelopment Construction Table 3.5: Impact of Commercial and Residential Construction Table 3.6: Annual Impact of Total Future Operations Table 3.7: Annual Economic Impact of New Future Operations Table 3.8: Table 3.9: Annual Economic Impact of Out of Town Visitors Related to Total Future Events Annual Economic Impact of Out of Town Visitors Related to New Future Events Table 3.10: Total Impact of Future Redevelopment (NPV) Table 3.11: Impact of New Activities Following Redevelopment (NPV) LIST OF FIGURES Figure 2.1: Percentage of Low Density Houses by Assessed Value... 9 Figure 2.2: Percentage of Low Density Houses by Assessed Value Without Redevelopment10 Figure 3.1: Employee Residences By Postal Code Area... 16

3 1 Executive Summary Background In its strategic plan, Vision 2020: The Re creation of Recreation, has put forward a redevelopment strategy that encompasses the entire campus, including: - a repurposed arena facility as a multi ice sheet venue; - a redeveloped 5,000 seat Hall D in the Expo Centre; - a mix of on site residential and commercial development; - an outdoor urban festival and events site; and - an area to support and showcase agricultural related activities (e.g. agriculture school, innovation kitchen, and market brewery). As part of understanding the potential effects of its redevelopment plans on the City of and the province as a whole, engaged Nichols, an based economics and management consulting firm, to prepare a concise overview of the economic and fiscal impacts of redevelopment. The study was conducted in early As of early 2016, redevelopment plans are largely conceptual. As such, the findings of this study are preliminary in nature and subject to further refinement and analysis as proceeds with its redevelopment plans. Fiscal Impact Findings The successful redevelopment of the campus will have a fiscal impact on the City of in three ways: by increasing the residential assessment base through increased property values as the aesthetics of the neighbourhood are improved; through the addition of new infill residential and commercial development on the campus will add to the assessment base; via revenue from the sale of a portion of the site to developers. Taken together, the three categories of impacts are expected to result in an increase in: the assessment base of between $95 and $155 million; - housing values in the surrounding neighbourhoods are estimated to increase by 2% to 5% percent ($5,300 and $13,000) as it is anticipated that redevelopment will improve the aesthetics of the local neighbourhood, contribute to the diversity of housing types, and increase the number of businesses operating in the surrounding area.

4 2 property taxes of between $1.2 and $1.8 million annually; general revenues to the City of approximately $22.2 million related to the sale of a portion of the campus to residential and commercial developers. On a net present value basis, the total fiscal inflows to the City of as a result of the complete redevelopment are estimated to be between $29 and $32 million over the next 20 years. 1 The future impacts are discounted to present value to allow for comparison between expenditures made today and anticipated future revenue 2. Economic Impact Findings The analysis considered two broad categories of impacts. Firstly, the spending related to the construction phase and secondly, spending related to the operational life of the project, including spending by out of town visitors to the site. The study team also endeavoured to isolate impacts that are related to the new activities that will be incremental to the existing operations and do not include activities displaced to Rexall or that would occur in the absence of redevelopment (e.g. current EXPO centre activities). The impact on GDP is summarized in Tables E1 and E2 below and provided as a range to reflect some degree of uncertainty in redevelopment costs and variability in the discount rate used to estimate the present value of future impacts. As with fiscal impacts, the future impacts are discounted to present value to allow for comparison between expenditures made today and anticipated future activity. Table E1: Summary of Economic Impacts of Redevelopment (Provincial) Impact Category Construction Operations Total $ Millions GDP ,045 Notes: 1: present value over 4 year construction period 2: present value over 20 year operational life of the project 1 2 This analysis has not incorporated the cost of servicing the site as it is assumed that developers will be responsible for these costs, an assumption that is reflected in the sale price of the land. Other costs to the City (i.e. planning) have also been excluded at this stage. The discount rates used range between a low of 3% and a high of 8%.

5 3 Table E2: Summary of Economic Impacts of Redevelopment (City of ) Impact Category Construction Operations Total $ Millions GDP Notes: 1: present value over 4 year construction period 2: present value over 20 year operational life of the project Expenditures related to redevelopment activities and amenities will support employment directly with, with suppliers to the project (indirect employment) and, through the spending of employees and its suppliers, in the general economy (induced employment). Specifically: Construction will support between 3,100 and 4,000 full time equivalent (FTE) jobs in both and across over the construction period. Operation will support an annual average of approximately 750 full time equivalent (FTE) jobs in both and across. This is long term employment and will likely be a mix of part time and full time positions.

6 4 1. Introduction 1.1 Background Since its founding as an agricultural society in 1879, has operated facilities, offered programs, and hosted special events that enhanced resident quality of life and contributed to the world class reputation of both the city and the province. As a result of these activities, has grown into an important employer and one of the largest not for profit corporations within the City of. Every year, more than 520 events take place at the campus drawing over three million visits to the site. As of 2015, the campus, which is located on 160 acres of City leased lands in northeast, is home to the following: the EXPO centre, a recently renovated 522,000 square foot multi purpose conference centre that hosts a variety of trade shows, conferences, and other events. Park Race Track and Casino, which hosts live racing, simulcast wagering, slot and VLT gaming, as well as on site dining. Rexall Place, the city s premier sports and concert venue. Currently home to the Oilers and Oil Kings, the venue was first opened in 1974 and has a seating capacity of just under 17,000. In 2014 the facility hosted over 160 events, including 36 concerts. In addition to these facilities and associated events, the campus hosts the city s premier exhibition, K Days, which draws just under 800,000 visits to the site each summer. Recent developments have necessitated a reconsideration of current operations. Paramount among these is the decision taken by City Council in 2013 to modernize the sport and entertainment experience within the City by investing in the new downtown arena (Rogers Place) and ICE district. Rogers Place is slated to open in 2016 and will result in a loss of visitation associated with Arena (Rexall Place). This will dramatically impact the viability of current business model. Further, the declining financial performance of racing and gaming, coupled with uncertainty regarding the current provincial government s long term support for horse racing in, raises serious questions regarding the future viability of Park Race Track and Casino. These challenges, along with a number of identified opportunities such as the opportunity to boost the trade show and conference marketplace in, as well as to enhance the social gathering experiences on the site have driven to engage with the City, community leaders, board and staff, and the general public in developing a renewed vision encompassing the entire campus.

7 5 1.2 Overview of Redevelopment Plan In its strategic plan, Vision 2020: The Re creation of Recreation, has outlined two distinctive directions for the future of the site. Specifically: The strategic wind down of all operations. Under this scenario, operations would cease at both Rexall Place and Park. It is assumed that the EXPO centre is transferred back to the City and would continue operating, either under management of the city or some other public agency, possibly including a repurposed Events organization. A redevelopment strategy that encompasses the entire campus, including: - A redeveloped arena facility as a multi ice sheet venue intended to service the demand for recreational and tournament ice in the capital region and northern - A retrofitted 5,000 seat Hall D in the Expo Centre that improves the potential of the facility as a venue for hosting various sporting events, concerts, and other types of events - A mix of on site medium, and high density residential development including student housing - On site commercial development including retail and hotel accommodations - An outdoor festival area capable of hosting large scale events, along with associated indoor amenities and services - An area to support and showcase agricultural related activities (e.g. farm school, brewery, market) that ties in with Northland s historical role as an agricultural society 3 Vision 2020 also proposes the development of a mid sized stadium onsite, but at the direction of this stadium was not considered in this analysis. Further, redevelopment of the current Coliseum LRT station is proposed in Vision It is expected that this work, if undertaken, would be carried out by the City. 1.3 Study Purpose is interested in a concise overview of the economic and fiscal impacts of its redevelopment plans on the City of and the province as a whole. To place the impact of redevelopment within the appropriate context, the study also discusses the economic and fiscal components of current operations, as well as impacts associated with a future scenario that envisions no redevelopment on the site. The impacts assessed in this 3 On direction, this analysis does not consider the mid sized stadium as outlined in Vision 2020: The Re creation of Recreation.

8 6 study include direct, indirect and induced employment, Gross Domestic Product (GDP), household income, and municipal tax assessment and revenue. The information may be used to support discussion with City officials and key stakeholders, as well as general public outreach. This economic and fiscal analysis has been prepared by Nichols, an based economics and management consulting firm with extensive experience in economic impact analysis, urban, regional and industry economics, and municipal finance. The study was conducted in January and February of has expended considerable effort in advancing its redevelopment plans in a relatively short period of time. Even so, as of early 2016 these plans are largely conceptual and will be refined and expanded upon as part of developing a detailed business case for the redevelopment overall as well as individual sub components. As a result, the findings of this study are preliminary in nature, and are subject to further refinement and analysis as proceeds with its redevelopment plans and feedback is collected in response to this report.

9 7 2. Fiscal Impact Analysis The redevelopment of the Campus has the potential to impact the fiscal position of the City due primarily to: changes in property values in proximity to the campus and the municipal revenues derived therefrom; revenues related to the lease or sale of campus lands; and expenses related to supporting the redevelopment project. This section of the report outlines the general approach taken to estimating the fiscal impacts of redevelopment, key data sources and research documents, and a summary of findings. 2.1 Methodology The impact of the redevelopment of the campus was contemplated by comparing two scenarios: no action is taken and portions of the Site (e.g. Rexall Place, Park) are unused and allowed to deteriorate; and the site is developed per current plans. The study team estimated the impact of each of the above described scenarios on the City by estimating expected changes to property values, the taxes derived therefrom, and the alignment of expected outcomes with existing City policies and programs. The general approach taken was to: Characterize the physical state of the campus under each of the two scenarios. Specifically: - If no redevelopment occurs, portions of the campus are assumed to be left vacant and deteriorate from lack of use. - Redevelopment of the campus which includes over 30 acres of commercial and residential development (see section 1.2). Identify the pathways through which the physical characteristics of the campus will interact with the surrounding community and the City. - After reviewing relevant academic literature and based on the experience of the study team, it was determined that changes to the value of existing properties in the vicinity of the campus, the addition of the proposed development to the

10 8 assessment base, and the proceeds from selling a portion of the campus lands to developers will constitute the vast majority of potential fiscal impacts to the City. 4 Delineate a study area in which changes to the Site are expected to have a quantifiable impact on properties. - Based on natural barriers and features, such as the North Saskatchewan River and the Yellowhead freeway, as well as results from relevant literature, the consultants defined a local study area (LSA) of a one kilometer radius around the campus in which properties are likely to be directly impacted by the decision to redevelop. The study area is comprised largely of the neighbourhoods of Bellevue, Cromdale, Eastwood, Montrose, Parkdale, and Virginia Park. Quantifying the fiscal impact to the City of the afore described changes. Specifically: - The study team first identified and delineated the existing residential and commercial assessment bases expected to be impacted by the campus and estimated the current value of and taxes related to these properties. - Following the characterization of the affected properties, the study team relied on academic literature to establish a range of expected changes to surrounding property values under both scenarios. - Lastly, the study team estimated the assessed value of the various residential and commercial components of a redeveloped campus and applied the appropriate municipal tax rates to estimate both the change in the overall assessment base and revenue to the City of. It should be noted that limited information was available with respect to the costs to the City of of servicing or otherwise supporting campus redevelopment as a part of regular business operations. As such, it was assumed that all servicing costs would be borne by the developers and related administrative costs would be negligible. 2.2 Data In addition to the internal and preliminary redevelopment plans provided by, the consultants relied on academic articles that contemplate the impact of urban redevelopment activities and freely available data collected from a number of public sources including: the City of Open Data Portal; 4 For the purposes of the analysis we have assumed that land slated for residential development will be sold and land slated for commercial developed will be leased out by.

11 9 the City of Tax Assessment Methodology and Bylaws; neighbourhood structure plans prepared by the City of ; and the Real Estate Board. 2.3 Results Existing Impact In general, the neighbourhoods within the LSA consist primarily of residential and commercial properties, the former comprised primarily of low and medium density housing which are valued at substantially less than elsewhere in the City. For example: The average assessed value of a residential single family home in the LSA is estimated to be $266,000, nearly one third below the municipal average of $390,000. As shown in Figure 2.1, the assessment base in the LSA includes a disproportionately high percentage of low value homes. Specifically, 43% of homes in the LSA are valued at less than $230,000 as compared to only 18% in the City overall. Figure 2.1: Percentage of Low Density Houses by Assessed Value Percentage of low density houses by assessed property value Local Study Area 43% 27% 18% 14% 14% 16% 14% 9% 7% 3% 9% 2% 6% 4% 1% 1% Thousands of dollars Together, the residential and non residential properties within the LSA constitute $1.8 billion (1%) of the municipal tax base and contribute $14 million (0.03%) in property taxes to the City. 5 The value of the properties and their contribution to the municipality will be impacted by the future state of the campus. The balance of this section outlines the preliminary estimates of the expected changes with and without redevelopment. 5 The assessed value of the site was not included as property taxes are not paid on these properties.

12 Impact of No Redevelopment As outlined previously, the study team has assumed that in the absence of redevelopment, the campus will become largely disused and a large portion of it will become derelict. A review of academic literature related to urban development and property values suggests that a derelict property of this size has the potential to place downwards pressure on the value of properties within a 1 km radius of the site in the order of 5% to 10%. Using this established range, the expected impact is a reduction in: home values of between $13,000 and $27,000; the residential assessment base of between $60 and $125 million; and residential property taxes of between $435,000 and $870,000 annually. On a net present value basis (8%), the total value of the foregone property taxes over the next 20 years is estimated to be between $3 and $6.5 million. Furthermore, the erosion of home values in the LSA would cause a substantial shift in the relative mix of low and high value housing in the community which may serve to create or exacerbate existing socio economic challenges for residents. As shown in Figure 2.2 below, an estimated 57% of homes in the LSA would likely be valued under $230,000 as compared to the current level of 43% and 18% in the City overall. Figure 2.2: Percentage of Low Density Houses by Assessed Value Without Redevelopment Percentage of low density houses by assessed property value ( 10%) Study area current Study area if property values decrease 10% 57% 43% 27% 18% 9% 22% 14% 14% 10% 16% 7% 4% 14% 9% 3% 3% 2% 6% 4% 1% 1% 1% 1% 0% Thousands of dollars The study team did not identify any literature relating to the impact of a derelict site on nearby commercial properties. In an effort to be conservative, the study therefore assumed that the value of commercial properties would remain unchanged if redevelopment does not proceed.

13 Impact of Redevelopment The successful redevelopment of the campus will have a fiscal impact on the City of in three ways: in contrast to the reduction anticipated in the no development scenario, the properties in the LSA may increase in value by an estimated 2% to 5% as the aesthetics of the neighbourhood are improved; the addition of new infill residential and commercial development on the campus will add to the assessment base of the City; the sale of a portion of the site to residential and commercial developers. Taken together, the three categories of impacts are expected to combine and result in an increase in: home values of between $5,300 and $13,300; the residential assessment base of between $25 and $65 million; residential property taxes of between $175,000 and $435,000 annually; the commercial assessment base of between $70 million and $90 million; commercial property taxes of between $1 million and $1.4 million annually; general revenues to the City of approximately $22.2 million related to the sale of a portion of the campus to residential and commercial developers. On a net present value basis (8%), the total fiscal inflows to the City of as a result of the complete redevelopment are estimated to be between $29 and $32 million over the next 20 years. Note that this analysis has not incorporated the cost of servicing the site as it is assumed that developers will be responsible for these costs, an assumption that is reflected in the sale price of the land. Other costs to the City (i.e. planning) have also been excluded at this stage. 2.4 Additional Considerations As demonstrated, allowing to become largely disused has the potential of depressing property values in the area and subsequently reducing the tax revenue derived from properties in the LSA. Additionally, this depression of property values would run contrary to various City of initiatives aimed specifically at revitalizing neighbourhoods within the LSA. For example the City has invested:

14 12 upwards of $25 million in the 118 th Avenue revitalization program; and 6 nearly $15 million on revitalizing Borden Park. The express purpose of these initiatives is to improve the quality of life in the area. Further, the city is budgeting in the range of $130 million 7 over the next seven years to improve communities in the LSA, primarily via the Neighbourhood Renewal Program. The depressive effect of a disused Site has the potential to undermine this program and make redundant these investments. Additionally, the City of has a stated policy objective of encouraging and increasing infill development up to 25% of new development units each year. The current Site redevelopment strategy has a considerable portion of land allocated for medium and high density development which would help the City achieve its infill target while simultaneously reducing the need for new developable lands on the outskirts of the City. The City of may also have the opportunity to benefit from the economies of scale that are expected to occur as a result of the Rexall Place redevelopment. The City currently operates a number of stand alone indoor arenas, some of which are in need of significant maintenance or replacement. If the City is in the position of having to replace six sheets of ice across the City, doing so in a centralized location such as Rexall is likely to be the most costeffective solution. estimates that: the cost to build a twin arena is $33 million, or $99 million for six sheets of ice. the cost to repurpose Rexall to a six sheet arena is between $76 and $94 million If the City were to support the redevelopment of Rexall as an alternative to three new twin complexes, it could realize a savings of between $5 and $23 million in capital costs. Furthermore, estimates that the current operating model for twin sheet facilities is a 75% cost recovery, or a net operating loss of $250,000 per sheet, or $1.5 million for six sheets, annually. Conversely, believes that a re purposed Rexall will generate a net revenue of $1 million annually initiativerevitalization.aspx City of Capital Budget

15 13 3. Economic Impact Distinct from the fiscal effects outlined in the preceding section, the current and future activities at the Site contribute to the overall economic activity in the City of, as well as elsewhere in. The interconnected nature of an economy is such that spending in one sector causes businesses in related industries to expand output which subsequently increases household incomes thus leading to the purchase the goods and services needed in daily life. Taken together, these ripple effects of spending constitute the total economic impact of a particular activity. The balance of this section is focused on the quantification of the economic impact of current activities taking place at as well as the expenditures related to the redevelopment and future operation of the site. 3.1 Methodology and Data Input Output Modelling The study team relied on financial and operational data provided by and the Input Output (IO) model, built and maintained by Finance, to develop estimates of the economic impact of both the current and future activity at the campus. Conceptually, the IO model allows an analyst to quantify the economic effects of a particular activity or project as the spending associated with the activity ripples through the economy due to the interconnected nature of various sectors and markets. Specifically, an IO model considers the: direct effects of project expenditures on goods and services; indirect effects of project expenditures as suppliers to the project and related industries expand their output to meet the needs of the project; and induced effect of the project as the additional income paid to employees of the direct and indirect sectors is circulated through the economy. Together, the direct, indirect, and induced effects constitute the full economic impact of a project or activity which can be characterized using a number of metrics that include: Gross Domestic Product (GDP); 8 Household income; and Employment (jobs). 8 As a measure of value added, GDP is the widely accepted measure of economic activity. Estimates of gross output were not provided as this metric double counts, and thus overestimates, economic activity.

16 14 Despite the intuitive appeal of IO models, their use has been criticized in a number of venues due to the misapplication of the framework and the interpretation of results. The concerns expressed with regard to the use of IO models relate primarily to the claims made with respect to the incremental nature of the estimated activity when the prevailing socio economic conditions may in fact suggest that the expenditures being analysed could be redirected elsewhere and the indirect and induced effects may be limited if the expenditures are being made in a fully employed economy. In an effort to be conservative, when estimating the current and possible future impacts of redevelopment at the campus, the study team limited the scope of the analysis to the expenditures made by alone and visitors to the City. Attendees of events who reside within the City and whose entertainment expenditures may be redirected elsewhere were excluded from the analysis. Further discussion of how the direct impact of visitor expenditures was considered is provided in Section Visitor Expenditures The practice of estimating the impact of attendee expenditures and identifying these impacts as being a net gain to the local economy and solely attributable to a particular activity has come scrutiny for a number of reasons, chief amongst which are the counterarguments that: individuals may have a pre determined entertainment budget to spend and the elimination of one leisure activity will not result in the elimination of spending, but rather shift it to a different activity; and characterizing the spending on a new amenity, good, or service by local residents in a defined geographic region as new or incremental economic activity is problematic as this new expenditure could be displacing previous spending. With a view to addressing the above described concerns, the study team developed a methodology designed to identify only the incremental effects of visitors to the site. Conceptually, the methodology consisted of: using administrative data provided by, identify the total number of visitors who attend events in a given year; estimating the number of site visitors who live outside of the region and whose spending can therefore be thought of as incremental to the municipal economy; using data from Culture, Statistics Canada,, and related published studies to develop a profile of the estimated amount and nature of spending by out oftown visitors;

17 15 applying the Input Output model to the estimated spending by out of region visitors to generate estimates of the GDP, labour income, and jobs supported by this spending; and allocating a portion of the total provincial economic impact to the City of based on the proportion of the labour force employed in selected industries and resident in vis à vis the province overall. 3.2 Results Impact of Current Operations Direct Expenditures Direct annual expenditures related to operations have been estimated at approximately $165 million. 9 Table 3.1 outlines the economic impact of those expenditures, broken out by key assets and related corporate support functions. Based on published statistics direct annual impact in terms of Gross Domestic Product (GDP), and household income in is approximately $129 million and $84 million respectively. Table 3.1: Annual Economic Impact of Current Operations Business Unit Direct Expenditures Gross Domestic Product Labour Income Park Expo Rexall Place Corporate Total Note: Table figures have been rounded. Based on a review of workforce data, the organization currently employs approximately 275 full time and 1,295 part time employees. This employment translates to a total of approximately 520 full time equivalent (FTE) positions. Figure 3.1 demonstrates that although employees live throughout the City of, over one third (575) live in relatively close proximity to the Campus in 9 Based on an average of three years ( ) of direct operational expenditures provided by.

18 16 the northeast part of City. It appears that a number of the positions supported by the various events accrue to residents of nearby communities. Figure 3.1: Employee Residences By Postal Code Area 100+ employees employees employees employees employees 0 20 employees Along with direct employment, the economic activity that is generated by also supports employment with suppliers (indirect employment) and, through the spending of employees and its suppliers, in the general economy (induced employment). The total direct, indirect and induced employment associated with operations is estimated at 1,485 FTEs annually, the majority of which are located in the area. In addition to paid employment, is also supported by an active volunteer base. In 2015 alone, nearly 1,100 people contributed almost 22,000 hours of time in support of through activities such as event planning, production, and implementation. This level of engagement is equivalent to approximately 11 annual FTEs. Further, provides annual value in kind donations ranging between $500,000 to $600,000 to various community groups and initiatives. Visitor Expenditures In addition to the economic impact related to the expenditures made directly by as a part of their regular operations and in support of specific events, attendees of these events make purchases whose effects ripple through the local economy. The study team endeavoured to quantify these impacts using the approach described in section

19 17 As shown in Table 3.2 the out of town visitors to currently spend an estimated annual average of $86.0 million in the City of, an amount that translates to approximately: $22 million in local GDP and an additional $46 million to the rest of the Province (i.e. $68 million, in total); and $13 million in local household income and an additional $28 million to the rest of the Province (i.e. $41 million, in total). In terms of employment, the annual economic impact of out of town visitors related to current events is estimated to generate approximately 985 FTEs in and across the province. Table 3.2: Event Location Visitor Expenditures Annual Economic Impact of Out of Town Visitors Related to Current Events Gross Domestic Product Labour Income Expo Hall D Fair Grounds Total Note: Events hosted at Rexall Place were not included in the analysis. Out of town visitors, and their associated economic impacts, related to Rexall events are expected to continue into the future with the opening of Rogers Place in fall Note: Table figures have been rounded No Redevelopment With the wind down of operations scenario identified in Section 1.2, it is expected that only the EXPO centre would continue in operation on the site. Under this scenario, direct expenditures are estimated at approximately $37 million. This number encompasses expenditures to operate the facility, along with a portion of corporate expenditures estimated to be needed to support the facility. The corporate expenditures would be borne by whatever entity is ultimately charged with operation of the facility. Table 3.3 outlines the economic impact of these expenditures. Under the no redevelopment scenario, the annual GDP effects are expected to decrease by approximately $100 million from $129 to $28 million (see Table 3.1 and 3.3). In addition, employment related to these

20 18 expenditures is expected to drop by over 1,100 FTEs, from 1,485 to 340 FTEs. A portion of the FTEs lost may be offset by the creation of similar positions at the Rogers Arena. Given the apparent preference for current employees to live in proximity to their job (Figure 3.1), it may not be the case that the individuals hired by Rogers Arena will be the same individuals currently working at. Table 3.3: Annual Economic Impact of Future Operations (No Redevelopment) Direct Expenditures Gross Domestic Product Labour Income Expo Total Note: Table figures have been rounded Impact of Redevelopment Introduction Under the redevelopment scenario outlined in Section 1.2, the economic impacts of redevelopment will be realized during two distinct phases: The design and construction phase, which is currently expected to take place over the timeframe; and The operations phase. Operation of the various redevelopment components will begin in a staggered fashion over the period. For the purposes of this analysis, it is assumed that full operation of all redevelopment components is underway in Construction Total initial capital expenditures related to onsite redevelopment are estimated to be between $460 and $590 million ($ 2015). These expenditures relate to: Construction of onsite facilities including the redeveloped Rexall Place, Hall D retrofit, urban festival site, and an area to support and showcase agricultural related activities. 10 Construction of commercial and residential properties on the Site, including a hotel next to the redeveloped Rexall Place and another hotel next to the Expo Centre, onsite commercial/retail space and residential development. 11,12 10 Construction cost estimates were provided by.

21 19 Construction capital expenditures include wages and salaries paid to construction workers, professional engineering services, and the direct purchase of goods and services, such as materials and equipment. Table 3.4 outlines the economic impact of expenditures related to construction of facilities. The GDP effects of construction are expected to be approximately $128 to $155 million, while household income is estimated at between approximately $82 and $100 million. In terms of employment, construction is estimated to generate between 1,390 and 1,680 FTEs over the entire construction period. Table 3.4: Impact of Redevelopment Construction Facility Gross Domestic Product Labour Income Construction Expenditures Multi Ice Sheet Venue Hall D Retrofit Festival Site Agricultural Site Total Note: For NPV calculations of construction a real discount rate of 8% was used. Note: Table figures have been rounded Table 3.5 outlines the economic impact of expenditures related to construction of commercial and residential properties on the Site. The GDP effects of construction are expected to be approximately $150 to nearly $200 million, while household income is estimated at between $96 and $128 million. In terms of employment, construction is estimated to generate between 1,735 and 2,310 FTEs over the construction period Hotel construction cost estimates were based on information sourced from HVS appraisal documents provided by. Construction cost estimates for onsite commercial were taken from Clarke Builder estimates for Mixed Use Commercial provided by. Construction cost estimates for residential development were developed by Nichols based on development details, such as the nature and size of development, provided by. Construction costs for LRT redevelopment are not included in the analysis.

22 20 Table 3.5: Impact of Commercial and Residential Construction Facility Gross Domestic Product Labour Income Construction Expenditures Hotels Commercial/ Residential Total Note: For NPV calculations of construction a real discount rate of 8% was used. Note: Table figures have been rounded It is worth noting that the recent decline in oil prices and associated decline in economic activity has lowered employment in the construction industry across, creating an increased supply of available labour. Current forecasts predict further reductions in employment to 2019, with a steady recovery beginning in Although employment statistics for 2015 have shown continued strong growth in the construction industry in, a number of major construction projects currently underway in the city will likely be completed at or before 2017, including portions of the Blatchford redevelopment, Rogers Place Hockey Arena and the Anthony Henday northeast roadway divide. 14 s economy is not immune to the downturn in economic activity occurring elsewhere in the province, and based on current forecasts there is a strong likelihood that capacity within the construction industry (labour, contractors, etc.) will be available during the anticipated construction phase of redevelopment. Moreover, the redevelopment may employ resources that would otherwise be idle given the anticipated state of the economy Operations Direct Expenditures Under the redevelopment scenario outlined in Section 1.2, direct annual expenditures are estimated at just over $75 million ($ 2015). Table 3.6 outlines the economic impact of those expenditures. Based on published statistics direct annual impact in terms of Gross Domestic Product (GDP), and household income is approximately $57 million and $36 million respectively. 13 Buildforce Canada Construction and Maintenance Looking Forward, : Key Highlights. 14 City of Economic Indicators: Labour Force Report. December Government of. Major Projects.

23 21 Table 3.6: Annual Impact of Total Future Operations Business Unit Direct Expenditures Gross Domestic Product Labour Income Multi Ice Sheet Venue Expo Festival Site Agricultural Site Corporate Total Note: Table figures have been rounded Total (direct, indirect, induced) employment related to expenditures is estimated at nearly 730 FTEs, annually. This is more than double the employment associated with no on site redevelopment. It should be noted that the figures shown in Table 3.6 include the impacts of expenditures that are anticipated to take place in spite of redevelopment (i.e. Expo Centre). As shown in Table 3.7, the expenditures related to the new activities driven by redevelopment are estimated at approximately $38 million and translate to an annual impact in terms of Gross Domestic Product (GDP), and household income of approximately $29 million and $18 million respectively. Table 3.7: Annual Economic Impact of New Future Operations Business Unit Direct Expenditures Gross Domestic Product Labour Income Multi Ice Sheet Venue Expo Festival Site Agricultural Site Corporate Total Note: Table figures have been rounded

24 22 Out of Town Visitor Expenditures As shown in Table 3.8, following the redevelopment of, the increased out of town visitors related to a renovated Rexall Place, Expo Centre, and Hall D in addition to the new Festival Area are estimated to spend an annual average of $170.5 million in the City of, an amount that translates to approximately: $38 million in local GDP and an additional $80 million to the rest of the Province ($118 million, in total); and $22 million in local household income and an additional $48 million to the rest of the Province ($70 million, in total). In terms of employment, the annual economic impact of out of town visitors related to future events is estimated to generate approximately 1,710 FTEs, both in and across the province. Table 3.8: Annual Economic Impact of Out of Town Visitors Related to Total Future Events Event Location Visitor Expenditures Gross Domestic Product Labour Income Multi Ice Sheet Venue Expo Renovated Hall D Festival Area Fair Grounds Total Note: Table figures have been rounded It should be noted that the figures shown in Table 3.8 include the impacts of activities currently taking place elsewhere in but which could relocate to the redeveloped site in order to take advantage of an improved venue and related amenities. As shown in Table 3.9, following the redevelopment of, the increased out of town visitors related to the incremental new events hosted in a renovated Rexall Place, Expo Centre, and Hall D in addition to the new Festival Area are estimated to spend an annual average of $33 million in the City of, an amount that translates to approximately: $8 million in local GDP and an additional $18 million to the rest of the Province (i.e. $26 million, in total); and $5 million in local household income and an additional $11 million to the rest of the Province (i.e. $16 million, in total).

25 23 In terms of employment, the annual incremental economic impact of out of town visitors related to future events is estimated to generate approximately 370 FTEs, both in and across the province. Table 3.9: Annual Economic Impact of Out of Town Visitors Related to New Future Events Event Location Visitor Expenditures Gross Domestic Product Labour Income Rexall/6 Plex Expo Renovated Hall D Festival Area Fair Grounds Total Note: Table figures have been rounded 3.3 Cumulative Impact of Redevelopment In determining the impact of redevelopment, we have also considered the cumulative impact associated with construction and the total operational life of amenities associated with redevelopment. The future impacts are discounted to present value to allow for comparison between expenditures made today and anticipated future activity. Table 3.10 summarizes the preliminary Net Present Value (NPV) calculations related to the future redevelopment of. Real discount rates of 3%, 5%, and 8% were used. Assuming a 20 year operational life for facilities and related activities, the net present value of these activities in the City of is estimated at between $476 and $796 million. When taking into consideration impacts to other parts of, the value rises by an additional $972 million to $1.6 billion. Please note that this number is not purely incremental to the without redevelopment case as it takes into consideration the expenditures related to events on the site and elsewhere in the city that would likely continue in the absence of redevelopment.

26 24 Table 3.10: Total Impact of Future Redevelopment (NPV) Impact Pathway Gross Domestic Product Total 3% Discount Rate Construction Operations Visitor Spending ,283.0 Total , , % Discount Rate Construction Operations Visitor Spending ,005.5 Total , , % Discount Rate Construction Operations Visitor Spending Total ,448.0 Note: For NPV calculations of construction a mid point in the range of construction estimates was used. Note: Table figures have been rounded

27 25 Table 3.11 summarizes the preliminary Net Present Value (NPV) calculations related to the impact of new activities resulting from future redevelopment. Again, a 20 year operational life for facilities and related activities, along with real discount rates of 3%, 5%, and 8%, were used. Based on these assumptions, the net present value of these activities in the City of is estimated at between $228 and $346 million. When taking into consideration impacts to other parts of, the value rises by an additional $456 to $699 million. Table 3.11: Impact of New Activities Following Redevelopment (NPV) Impact Pathway Gross Domestic Product Total 3% Discount Rate Construction Operations Visitor Spending Total , % Discount Rate Construction Operations Visitor Spending Total % Discount Rate Construction Operations Visitor Spending Total Note: For NPV calculations of construction a mid point in the range of construction estimates was used. Note: Table figures have been rounded