CITY CLERK Clause embodied in Report No. 2 of the, as adopted by the Council of the City of Toronto at its meeting held on February 13, 14 and 15, 2002. 15 Lorraine Kimsa Theatre for Young People, Line of Credit Guarantee (All Wards) (City Council on February 13, 14 and 15, 2002, adopted this Clause, without amendment.) The recommends the adoption of the Recommendation of the Economic Development and Parks Committee embodied in the communication (January 28, 2002) from the City Clerk, subject to amending Recommendation No. (1) contained in the report (January 2, 2002) from the Commissioner of Economic Development, Culture and Tourism by adding thereto the following words and that the Chief Financial Officer and Treasurer be requested to negotiate adequate safeguards with the bank to ensure that the City is promptly advised in the event of ongoing default or delay in the payment of interest;, so that the Recommendations embodied in the aforementioned report now read as follows: (1) authority be granted to enter into an agreement with the bank for Lorraine Kimsa Theatre for Young People for a guarantee of a line of credit in the amount of $250,000.00 (inclusive of all interest payable by Lorraine Kimsa Theatre to the bank), for the period March 1, 2002 to February 28, 2005, and that such guarantee be on terms and conditions satisfactory to the City Solicitor, the Acting Treasurer, and the Commissioner of Economic Development, Culture and Tourism; and that the Chief Financial Officer and Treasurer be requested to negotiate adequate safeguards with the bank to ensure that the City is promptly advised in the event of ongoing default or delay in the payment of interest; (2) authority be granted to enter into an agreement with Lorraine Kimsa Theatre for Young People with respect to the line of credit guarantee on terms and conditions approved by the City Solicitor, the Acting Treasurer and the Commissioner of Economic Development, Culture and Tourism; (3) authority be granted to enter into a tri-party agreement with Lorraine Kimsa Theatre for Young People and the bank for Lorraine Kimsa Theatre for Young People with respect to the line of credit guarantee, on terms and conditions approved by the City Solicitor, the Acting Treasurer, and the Commissioner of Economic Development, Culture and Tourism;
2 (4) the guarantee of the line of credit is deemed to be in the interest of the municipality; (5) the report be forwarded to for consideration; and (6) the appropriate City officials be authorized and directed to take the necessary action to give effect thereto. The submits the following communication (January 28, 2002) from the City Clerk: Recommendation: The Economic Development and Parks Committee recommended to the Policy and Finance Committee, and Council, the adoption of the report (January 2, 2002) from the Commissioner of Economic Development, Culture and Tourism. Background: The Economic Development and Parks Committee at its meeting held on January 21 and January 25, 2002, had before it a report (January 2, 2002) from the Commissioner of Economic Development, Culture and Tourism, requesting approval for an extension of the guarantee of a line of credit for the Lorraine Kimsa Theatre; and recommending that: (1) authority be granted to enter into an agreement with the bank for Lorraine Kimsa Theatre for Young People for a guarantee of a line of credit in the amount of $250,000.00 (inclusive of all interest payable by Lorraine Kimsa Theatre to the bank), for the period March 1, 2002 to February 28, 2005, and that such guarantee be on terms and conditions satisfactory to the City Solicitor, the Acting Treasurer, and the Commissioner of Economic Development, Culture and Tourism; (2) authority be granted to enter into an agreement with Lorraine Kimsa Theatre for Young People with respect to the line of credit guarantee on terms and conditions approved by the City Solicitor, the Acting Treasurer and the Commissioner of Economic Development, Culture and Tourism; (3) authority be granted to enter into a tri-party agreement with Lorraine Kimsa Theatre for Young People and the bank for Lorraine Kimsa Theatre for Young People with respect to the line of credit guarantee, on terms and conditions approved by the City Solicitor, the Acting Treasurer, and the Commissioner of Economic Development, Culture and Tourism; (4) the guarantee of the line of credit is deemed to be in the interest of the municipality; (5) the report be forwarded to the for consideration; and
3 (6) the appropriate City officials be authorized and directed to take the necessary action to give effect thereto. Purpose: (Report dated January 2, 2002, addressed to the Economic Development and Parks Committee from the Commissioner of Economic Development, Culture and Tourism) This report seeks approval for an extension of the guarantee of a line of credit for the Lorraine Kimsa Theatre for Young People (formerly Young People s Theatre), in the amount of $250,000.00. Financial Implications and Impact Statement: Issuance of a line of credit guarantee is considered a financial commitment of the City. However, there is no direct cost to the City for providing this guarantee unless the organization defaults on its obligation and the City cannot recover any funds from them. The Acting Treasurer has certified that the renewal of the guarantee commitment of $250,000.00 is within the updated Debt and Financial Obligation Limit of the City, and has reviewed this report and concurs with the financial impact statement. Recommendations: It is recommended that: (1) authority be granted to enter into an agreement with the bank for Lorraine Kimsa Theatre for Young People for a guarantee of a line of credit in the amount of $250,000.00 (inclusive of all interest payable by Lorraine Kimsa Theatre to the bank), for the period March 1, 2002 to February 28, 2005, and that such guarantee be on terms and conditions satisfactory to the City Solicitor, the Acting Treasurer, and the Commissioner of Economic Development, Culture and Tourism; (2) authority be granted to enter into an agreement with Lorraine Kimsa Theatre for Young People with respect to the line of credit guarantee on terms and conditions approved by the City Solicitor, the Acting Treasurer and the Commissioner of Economic Development, Culture and Tourism; (3) authority be granted to enter into a tri-party agreement with Lorraine Kimsa Theatre for Young People and the bank for Lorraine Kimsa Theatre for Young People with respect to the line of credit guarantee, on terms and conditions approved by the City Solicitor, the Acting Treasurer, and the Commissioner of Economic Development, Culture and Tourism;
4 (4) the guarantee of the line of credit is deemed to be in the interest of the municipality; (5) the report be forwarded to for consideration; and (6) the appropriate City officials be authorized and directed to take the necessary action to give effect thereto. Background: Lorraine Kimsa Theatre for Young People (LKTYP, formerly Young People s Theatre) was founded in 1966 and is the second largest not-for-profit theatre in Toronto, as well as the first and largest professional theatre for young audiences in Canada, providing touring productions to Toronto elementary and secondary schools. The activities of the organization include theatrical productions for family and school audiences, educational outreach programs that include subsidizing the theatrical experience to disadvantaged children, teacher training workshops, a year-round Drama School in several locations in the Greater Toronto Area, and co-op student placements and apprenticeships. When a non-profit cultural organization requests a credit facility from a financial institution, there may be a requirement from the lender to obtain a guarantee. Since a portion of the LKTYP s funding consists of a grant from Council, the City may be requested to provide a guarantee to the lender that it will cover any losses arising from the arrangement. There is no direct cost to the City for providing this guarantee unless the organization defaults on its obligation and the City cannot recover any funds from them. LKTYP has received a line of credit guarantee from the municipal level of government since 1990, with the last guarantee from the City of Toronto covering a three-year period that ended on October 31, 2001. It has never defaulted on the guarantee during this 11-year period. City Council at its meeting of March 6, 7 and 8, 2001, adopted, Clause No. 3 of Report No. 2 of the, establishing the Policy of Capital Loan and Line of Credit Guarantees for cultural and community organizations that have a direct financial relationship with the City of Toronto. Comments: Celebrating its 35th anniversary this year, LKTYP is an important cultural organization for the City of Toronto, reaching an audience of about 75,000 through its annual programming. The company employs 24 full-time staff, 109 part-time staff and contract staff and has attracted 55 volunteers. LKTYP s 2000/2001 operating revenues totalled $2,882,546.00 at fiscal year-end. Its annual operating grant from the City of Toronto through the Toronto Arts Council is $290,000.00 or 10 percent of total revenues. Other governments support for the operations totalled $581,015.00. The company generated $1,437,183.00 in earned revenue and $574,348.00 in donations, sponsorships and other private sector revenue. According to its audited financial statements for the year ended June 30, 2001, it shows an operating surplus of $42,785.00 for 2000/2001. It has demonstrated financial vitality and is capable of payments taken out on the proposed line of credit.
5 LKTYP has secured a substantial gift that will, over time, provide significant financial stability to the theatre. Mr. Kevin Kimsa has made a donation of $1.5 million, in honour of his mother, Lorraine Kimsa, and in acknowledgement of this gift Young Peoples Theatre has been renamed the Lorraine Kimsa Theatre for Young People for a period of ten years. This gift is being paid in three annual installments, starting in June 2001. In addition to its annual deficit reduction plan, the Board of Directors has designated a special committee to oversee the management of the Kimsa gift and other significant donations, with the intention to fully address its accumulated operating deficit of $436,185.00 by the 2003 fiscal year, and to ensure long-term financial stability. Due to the production schedules, it is necessary for LKTYP to incur up front expenses well in advance of matching revenues from public and corporate funding sources, and from ticket sales. The requested guarantee for a line of credit will provide the necessary assistance to meet short-term cash flow requirements. Although LKTYP has demonstrated sound fiscal management system and capability, it has been advised by its bank that, being a non-profit organization, a guarantor is required to continue to secure a credit line of $250,000.00. LKTYP has demonstrated the ability to manage previous guarantees, and satisfies Council s Policy for Capital Loan and Line of Credit Guarantees. The proposed extension of the City s guarantee of LKTYP s line of credit would alleviate a cash flow crunch. LKTYP is required to pay the interest and principal on the credit line utilized throughout the term. The bank is willing to continue LKTYP s line of credit in conjunction with the City s guarantee. There is no financial impact on the City unless the organization is unable to repay the credit line. The Acting Treasurer concurs with the financial aspects of this report and the City Solicitor is satisfied with the legal requirements. It is recommended that authority be granted to enter into a tri-party agreement with the bank for Lorraine Kimsa Theatre for Young People, and the Lorraine Kimsa Theatre for Young People for a guarantee of a line of credit in the amount of $250,000.00 (inclusive of all interest payable by Lorraine Kimsa Theatre to the bank), for the period March 1, 2002 to February 28, 2005, and that such guarantee be on terms and conditions satisfactory to the City Solicitor and the Acting Treasurer. It is further recommended that authority be granted to enter into an agreement with Lorraine Kimsa Theatre for Young People with respect to the line of credit guarantee on terms and conditions approved by the City Solicitor, the Acting Treasurer and the Commissioner of Economic Development, Culture and Tourism. Conclusion: The City of Toronto, as the second largest theatre centre in the North America and third largest English-speaking theatre centre in the world, derives considerable benefit from the presence of the not-for-profit theatre companies, both in terms of quality of life and economic impact. LKTYP has demonstrated artistic excellence, benefit for school-aged children and the larger community, and sound financial management system. The recommended guarantee of the line of credit is deemed to be in the interest of the City of Toronto.
6 Contact Name: Ms. Rita Davies, Managing Director of Culture, Tel.: (416) 397-5323, Fax: (416) 395-0278; E-mail: rdavies@city.toronto.on.ca.