EXPANDING THE VANCOUVER CONVENTION AND EXHIBITION CENTRE EXECUTIVE by maclaren1

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									    EXPANDING    VANCOUVER
                        THE
CONVENTION AND EXHIBITION CENTRE
      EXECUTIVE SUMMARY




                       Prepared by:
     VANCOUVER CONVENTION CENTRE EXPANSION TASK FORCE
                       October 2000
 EXPANDING
 THE VANCOUVER                                                    EXECUTIVE SUMMARY
 CONVENTION &
 EXHIBITION CENTRE                                 VANCOUVER CONVENTION CENTRE EXPANSION TASK FORCE


                             “The status quo is not an option.
     Without expansion, Vancouver will not achieve its potential in the North American and
 international convention and trade show marketplace. In addition, the current benefits realized
    by Greater Vancouver’s tourism industry will decline as the VCEC is unable to effectively
compete in an environment of increasing attendance and demands for additional exhibit space.”
KPMG, Expanding the Vancouver Convention and Exhibition Centre, Market Justification and Economic Benefits, February, 2000


1.0       SUMMARY
Expanding the Vancouver Convention & Exhibition Centre (“VCEC”) is an opportunity to build
on the exceptional success of Canada Place as an internationally recognized symbol and the
proven success of the VCEC as an economic generator. It delivers significant benefits to all
stakeholders – to industry and to the citizens of Vancouver, British Columbia and Canada.

Expanding the VCEC comprises:
   •   constructing new facilities on the Burrard Landing site to the west of Canada Place;
   •   renovating the existing facilities at Canada Place; and
   •   linking the two sites to form an integrated convention and exhibition centre.

Expanding the VCEC requires a capital investment of $495 million – expressed in Year 2000 dollars.
The net present value of the benefits of (a) construction; and (b) the first thirty years of expanded
operations are $1.535 billion – expressed in Year 2000 dollars:
    •   Government (tax revenues)
    •       Federal                                           $521 million
    •       Provincial                                        $636 million
    •       Municipal                                         $162 million
    •   Industry (net profit)                                 $216 million
The incremental net benefits of the convention centre expansion to governments and industry
are $1.040 billion ($1.535 billion less $495 million = $1.040 billion). Payback of the entire
investment will take place in 10.7 years.
Expanding the VCEC creates significant employment. Employment impacts are:
   •   construction (person-years of employment)           6,702
   •   operations (full-time, new jobs)                    7,530
The Task Force recommends that expansion be financed as follows:
   •   Tourism Industry                             $90 million (committed)
   •   Federal and Provincial Governments           $405 million (proposed)
The expected annual return on investment is as follows:
   •   Tourism Industry                                       11.5%
   •   Federal Government                            13.5% to 23.6%
   •   Provincial Government                         15.2% to 25.6%
Expanding the VCEC is a low risk investment that makes sound financial sense. The Task Force
strongly recommends that this project proceed without delay.




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2.0     INTRODUCTION
The VCEC and Vancouver have a reputation for excellence in the conventions industry. The
symbol of that excellence is the icon of the five sails of Canada Place. Canada Place first housed
the Canadian pavilion for EXPO 86, the 1986 World Exposition. The federal government selected
the site and design to provide a long-standing legacy for Canadians in the form of a world-class
convention and exhibition centre. As the VCEC, it continues to welcome millions of event
delegates and exhibitors from around the world.

The VCEC has also been extremely successful in economic terms. Each year, VCEC activities
generate $245 million in delegate spending, $73 million in taxes to governments and 3,930 full-
time jobs.

The idea of expansion was first articulated in approximately 1995 when, following an extensive
study and report, KPMG reported that expansion was warranted. Later that year, the Provincial
government began a formal process for expansion with a Call for Expressions of Interest that
concluded four years later with the cancellation of the Portside project, which would have been to
the east of the VCEC.

In cancelling the Portside project on October 5, 1999, (then) Premier Dan Miller recognized that
the need for expansion was very strong, but stated that the province would not consider the
expansion further unless the private sector came forward with a viable alternative.


3.0     VANCOUVER CONVENTION CENTRE EXPANSION TASK FORCE
Following the cancellation, there was widespread agreement throughout the business community
and particularly in the tourism industry that expansion of the convention centre was too crucial to
the economic future of British Columbia not to pursue.

Within days of Premier Miller’s announcement, an industry group comprising PAVCO, Tourism
Vancouver, The Vancouver Board of Trade and the Vancouver Hotel Association formed the
Vancouver Convention Centre Expansion Task Force (“Task Force”) with the express purpose of
bringing convention centre expansion to Vancouver.

The Task Force undertook that it would provide leadership, direction and focus leading to a
workable, industry-driven Business Plan for expansion of the VCEC. The Plan would be prepared
on the premise that funding would be provided by the federal government, provincial government
and industry.

The Task Force agreed that there was no benefit in re-creating the previous selection process that
concluded with the cancellation of Portside. However, there were significant benefits in utilizing
what had been learned from the previous process and the Task Force agreed that it should
consider only those projects that had gone through the extensive industry and public scrutiny of
that process.




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4.0    DUE DILIGENCE
The convention centre expansion represents a significant public/private partnership involving
millions of dollars and high profile in the community. The Task Force was not prepared to
recommend such a large infrastructure project without appropriate due diligence.

The due diligence steps the Task Force undertook were to:
   •   confirm that expansion was warranted;
   •   evaluate the best site and design for expansion, one worthy of Vancouver’s waterfront,
       that enhances the Canada Place icon and is highly functional
   •   evaluate the project and confirm the cost to build the project; and
   •   compile the results and present them in a business plan.

BUSINESS CASE
While there was practical evidence to suggest that expansion was needed, no formal independent
evaluation of the market had taken place since 1995. Therefore, KPMG was retained by the Task
Force to update its 1995 study and report on the advisability of expanding the VCEC.

KPMG strongly recommended expansion in order to:
  •  protect the existing business (and associated economic benefits); and
  •  take advantage of market demand to realize significant incremental economic benefits
     (i.e., in addition to the benefits generated by the existing VCEC) for both industry and
     governments.

Due to size constraints, the VCEC’s reputation is being tarnished. Existing customers are being
forced to go elsewhere because they have outgrown the VCEC and new customers are being
turned away because the VCEC is too small for their needs or space is not available. KPMG
concluded that, if the VCEC was not expanded, VCEC activities and the associated economic
benefits would decline.

In addition to protecting existing business, expansion will generate incremental spending by
delegates of $229 million per year, bring in incremental annual tax revenues of $76 million to
three levels of government and create 7,530 new, full-time jobs.

Given construction costs of $495 million, funded by the tourism industry and the federal and
provincial governments, the incremental benefits create a significant return on investment.


SITE AND DESIGN SELECTION
The Task Force agreed to focus its investigation on those sites that were on the waterfront
adjacent to the existing VCEC. There were a number of solid business reasons for this decision.
    •   Canada Place has become one the world’s most recognized landmarks and has great
        appeal to delegates and meeting planners.
    •   The existing VCEC continues to be an excellent venue for events and will continue to be
        an integral part of the expansion plans.




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    •   Meeting planners told Vancouver marketing personnel that a waterfront location was a
        critical part of the decision to select Vancouver over its competitors and accounted for
        increased business.
    •   A site adjacent to the existing VCEC provides efficiencies both for delegates and
        exhibitors and for management of the VCEC.

Two sites qualified for consideration – the Portside project site to the east of the VCEC and the
“Discovery Place” proposal on the Burrard Landing site owned by Marathon Developments Inc.
(“Marathon”) to the west.

Shortly after the Province cancelled the Portside project, Marathon notified the Province that its
Burrard Landing site was available for convention centre expansion. Marathon was offering the
site as a vendor, not in its role as a developer as it did in 1997. The Province referred Marathon’s
interest to the Task Force.

The Task Force was fortunate in that the Marathon site was still available and the plans for its
Discovery Place proposal on the Burrard Landing site were essentially complete, having been
withdrawn from the previous process shortly before the deadline for submissions in 1997.

Given that:
   •    the Province had just cancelled the Portside project;
   •    the Portside project had been thoroughly investigated and was very well known to
        members of the Task Force;
   •    the Burrard Landing concept had been through the extensive public process as part of the
        Stage I Evaluation of the Vancouver Convention and Exhibition Centre Selection
        Process;
   •    the Burrard Landing site was on the waterfront to the west of the VCEC; and
   •    the Burrard Landing concept was essentially complete

the Task Force agreed that it should first focus its attention on Burrard Landing concept.

Pacific Liaicon and Associates Inc. (“PLA”), recognized for their extensive work on major
projects including the Vancouver International Airport expansion, conducted an assessment. The
assessment was conducted in close liaison with PAVCO, who are responsible for managing the
VCEC.

LMN Architects (“LMN”) were engaged to modify and update the original design they had
prepared for Marathon. LMN are recognized experts in convention centre design having
participated in over 40 convention centre designs throughout the world and won numerous design
competitions.

George Loschky of LMN described the site as “the most dramatic and attractive location we
have ever worked with”. LMN worked with VCEC management and staff, and City of Vancouver
planning staff to arrive at a final design concept that is spectacular, yet functional and
complementary to the sails of Canada Place.




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EXHIBITION CENTRE                          VANCOUVER CONVENTION CENTRE EXPANSION TASK FORCE

The result of the analysis was that the Task Force unanimously recommended the Burrard
Landing site and design concept as its preferred choice for the convention centre expansion.

PROJECT COSTING AND TECHNICAL EVALUATION
PLA provided the Task Force with a capital cost estimate and a technical evaluation of the
project. PLA worked with PCL Constructors (“PCL”) to prepare the capital cost estimates. PCL
has significant convention centre experience in Canada and the United States. In addition, PCL
recently worked on major projects in western Canada/USA, including the Vancouver
International Airport expansions. PCL also provided the capital cost estimates for the cancelled
Portside project and the Discovery Place concept originally presented by Marathon.

When PLA presented its original capital cost estimates, it expressed confidence in the level of the
cost estimate for the convention centre building, parkade, plaza and infrastructure. However, it
expressed concern about its ability to control cost and schedule if site preparation and foundation
installation methodology originally proposed for Discovery Place were to be implemented.

On PLA's recommendation, the Task Force decided to identify and confirm a site preparation and
foundation installation approach that would provide the same level of confidence in the cost and
schedule of the site preparation and foundation components as in the building components. The
Task Force funded a detailed examination of this component of the project, in order to confirm
the capital cost estimate and project schedule.

PLA concluded that the cost of constructing the expansion will not exceed $495 million.

BUSINESS PLAN
The purpose of the Business Plan was to:
   •   provide accurate and detailed information for the financial participants in the project; and
   •   provide a blueprint for the controlled and business-like construction and implementation
       of the expansion.

The Task Force first approved a Business Plan Outline, which was forwarded to senior officials in
the provincial and federal governments for comment. In preparing the Business Plan, the Task
Force undertook extensive due diligence, including meetings and consultation with industry
representatives, municipal, provincial and federal politicians and staff and professional advisors.


5.0     WHAT IS THE PROJECT?
As stated previously, the convention centre expansion project comprises:
    •   constructing new facilities on the Burrard Landing site to the west of Canada Place;
    •   renovating the existing facilities at Canada Place; and
    •   linking the two sites to form an integrated convention and exhibition centre.

SIZE
The gross area of the convention centre expansion will be almost 1.2 million square feet. The
major components are the Burrard Landing facility, parkade, marina support, retail and loading
bus staging.




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Expansion will create an additional 395,000 square feet of exhibit space, meeting space, ballroom
space and a signature room. The VCEC currently has 134,000 square feet of function space,
bringing the total function space available to 529,000 square feet. A summary of the function
space is set out in Exhibit E.1.

FUNCTION
The site and design address the top priorities of event organizers – building access, arrangement
of spaces, adjacencies, traffic separation, loading efficiency and flexibility of spaces. It also
addresses a number of deficiencies in the existing facility that have been ongoing issues with
clients. These include limited access, loading facilities and overlapping traffic flows.

EXHIBIT E.1
FUNCTION SPACE SUMMARY (Square Feet)
FUNCTION SPACE             EXPANSION                        EXISTING        COMBINED
                                                                             FACILITY
Exhibit Space                                 250,000         91,000          341,000
Meeting Space                                  83,000         26,000          109,000
Ballroom Space                                 50,000         17,000           67,000
Signature Room                                 12,000              –           12,000
Lecture Theatre                                24,000              –           24,000
TOTAL                                         419,000        134,000          553,000

Source: Pacific Liaicon and Associates Inc.

INTEGRATION WITH THE LOCAL ENVIRONMENT
The low profile and horizontal orientation of the building design allows for sweeping views from
Stanley Park to the sails at Canada Place. A feature of the design is a large plaza at the west end
of the development that will be for public use, again offering excellent views and visual access to
the water.

The site offers direct linkages to the downtown core with access to downtown hotels, restaurants
and retail areas that represent the needs and interests of convention delegates. The natural drop in
elevation from the level of the existing street grid to the harbour front allows for the construction
of the exhibition hall below city grade where it will not impede city views. It also enables the
development of a significant street level public plaza, which provides direct access to the harbour
edge from the downtown core.

IMPACT ON THE PROPOSED ARTS CENTRE FOR BURRARD LANDING
The Business Plan assumes that an arts centre originally proposed as part of the development of
the Burrard Landing site is relocated. The Task Force supports the establishment of an arts centre
and is working with the City to resolve this issue.


6.0       WHAT IS THE COST OF THE CONVENTION CENTRE EXPANSION?
The Task Force engaged PLA, at a cost of $550,000 including the site preparation and foundation
installation approach study, to prepare a Project Evaluation and Cost Report. PLA confirms that
the capital cost of the convention centre expansion will not exceed $495 million.




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 THE VANCOUVER                                                     EXECUTIVE SUMMARY
 CONVENTION &
 EXHIBITION CENTRE                                   VANCOUVER CONVENTION CENTRE EXPANSION TASK FORCE

The project cost includes the cost of the land, development of the expansion and renovation to the
existing VCEC. A more detailed schedule of costs is set out in Exhibit E.2.

The project will take approximately five years to complete including renovating the existing
VCEC and linking the two sites.

EXHIBIT E.2
PRELIMINARY CAPITAL COST OF CONVENTION CENTRE EXPANSION BY COST AREA (YEAR 2000 $)
COST AREA
Hard Construction Costs
        New Convention Facility                                       $ 233,500,000
        Parkade                                                           12,300,000
        Plaza                                                             10,100,000
        Infrastructure                                                    10,000,000
        Site Preparation/Foundations                                      58,100,000
        Renovations and linkage to existing VCEC                          15,000,000
        Total Hard Construction Costs                                   339,000,000
Soft Costs, Land & Interest During Construction                          112,000,000
Contingency                                                               45,000,000
TOTAL CAPITAL COST                                                     $ 495,000,000
Note. Soft Costs include architect, engineering and project management fees.
Source: Pacific Liaicon and Associates Inc.

OPERATING COSTS AND REVENUES
The VCEC currently generates a modest operating profit and, while there is demonstrated
demand for an expanded convention centre immediately, it will take a few years for the expanded
convention centre to absorb the increased capacity and return to normalized operations. Until
then, the expanded VCEC will incur a modest operating loss and require funding assistance.
Exhibit E.3 summarizes the projected net income statement for the years 2005 to 2009.

EXHIBIT E.3
PROFORMA NET INCOME STATEMENTS ($000’s)
EXPANDED VCEC
                            Current               2005           2006             2007           2008           2009
                            $    %            $       %      $       %        $       %      $       %      $       %

 Revenue                   14,000    100 18,941       100 19,651      100   20,433    100   21,437   100   22,259 100
 Direct Expenses            7,700     55 9,991         53 10,373       53   10,818     53   11,380    53   11,845 53
 Gross Margin               6,300     45 8,950         47 9,278        47    9,615     47   10,057    47   10,414 47
 Facility Expenses          6,100     44 9,817         52 9,888        50   10,033     49   10,033    47   10,033 45
 Net Income/(Loss)            200      1  (867)        -5  (610)       -3    (418)     -2       24     0      381   2

Note: There is no provision for depreciation or amortization in the statements.
Source: VCEC


In addition to the operating costs of operating the expanded VCEC, an additional investment of
$3 million per year will be required for marketing the expanded facility. This investment should
commence from the announcement of the expansion through to the return to normalized
operations.

The site also provides revenue opportunities for parking, marina and retail operations. Total net
revenues from these sources is estimated at $1.1 million dollars per year expressed in Year 2000




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dollars. It is assumed that the parking, marina and retail would begin to produce income
coinciding with the opening of the convention centre expansion in 2005.


7.0      WHAT ARE THE BENEFITS OF THE CONVENTION CENTRE
         EXPANSION?
Expanding the VCEC is an astute business decision – for industry and for governments – and is
clearly in the public interest. It builds on the success of the VCEC and provides an attractive
return on investment for its investors. Benefits are created from delegate and exhibitor spending
at VCEC-hosted conventions and trade shows. This creates revenues for business and taxes for
governments.

WHO FUNDS THE BENEFITS?
What makes this investment particularly attractive is that the profits to industry and revenues to
governments are generated by delegates who are attending VCEC-hosted conventions and trade
shows and who are predominantly from outside BC and largely from outside Canada. In essence,
these delegates are injecting foreign capital into our economy and creating these significant
benefits to industry and governments.

TAXPAYERS
The tax revenues generated for government will be available to fund government programs such
as health care, education and infrastructure.

According to BC STATS, the statistical agency of the BC Ministry of Finance and Corporate
Relations, construction of the expansion will generate $88 million in incremental taxes to the
three levels of government and operations will generate $76 million per year in incremental
revenues to the governments. (From the BC STATS’ report, economic impacts are measured as
the total of direct, indirect and the low range of induced impacts).

In addition, construction of the expansion will create 6,702 person years of employment and
operations will create 7,530 new, full-time jobs.

EXHIBIT E.4
ECONOMIC IMPACTS TO GOVERNMENTS
CONSTRUCTION AND ANNUAL OPERATING IMPACTS
NOMINAL DOLLARS ($millions)
Taxes                                                   Construction        Operations (Annually)
Federal                                                       $ 44.8                       $ 29.4
Provincial                                                      36.2                         36.8
Municipal                                                        6.8                          9.5
Total                                                         $ 87.8                       $ 75.7

Source: BC STATS, BC Input Output Model




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The net present value of the taxes generated to governments as a result of expansion and the first
thirty years of operations of the expanded VCEC are summarized in Exhibit E.5.

EXHIBIT E.5
ECONOMIC IMPACTS TO GOVERNMENTS
CONSTRUCTION AND TOTAL OPERATING IMPACTS
NET PRESENT VALUE ($millions)
                          Construction   Operations                                          Total           %
Federal                           $ 37       $ 484                                         $   521         40%
Provincial                          30          606                                            636         48%
Municipal                            6          157                                            162         12%
Total                             $ 73       $1,246                                        $ 1,319        100%

All net present values are based on a discount rate of 6.5% and are stated in Year 2000 dollars.

TOURISM INDUSTRY
The tourism industry is a major beneficiary. As a result of delegate and exhibitor spending,
expansion will generate:
   •   incremental annual revenues of $229 million, creating an estimated $12.5 million in net
       profits for businesses such as hotel operators, restaurants, attractions, taxi and tour bus
       operators and retail outlets; and
   •   7,530 full-time jobs.

Exhibit E.6 summarizes the annual impact of delegate and exhibitor spending on industry.

EXHIBIT E.6
ANNUAL ECONOMIC IMPACTS – TOURISM INDUSTRY
DELEGATE AND EXHIBITOR SPENDING BY CATEGORY($millions)
                                                                                   Revenues          Net Profits
Accommodation                                                                        $ 83.3
Food & Beverage                                                                         69.3
Local Transportation                                                                    13.5
Retail                                                                                  32.9
Recreation                                                                               7.5
Other                                                                                   22.3
TOTAL                                                                                $ 228.9             $ 12.5*
* Net Profit was calculated using reference data obtained from Statistics Canada

Source: KPMG, modified to show 2009 as normalized year, BC STATS, BCIOM


Over the first thirty years of the operations of the expanded convention centre, delegate and
exhibitor spending will generate sales of $15.3 billion and net profits of $835 million for the
tourism industry.

The net present value of the profits for the tourism industry over the first thirty years of operations is
$208 million.




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CONSTRUCTION INDUSTRY
The construction industry will also benefit from the expansion project. It is estimated that the
expansion will generate:
   •   $10 million in net profits to the construction industry; and
   •   6,702 person-years of employment.


8.0     WHO SHOULD FINANCE CONVENTION CENTRE EXPANSION?
It is the view of the Task Force that those who benefit from expansion should contribute to its
development. Industry and governments are significant beneficiaries of the construction and
operation of the convention centre expansion. An underlying premise of the Task Force approach
is that expansion should not proceed without the significant financial participation of industry and
the two senior levels of government.

The Task Force believes that there are positive reasons for the federal government, provincial
government and industry to participate in funding the convention centre expansion. The
convention centre expansion project is a well-defined project with very specific costs and
economic benefits that have been quantified for all proposed financial participants.

Industry has always agreed to participate in a significant financial way, with the proviso that
industry’s investment would not endanger industry’s destination marketing programs.

While not being requested to contribute financially to the convention centre expansion, it is
anticipated that the City of Vancouver will provide benefits during the construction and operation
of the convention centre expansion rather than direct financial contributions.


9.0     HOW MUCH SHOULD EACH INVESTOR CONTRIBUTE?
The Task Force proposes that the tourism industry contributes $90 million and that the federal
and provincial governments contribute the remaining $405 million.

TOURISM INDUSTRY CONTRIBUTION
The tourism industry proposes to fund its $90 million contribution by borrowing against the
proceeds of the voluntary hotel tax collected in Vancouver.

The voluntary hotel tax was initiated by the private sector as a fair and effective collection
mechanism to fund tourism marketing and initiatives. In 1988 the tourism industry, together with
the City of Vancouver, approached the provincial government to implement a voluntary
incremental 2% levy on the room tax for hotel, motel and other accommodation in the City. The
Additional Tax regulation is tied to the Hotel Room Tax Act. The voluntary hotel tax has been in
place in Vancouver since 1988 and has been implemented in a number of other municipalities
around B.C.




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The tourism industry proposes that of the $90 million contribution:
   •   $33 million (net present value) will come from the operating funds of Tourism
       Vancouver (who currently receives the proceeds of the voluntary hotel tax for destination
       marketing); and
   •   $57 million will come from an increase in the voluntary hotel tax in Vancouver from 2%
       to 2.5%. (The current ceiling on the amount of the tax is 2%.)

Provincial guidelines now state that a majority of the hotels and a majority of the hotel rooms in
the municipality must agree to the implementation of the hotel tax before it will be considered by
the Province. At the present time, the Vancouver Hotel Association is working with the
Vancouver accommodation sector to gain the support necessary. The Vancouver Hotel
Association expects that the required majority will be secured in the near future. In addition, the
City will be required to approve this arrangement.

After approval by the accommodation sector, the City and the tourism industry will need to apply
to the Province for a .5% increase in the room tax rate.

FEDERAL AND PROVINCIAL CONTRIBUTIONS
Both the Federal Government of Canada and the Provincial Government of British Columbia
have a long history of successful involvement with the Vancouver Convention & Exhibition
Centre.

The international icon created by the VCEC’s sails on Vancouver’s waterfront first housed the
Canadian pavilion for EXPO 86, the 1986 World Exposition. The federal government selected the
site and design to provide a long-standing legacy for Canadians in the form of a world-class
convention and exhibition centre. That investment in infrastructure can be looked upon with
significant pride as it gave cause for community pride and stimulated a surge in tourism business
that has yielded a financial return to Canadians many times over the original investment. Canada
Place stands as an important symbol of federal government involvement in British Columbia.

2000 marks the thirteenth year that the British Columbia government has had responsibility for
management of the VCEC. Managed by the Provincial Crown Corporation, PavCo, the VCEC
has experienced growth and success that now demands additional space. It was the provincial
government that launched the process to arrive at the best means of expanding the existing
convention and exhibition facilities.

With the cancellation of the Portside project, former Premier Miller charged industry with
responsibility for developing a viable alternative. The assumption remains that the provincial
government will make a significant financial contribution to the expansion, in keeping with the
sizeable revenue stream that expansion will provide for government.

While the federal government has at no time made a financial commitment to expansion, it is
assumed the federal government will consider the project an expansion of the highly successful
Canadian icon they first established, Canada Place. The demonstrable significance of the revenue
stream to the federal government will show government involvement to be an excellent
investment in the expansion of the previously established infrastructure. Finally, the Honourable
David Anderson, the senior Minister for British Columbia, requested that a Business Plan be




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prepared to provide a careful review of the investment opportunity. The Business Plan is now
available for review and confirms the business case for proceeding with this project.

The Task Force makes no assumptions about the vehicles government will utilize to contribute to
the expansion. Further, in recognition of the ongoing nature of financial relationships between
federal and provincial levels of government, the Task Force assumes the two levels of
government will negotiate the contribution each will make to the project. The tourism industry
representatives propose to work with the federal and provincial governments to expedite a
mutually satisfactory funding agreement between the two levels of government.

For illustrative purposes, Exhibit E.7 sets out an investment range representing one-third to two-
thirds of the $405 million. Benefits to industry and to the municipal governments are also shown.
The returns to governments are impressive. The annual returns range from a low of 13.5% to a
high of 25.6%.
EXHIBIT E.7
MEASURES OF ECONOMIC PERFORMANCE
($millions)
                                                                       Low end      Mid-point    High end
FEDERAL GOVERNMENT
   Investment (millions)                                                 $ 135.0       $ 202.5     $ 270.0
   Annual Return 2009 ($millions)                                        $ 29.43       $ 29.43     $ 29.43
   Net Cashflow
                      Nominal Value (millions)                           $ 1,866       $ 1,798     $ 1,731
                      Net Present Value (millions)                         $ 386         $ 319       $ 251
   Annual Return on Investment (%)                                        23.6%         16.9%       13.5%
   Payback (years)                                                           8.4          10.6        12.5

PROVINCIAL GOVERNMENT
   Investment ($millions)                                                $ 135.0       $ 202.5     $ 270.0
   Annual Return 2009 (millions)                                         $ 36.82       $ 36.82     $ 36.82
   Net Cashflow
                      Nominal Value (millions)                           $ 2,348       $ 2,280       2,213
                      Net Present Value (millions)                         $ 501         $ 433       $ 366
   Annual Return on Investment (%)                                        25.6%         18.7%       15.2%
   Payback (years)                                                           6.8           8.4         9.8

MUNICIPAL GOVERNMENTS
   Annual Return 2009 ($millions)                                          $ 9.53       $ 9.53      $ 9.53
   Net Cashflow
                    Nominal Value (millions)                               $ 633         $ 633        $633
                    Net Present Value (millions)                            $157          $157        $157

TOURISM INDUSTRY
   Investment                                                             $ 90.0        $ 90.0      $ 90.0
   Annual return (normalized year)                                       $ 12.51       $ 12.51     $ 12.51
   Net Profits
                      Nominal Value (millions)                          $ 834.84      $ 834.84    $ 834.84
                      Net Present Value (millions)                       $ 208.10     $ 208.10     $ 208.10
   Payback (years)                                                            7.9          8.9          9.9
   Annual return on investment (%)                                         11.5%        11.5%        11.5%




                                                                                                        xii
EXPANDING
THE VANCOUVER                                         EXECUTIVE SUMMARY
CONVENTION &
EXHIBITION CENTRE                        VANCOUVER CONVENTION CENTRE EXPANSION TASK FORCE

In summary, and as shown on Exhibit E.8, the VCEC expansion requires an investment of $495
million, generates incremental net profits and taxes of $1.535 billion – creating a net benefit of
$1.040 billion. Expansion has a significant employment impact. Expansion is responsible for
creating 6,702 person-years of construction jobs and 7,530 new, full-time jobs during operations.
EXHIBIT E.8
ESTIMATED PROJECT INCREMENTAL AGGREGATE CONTRIBUTION 2001-2034 (NPV $MILLIONS)
                                      Construction    Operations            Total
Tax Revenues
  Federal Government                          $ 37          $ 484            $ 521
  Provincial Government                         30            606              636
  Municipal Government                           6            157              162
Industry Profits                                 8            208              216
TOTAL REVENUES                                  81          1,454            1,535
INVESTMENT COST                                                              (495)
NET CONTRIBUTION                                                           $ 1,040

EMPLOYMENT IMPACTS                                        6,702              7,530




10.0 WHAT ARE THE RISKS?
The convention centre expansion is a major project involving construction bridging water and
land and as such, involves the usual risks associated with such projects. However, the Task Force
has addressed these risks through its due diligence and, specifically, by obtaining a detailed
technical plan and cost estimates which include appropriate contingencies.

On a theoretical basis, there is a risk that the market for conventions and trade shows may not be
as strong in the future as it has been in the past. However, all studies and indications support the
view that the market will remain strong and Vancouver will continue as a premier destination.


11.0 WHAT ARE THE RISKS OF NOT PROCEEDING?
The existing VCEC is a good facility. However, the market has outgrown the ability of the VCEC
to service its clients.

The KPMG study reported that “… the size of the facility is causing:
   •  existing users to outgrow the building;
   •  potential users to bypass the VCEC in favour of larger facilities; and
   •  VCEC management to decline business that could be accommodated in parallel with
      another group were the VCEC facilities suitable for hosting multiple events.”

Not proceeding puts at risk the current $245 million spent annually by delegate at VCEC-hosted
events. This spending accounts for $12.5 million in profits for the tourism industry, $73 million
in tax revenues for governments annually and 3,930 jobs.

The KPMG report was conclusive on this issue. “The status quo is not an option. … the current
benefits realized by Greater Vancouver’s tourism industry will decline as the VCEC is unable




                                                                                                 xiii
EXPANDING
THE VANCOUVER                                         EXECUTIVE SUMMARY
CONVENTION &
EXHIBITION CENTRE                         VANCOUVER CONVENTION CENTRE EXPANSION TASK FORCE

to effectively compete in an environment of increasing attendance and demands for additional
exhibit space.”

Time is of the essence. There is a great risk that the Marathon property will be lost for use as a
convention centre if this project does not proceed expeditiously. The Burrard Landing site Task
Force has been secured only for enough time to secure the project funding. If funding approval is
not obtained in the near future, the site will revert to Marathon and likely be sold for construction
of a hotel or office tower. It will not be available for consideration as a convention centre.


12.0 GOVERNANCE AND MANAGEMENT
The VCEC continues to be a well-run facility with a long history of success. Building on that
success, it is proposed that the current operators would continue to manage the expanded facility.

In addition, the tourism industry, and its ability to market the City and provide the tourism
products and services, has an outstanding international reputation and is often looked to by other
cities as a model of excellence.

At the request of the Task Force, The Vancouver Board of Trade prepared a report of its
recommendations for governance of the expanded convention centre. The consensus was that
governance, marketing and operation of the existing VCEC appear to be very good.

The Board of Trade recommended a governance model that provides an appropriate balance of
industry and government representation. The Task Force endorsed the recommendations of The
Board of Trade.


13.0 CONCLUSION
The expansion of the VCEC is a low risk investment that makes sound financial sense. It delivers
significant benefits to all stakeholders – to industry and to the citizens of Vancouver, British
Columbia and Canada. It enhances the equity of Canada Place and entrenches tourism and the
VCEC’s ongoing role in BC’s future economy.

The Task Force strongly recommends that this project proceed without delay.




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