Date:September 18, 1998
To:Corporate Services Committee
From:Commissioner, Economic Development, Culture and Tourism
Subject:Line of Credit Guarantee - Theatre Passe Muraille
Purpose:
This report seeks approval for an extension of the former Metropolitan Toronto's guarantee of
a line of credit for Theatre Passe Muraille, in the amount of $140,000.00. This is reduced from
the amount of the current guarantee of $150,000.00.
Funding Sources, Financial Implications and Impact Statement:
Issuance of a line of credit guarantee is considered a financial commitment of the City. A
commitment of $140,000.00 is within the updated Debt and Financial Obligation Limit of the
City of Toronto.
Recommendations:
It is recommended that:
(1)authority be granted to enter into an agreement with Theatre Passe Muraille's bank for a
guarantee of the line of credit in the amount of $140,000.00 for the period from January 1,
1999, to December 31, 2001, on terms and conditions satisfactory to the Solicitor and Chief
Financial Officer and Treasurer;
(2)authority be granted to enter into an agreement with Theatre Passe Muraille with respect to
the line of credit guarantee on terms and conditions approved by the Solicitor, the Chief
Financial Officer and Treasurer and the Commissioner of Economic Development, Culture
and Tourism, including the taking and registration of any security interest against the assets
and property of Theatre Passe Muraille as considered appropriate by those Metropolitan
officials in order to protect the interests of the City of Toronto; and
(3)the appropriate officials be authorized to take the necessary action to give effect thereto.
Council Reference/Background/History:
Theatre Passe Muraille (TPM) was founded in 1968 as one of the first alternative theatres in
Toronto and Canada. The company evolved from its original setting within Rochdale College
in Toronto with a mandate to create a distinctly Canadian voice in theatre. It is now housed in
a self-owned facility with a 220-seat mainstage and 65-seat smaller stage at 16 Ryerson
Avenue, in the vicinity of Queen and Bathurst Streets.
Now in its thirty-first season of operation, TPM celebrates the creation of over 300 plays and
continues to be a leader in the theatre community. It continues to provide innovative,
challenging drama, reaching about 22,000 audience members annually while employing 18
staff and 60 contract personnel.
TPM's 1997/98 operating revenues totalled $850,750.00 at fiscal year-end, June 30, 1998. Its
combined annual operating grant from the former City of Toronto and former Metropolitan
Toronto is $132,400.00 or 15.6 per cent. of total revenues. Other governments' support for the
operations totalled $327,175.00. The company generated $297,109.00 in earned revenue and
$56,600.00 in donations, sponsorships and other private sector revenue. In addition, a
philanthropic gift of $50,000.00 was provided to the group and has been committed to next
year's operations.
Comments and/or Discussion and/or Justification:
Municipal History of Line of Credit Guarantees:
The former Metropolitan Toronto's activity in the area of line of credit guarantees to cultural
organizations was relatively limited. Since 1990, three theatre companies, the Canadian Stage
Company, Theatre Passe Muraille and Young People's Theatre were recipients of such
guarantees. To date, none have defaulted upon loans during the course of their agreements
with Metropolitan Toronto, which through amalgamation have now become agreements with
the City of Toronto. The Canadian Stage Company's guarantee expired in June 1996, as
planned. Young People's Theatre's was recently extended by the City of Toronto to October
31, 2001. Theatre Passe Muraille was the recipient of a guarantee in the amount of
$150,000.00, which is due to expire December 31, 1998 and is the subject of this report.
The former City of Toronto adopted a policy in 1992, whereby operating or working capital
loans or lines of credit guarantees would no longer be provided as a means of financial
support to community groups. Rather, grants would be provided through an established grant
program if deemed to be in the interest of the municipality. The strategy was intended to
phase out the existing line of credit guarantees over a three-year period and thereby eliminate
the City's contingent liability. The three-year period was also intended to allow the companies
sufficient time to make alternative arrangements. Three theatre companies, Canadian Stage
Company, Young People's Theatre and Buddies in Bad Times Theatre were recipients of this
funding. Theatre Passe Muraille received a $25,000.00 grant to replace the working capital
loan it had received previously.
In 1996, the former City Council provided new line of credit guarantees to Young People's
Theatre and Buddies in Bad Times Theatre. The issue of lines of credit was referred to the
Board of Management for a subsequent report on a recommended policy direction. In January
1997, one-time grants were provided to Young People's Theatre and Buddies in Bad Times
Theatre.
Discussion:
The former Metropolitan Toronto has guaranteed a portion of TPM's line of credit since 1997.
The current guarantee of $150,000.00 expires on December 31, 1998. The group is now
requesting that the City of Toronto guarantee its line of credit in the amount of $140,000.00
from January 1, 1999 to December 31, 2001.
TPM's accumulated deficit at the end of its 1997/98 season was approximately $114,000.00,
about 13.0 percent of operating revenues, reduced from a high of $229,000.00 in 1991.
Factors contributing to the deficit include the responsibility of facility ownership and upkeep,
reduced government support and slow implementation of a fundraising strategy.
The company's current financial status is relatively healthy. For the second consecutive year,
the company will report an operating surplus. This year's surplus, in the amount of
$11,000.00, represents the largest in the company's history. The general manager and board of
directors have submitted a business plan with three major elements designed to put the theatre
on solid financial footing. The plan includes running certain productions in repertory,
resulting in longer runs of commercially successful shows and lower production costs. It also
includes increasing ancillary revenues through rentals of newly refurbished spaces and
targeted marketing of individual donors, a segment showing the most growth in recent years.
The proposed extension of the City's guarantee of TPM's line of credit would accomplish
three objectives. First, it would alleviate a cash flow crunch and potential crisis. Second, it
would reduce the company's borrowing costs because the bank normally provides a lower
interest rate when security is provided by the City. Third, it would allow the company to
implement its business plan with the goal of deficit reduction and establishment of a working
endowment over five years. The bank will continue TPM's line of credit in conjunction with
the City's guarantee.
In order to monitor TPM's progress with deficit reduction, staff will require bi-annual status
reports from the company. In addition, the group's 1999 Cultural Grant from the City through
the Toronto Arts Council will be contingent on submission of satisfactory deficit reduction
information.
The TPM line of credit guarantee will be considered a financial obligation of the City. As
such the Chief Financial Officer and Treasurer's approval will be sought on the terms and
conditions of the agreement regarding the line of credit guarantee.
Line of Credit Guarantee Policy Development:
Staff has initiated work on the development of a policy approach to the issue of the City's
guarantee of cultural organizations' lines of credit, as per Council's directive at its meeting on
July 29, 1998 (Corporate Administration Report No. 11, Clause No. 9). The goal of the
policy, which is to be developed jointly with staff of the Solicitor and Treasurer and Chief
Financial Officer, will be to provide a service of value to the cultural community at the same
time as limiting financial exposure to the City. Guidelines and criteria for evaluating requests
will streamline the process, ensure equity and prevent crisis management. The policy will be
submitted to Council for approval later in the fall. Approval is being sought for the guarantee
of TPM's line of credit at this time to allow for time for negotiations with the bank and an
adequate planning period for the company.
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. As a leader in its community for producing innovative, distinctly Canadian theatre,
Theatre Passe Muraille is a national and local cultural asset. Provision of a line of credit
guarantee as requested will ensure short-term survival and allow longer-term stability for the
company. The company has demonstrated competent management and good will by reducing
the amount of its required security. Staff will continue to monitor the status of the deficit. The
Chief Financial Officer and Treasurer concurs with the financial aspects of this report and the
Solicitor is satisfied with the legal requirements.
Contact Name:
Irene Bauer, Culture Office, Economic Development, Culture and Tourism - 392-5225.
Joe Halstead
Commissioner of Economic Development, Culture and Tourism