Zoo Food Services- Ca~ital Improvements

2000-02-05

To request approval for a reallocation bf funds within the Capital Works Program for the renovation of restaurant facilities. I

Financial ImDlications:

Approval will result in a deferral of expenditures for planned building refurbishment to future years without an increase in the 2000 Capital rrogram.

Recommendation:

It is recommended that:

I. Funds in the amount of $500.0 thpusand be reallocated within the approved Building & Services Refurbishment 2000 Capital Progratn for the renovation of food services buildings;

2. Approval be granted for the demo4tion of the existing front entrance snack bar and the construction of a new larger snack bar at the fro~t entrance.

Background:

As part of its agreement with the Board of Management, McDonald's Restaurants of Canada Ltd. constructed the restaurants and operate the food services at the Zoo for a 25-year period commencing in August 1974.

In December 1998, the Board of Manag~ment hired a consultant and began the process of selecting a food services operator. In April 1999, the Zoo advertised a Re.quest for Qua.lifications (RFQ) for expressions of Interest and a detaIlIng of qua1Ificat ons from companIes or consortIa wIth the resources and proven ability to assume the food operations. The RFQ was step one of a two step process and the qualified proponents were invited to respond to e detailed RFP .

The first proposal call resulted in on

ione submission which was not consistent with the financial

arrangements requested in the RFP in t it proposed that food services be provided under a management contract for a fixed amount. Our cons ltants advised that during 1999, the market place changed such that foodservice operators lost their en usiasm for percentage based rent contracts.

At the September 1999 meeting, the Board directed staff to revise the requirements for the RFP to permit qualified proponents to bid on either a percentage rent or a cost-plus management contract. Again, only one firm, Beaver Foods Limited, submi ed a proposal. Their second bid was on the same basis and with similar costs as their earlier proposal. e proposal met all of the specifications of the revised RFP .

The proposal identifies the requirement for an investment of approximately $1.4 million in restaurant renovations and equipment purchases with an amortized payment of $205.0 thousand annually by the Zoo, for a period of 10 years.

The Board approved the proposal at its December meeting and requested staff to look into the feasibility of the City providing the necessary funds under the Capital Budget for the capital improvements for the food service facilities.

Discussion

The majority of the restaurants were constructed 25 years ago when the Zoo was opened. These facilities are now in need of significant investment in renovations and the purchase of new food preparation equipment. It was intended, as part of the award of the food contract, that the restaurants would be renovated at the expense of new operator. However, as outlined above, the change to a management agreement instead of a percentage rent agreement has made this less attractive as the new company would charge back the amortized cost of the renovations to the Zoo.

We have reviewed the requirements in relation to the approved Capital Works Program (CWP), in an attempt to fund the required food, services renovations and equipment without an increase in the Capital Program. The approved 2000 CWP includes a provision of $511.0 thousand for restaurant refurbishment, of the $1,511.0 thousand appropriated in the Building & Services Refurbishment Capital Project (No. Zoo28). We are now recommending a reallocation of an additional $500.0 thousand within the 2000 approved Building & Services Project. The balance of the funds required (approximately $400.0 thousand) will be requested in the 2001 Capital submission. Existing budgeted items, including replacing pavilion roof glazing, will be deferred to accommodate this change.

As part of the renovations the new food services operator proposes that the front entrance snack bar , which is too small and poorly situated, be demolished and a new one be built in a better location in a high traffic area. Approval for the demolition and construction is being requested in accordance with the agreement between the Board of Management and City Council.

The above reallocation has been discussed with the Chief Financial Officer &Treasurer who concurs with this action.

Conclusion:

The approval of the reallocation of funds will provide capital for necessary renovations to the food service facilities at the Zoo without impacting negatively on the 2000 Operating or Capital Budgets.

Calvin J. White

General Manager & CEO

Contact Name:

Robin D. Hale, Executive Director Administrative & Site Services Tel: 392-5913