Dear all,
I hope that this note finds you well and enjoying an awesome paddling season thus far. Heard often is the comment “where did _______(fill in the blank with month of choice) go? This phenomenon is particularly pronounced for the spring and summer, so best we get out and take advantage of what the Okanagan has to offer, including lakes and rivers in which we can paddle, fish and, sometimes, just float around.
Many of you have requested an update on what is happening with the KPC renovation. This is hardly surprising given that in June 2024 I wrote that
Construction is to be substantially completed between October 2024 and May 1, 2025.
So, what the heck happened??? In the following sections, I’ll endeavour to bring you up-to-date and preview what awaits us.
1. Lease negotiations with the City of Kelowna
This process has been underway for a while. Finalizing it is a critical step in advancing the project as the lease is necessary for us to secure financing from a lender, create a capital account to provide charitable tax receipts to donors, and to convince prospective funders that the project has a land guarantee of sufficient length that there is confidence the Centre will have a long legacy.
Through fall/24 and winter/25, City reps assured us that a draft lease would be available soon. In late March, we were presented with a draft lease that was long, legalistic and flawed regarding several points. Most concerning, the draft diverged in fundamental ways from the MOU we and the City created several years ago. In particular, this new document did not reflect the collective effort of City and KPC members to create a community resource that would serve residents and visitors for many years to come.
In early April, several members of the Board met with City staff to review our concerns and to request a reworking of the document. Two weeks ago, City staff invited us to a follow up discussion to review the concerns previously raised and to confirm changes to be made with the language of the lease. Since the meeting, we have exchanged notes with the City team in an effort to further clarify several of these key points. Discussions continue. Presently, it is difficult to estimate how long this negotiation will take, as well as how much time will be required to finalize some of these matters (e.g. subdivision of the KPC site from the parcel of park land).
Consequently, we continue to face a conundrum, which presents something like this:
- Many City staff would now like to see substantial completion of construction by April, 2026.
- However, they also want KPC to have 100% of funding in place before registering a lease against this property.
- Absent a lease, KPC is limited in being able to fundraise for our portion of the project.
- Lease required for debt financing.
- Financing required to expedite the start of the construction project .
- A lease is needed to establish a capital fund with Canoe/Kayak BC, enabling us to issue tax receipts.
- Finally, few large sponsors and funding organizations will contribute to a capital project like ours if there is not a confirmed site nor financing (which requires that the lease be completed). For example, BC Gaming advised us (last summer) that our project looked strong, but without these foundational pieces in place, they could not support us.
- Our counter proposal to the City was a minimum of one year from the point where we agree on the terms of the lease, with the caveat that construction needed to be completed outside of the Centre’s primary operating months (April to September). Communication remains cordial and collaborative but there has not yet been a meeting of the minds on this point.
Murray’s wife, Susan, has been invaluable in bringing to the Board’s attention critical considerations that should be addressed in the lease that will help the Centre to run smoothly in the future. Thanks Sue!!!
2. Construction preparation/approval
We continue to work with Chris Little’s company - Little Building Solutions. Chris and his team have been integral to our efforts to advance this project through various stages/facets of approval with the municipality. In preparing for the project to advance, several stages of approval were/are required:
- Development permit - this process reviewed the proposed designs for the Centre, change of use for the site (i.e. from residential to park and institutional use). Discussions for this permit began in the summer 2024 and were completed in early June with Council’s approval of the development application.
It is worth noting that there was a great turn out from the KPC community at the Council meeting (Many thanks to all who were able to join us). At this session, Council members spoke very favourably about the project.
- Construction permit - with the approval of the development permit, the way is clear for a building permit to be issued. We hope to see this approval v soon, though alas, this step by itself will not trigger the construction phase, including lease, financing, etc.
For anyone who has not seen the design for the renovations/construction, you can view renderings here.
Also regarding construction, over the past six weeks or so curbside work has been underway on Abbott St, from Grove to Meikle. This relates to the City’s commitment to complete the active corridor from Harvey to Gyro Park. This particular phase also coincides with an agreement the City has with the Mission Group to finish the segment of Abbott in front of the Alma apartments. This work will continue until October.
3. Financing
Current cost estimates for the project forecast a total project cost of $2.5 million, with slightly over $1 million to be borne by the City and $1.4 to be invested by KPC.
As was reported last spring, to complete the project on a timely basis, we require a financial institution to agree to debt financing that will allow us to:
- To bridge the construction phase,
- To span the $ difference between aggregate of City contribution, KPC equity and fundraising, and total project cost.
We estimate that this loan will need to be approximately $500,000, though this amount may need to be higher to meet City requirements to approve a KPC financial plan prior to giving the construction phase a final green light.
Again, we require a lease with the City to affirm our bona fides with this project. Additionally, we would ideally be able to present evidence to the financial institution that our business plan is feasible, and that revenues and margins are rising. Results for business ops in 2024 allowed for a modest contribution to the overall project costs, and though we expect to have similar success in 2025, it does not guarantee that we will secure financing.
Additionally, as many of you will have experienced, retail financial institutions prefer to finance borrowers who do not need a loan. For KPC, while the enterprise and the location have great promise, we possess very limited collateral and loan security. Hence, part of our negotiations with the City on the lease is confirming a long held assumption that if KPC defaulted on a loan, the City would assume responsibility for it. We have yet to get a definitive statement from the City on this point. I suspect that this assurance will be a vital element of finalizing our required financing.
4. Fund raising
It would be fair to say that our fundraising initiatives to date have been sporadic and at times somewhat confusing. This is certainly not for lack of time, energy and desire to see the Centre reach its fundraising goals. Rather, it highlights our challenges with limited institutional knowledge of, experience with, and expertise and capacity to support a larger capital fund raising project. These limitations intersected with other challenges noted elsewhere in getting City approval on the project design, lease, and project timeline, which has further challenged us to have concrete discussions with prospective donors and sponsors regarding what they would be supporting and when.
A number of these factors feature in our challenges to make arrangements for individual donors to receive charitable tax receipts. KPC does not have CRA charity status; consequently, we can not issue charitable tax receipts. Given that this benefit is important to many donors, we explored several options. One was for KPC to apply for this designation. While a possibility, this would be a challenging process for the society, with uncertain prospects of success.
We also explored working with a third party with the required status. We ruled out several possibilities because the administrative fee was relatively high (10% of funds raised). We eventually landed on Sport BC, which has an admin fee of 5%. However, to open a capital account with the fund, we need to confirm our development permit, lease, and financing.
Due to the delays in completing these steps, and the City’s message last year that we needed to demonstrate substantive progress with our fundraising, Sport BC suggested that we open an operating account, which donors can contribute to and receive a tax receipt. KPC will then use these funds to cover operational expenses, and revenues that would normally pay for those expenses (e.g. membership fees) can be diverted to cover capital expenses. While the funds donated will find their way to the correct part of the organization, this arrangement adds steps that makes the process more complicated and harder to understand.
Given this swirl of activities and discussion, we decided to pause most fundraising efforts until we had greater certainty about some of the critical project elements touched on above. At the moment, we are recalibrating a timeline for fundraising based on anticipated timeframes for finalizing the lease and debt financing. However, we won’t reactivate this process until there is certainty, at least regarding the lease.
In closing off this rather circuitous communique, I want to acknowledge contributions by many of you who have helped move this initiative forward, even though discussions often seemed trapped in a strange temporal loop (Groundhog Day, any one?). This includes all those who have donated hard earned funds towards the cause. This support is super important and greatly appreciated.
Looking forward, the Board commits to providing more regular updates to keep you posted. In the meantime, if you have any questions about what is happening, please shoot me an email (dennis.silvestrone@gmail.com) or DM (236 970 4298).
Otherwise, I’ll see you on the water.
All the best, D
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