Town would manage food, beverage service under new scenario at NTRC

Posted September 11, 2012

Before last night's council debate on the proposed recommendation to buy-out the alcohol and food sales exclusivity granted to councillor Richard Norcross in October 2007 at the New Tecumseth Recreation Centre (NTRC), a package that includes closing down the Hornets Nest Bar and Grill he operates on the second floor, mayor Mike MacEachern announced that Town staff had pieced together a "Fact Sheet" with answers to 12 questions which included why the matter was on the table for discussion in the first place and what's planned for the 6,000+ sq ft restaurant space once it's closed.

It started with a quick recap that reminded council Mr. Norcross' first five year term was up for renewal on September 30th. As long as he is in compliance with the deal, he has the right to renew for two more five year terms, giving him 15 years. In addition to the food and beverage contract, he also has the concessions and vending rights at the NTRC. His rent is based on 10 per cent of gross sales, of that, 2.5 per cent is to recognize that New Tecumseth paid about $750,000 in leasehold improvements and furnishings to build the restaurant.

(Mr. Norcross recused himself from the discussion for his conflict of interest, though he did not return for the remainder of the meeting).

In the proposed revised lease deal, he would keep the concessions and vending rights, but give up everything else for $50,000 plus interest paid out in five annual instalments starting June 2013. He would still pay 10 per cent on gross sales.

"Both parties were aware that the end of the first five year term occurs in September of this year," according to the fact sheet. ""The discussions were mutual over a period of time as the PRC (parks, recreation and culture) put forward options for increasing the multi-use functioning of the NTRC and looked for opportunities to maximize the use of space in the facility."

The Hornets Nest is open mostly during the hockey season, and is closed during late spring and summer months. Because it's operating as a business inside the facility and includes a bar, when it's closed, so too is public access. During the 2012 budget deliberations, council agreed to include funds to build a security gate to protect the bar and kitchen area so the space could open as a lounge or viewing area when the restaurant is closed.

"The (Hornets Nest) is not failing, the business is changing and the Town is changing its approach to revenue generation. We are paying for control of a large square footage of space that is underutilized throughout the year and can better serve our community's changing needs," according to the fact sheet. "This change will encourage more partnerships in the community and enhance services to the public in a state of the art environment that has the capacity to deliver a broader level of service year-round. The current business is much more limited in its scope than our business plan will allow us to be."

A sense of that "business plan" is also highlighted in the fact sheet. It includes the following:

The PRC would apply for a license with the Alcohol and Gaming Commission, which would include a stadium license;
The PRC would employ part-time staff to serve all sanctioned events of the department (hockey games etc);
The PRC would work with selected community groups by providing fundraising opportunities (including a percentage of total sales for specific events);
A caterer would be contracted for all regular events;
In the case of private functions (Jack and Jills, weddings) an arrangement will be made with individuals for the provision of bar services and licensing while still providing the opportunity for fundraising;
A list of preferred caterers will be given to potential clients; and
Selected caterers will remit a 10 per cent kitchen fee to PRC for each event.

While New Tecumseth currently averages about $30,000 annually in rent from the Hornets Nest, the fact sheet suggests the changes will net "in excess of $100,000" per year in revenues if the Town manages the food and beverage services.

Following the fact sheet presentation, members of the public in attendance joined the debate, including Gord McInnes, who wondered why the Town didn't buy-out the entire contract since it was only getting 10 per cent back in return.

"The other thing I'm concerned about, is when we use this term, 'we are going to generate more income.' I today took a trip around our town, there are five other fitness businesses in town. Not one of them can operate under $549 in a year for a membership in those facilities. Whereas we're offering an absolute absurd half price deal at $285," said Mr. McInnes. "Are we, the Town, supposed to be in business against our own taxpayers, our own businesses? I don't think so. ... If you're talking about reducing deficits of running the facility, I personally think that at $285, like a lot of things that we rent out, is far too cheap. And I didn't think we were going to give away so much of our money in terms of subsidizing people's activities."

Local lawyer Kevin Kemp, who in introducing himself said, "I'm in the business of suing people" noted his concern for New Tecumseth applying for a liquor license and hiring staff to serve it at functions.

"I think it would be very worriesome for the Town to become involved in the business of selling alcohol. That is a recipe for disaster," said Mr. Kemp. "There are lawsuits against servers all the time. Often times there are judgments that go beyond insurance policy limits. And in those circumstances, whereas most defendants don't have the ability to pay, the Town does. I think it would be a disaster."

Ward 2 councillor Jamie Smith said the exclusive provisions have had an impact on events like the Alliston Chamber of Commerce's Home Show. He suggested that vendors have been turned away because their displays included food sales (cupcakes in his reference).

"I want to repeat some comments that I've received from people in town, and that is that at least in some circles, it's viewed as unfair to permit the present tenant (Norcross) to continue operating the concession stands when in fact he never bid for the concession stands alone," said Mr. Smith. "He bid for the business including the restaurant and concessions, and those concessions have never been properly tendered and there are some people who feel that's unfair. I'm Not sure where I would go from there, except to ask staff whether they considered the consequences and whether it would make any significant difference in revenue if we did buy out the whole lease as Mr. McInnes just suggested, and re-did the concessions."

CAO Terri Caron said it was a topic that they will explore this week, as councillors raised several questions they want answers for next Monday night when it's back on the agenda.

"The important piece staff were trying to get was the maximum use out of that particular space and to provide more flexibility in the operations and to get rid of some of this exclusivity," said Ms. Caron. "The tenant indicated there was a desire to continue with the remaining portion of the lease. If council wishes we could certainly go back and explore buying out the full amount."

Ward 3 councillor Paul Whiteside said he too was troubled by the idea of the Town getting involved with alcohol sales, and also noted concerns expressed by others who wondered how the revised lease would impact the Alliston Memorial Arena decision; a decision that is supposed to be discussed sometime this month following a summer long delay.

"A lot of people that are concerned feel that we are making this decision prematurely," said Mr. Whiteside. "I realize the lease expires the end of September, there are people that feel if we make this decision now, it will be another nail in the coffin for the future of Alliston Memorial Arena."

By the end of the near hour long debate, Town staff were directed to return next week with answers to whether Mr. Norcross would agree to operate month to month while the Alliston Arena debate is concluded; as well what it would take to buy-out the entire contract; a breakdown of the revenue projections; whether the expropriation clause in the contract could be invoked with 90 days notice to terminate the contract; and whether the revision requires the concession rights to be re-tendered.

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