FIVE YEAR FINANCIAL PLAN NEW MUSEUM at THE SHIPYARDS. Prepared for the City of North Vancouver by the North Vancouver Museum & Archives Commission

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1 Page 1 of 31 FIVE YEAR FINANCIAL PLAN NEW MUSEUM at THE SHIPYARDS Prepared for the City of North Vancouver by the North Vancouver Museum & Archives Commission June 30, 2015

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3 Page 3 of 31 CONTENTS Page Background and Executive Summary.. 4 Summary of Financial Models: 1. Base Case Model Shipyards Model. 8 Base Case Model: Revenues 11 Unearned (contributed) revenue 11 Earned revenue 16 Expenses. 19 Shipyards Model: Revenues 22 Expenses Program and Rental Space Options.. 26 Financial Risk Management and Contingencies Appendices: 1. Local and National Comparisons 2. Organization Chart 3. Spreadsheet: Comparison of Revenues and Expenses for all Models (Lord Study, Base Case, and Shipyards) over five years attached pdf

4 Page 4 of 31 Background and Executive Summary This report has been prepared at the request of the City of North Vancouver. On July 13, 2013, Council passed a resolution ( New Museum ) endorsing in principle the business case for a new North Vancouver Museum as outlined in the North Vancouver Museum Business Case and Feasibility Study prepared by Lord Cultural Resources, Toronto, in April Council also directed the NVMA Commission to report back on operating estimates for the New Museum with varying revenue and service levels, and to develop options on hours of service so best to ensure continuity with other Central Waterfront spaces. On April 27, 2015, City Council directed the Commission to submit revised operating estimates with varying revenues and expenditures to the City no later than June 30, This report contains the revised operating estimates requested by Council. Two complete models have been developed, with detailed discussion of revenue projections for each: o The Base Case Model is based on the 2013 New Museum Business Case, a marketing-focused document which contained detailed estimates of attendance, membership, and other categories of earned income. The new Base Case Model has been updated with the addition of current assumptions and significant detail on contributed (unearned) revenue which was lacking in the original Business Case. o The Shipyards Model builds on assumptions and projections in the Base Case Model, but reflects enhanced hours of operation to align with the proposed schedule for tenants in the Shipyards development (as reflected in The Shipyards-Lot 5 vision and site planning principles confirmed by Council on April 7, 2015). Detailed revenue projections, which were not included in the New Museum Business Case, have been developed for both operating models by an experienced fundraiser (Nicholas Locke of Optimus Fundraising, Vancouver and Seattle). Local and national comparisons for the revenue estimates are found in Appendix One. They demonstrate that the New Museum s revenues are realistic and in line with projections for other new cultural attractions. Expenses discussed in the 2013 New Museum Business Case have been updated to reflect the Commission s approved 2015 operating budget, revised to reflect any changes to the Museum s plans since 2013, and projected to 2018 figures (the base year of this new Financial Plan). Both the Base Case and Shipyards operating models also incorporate the lease value for Lot 4 (the Pipe Shop), as provided by the City of North Vancouver. Per item #11 of the City Council resolution of July 15, 2013, the Commission was directed to include the market rental rate of the Pipe Shop in their financial

5 Page 5 of 31 model as an occupancy cost, and that Council provide an annual operating facility grant to the NVMA Commission in the amount equal to the market rent of the Pipe Shop. (NOTE: In order not to distort comparisons with national and local statistics, the lease value and off-setting facility grant are shown below the bottom line of the summary spreadsheet.) The operating estimates outlined in this Financial Plan: o Show that a New Museum in the Pipe Shop can generate a surplus over the five year period and be an active and complementary partner in the emerging Shipyards development on the central waterfront. o Confirm the Lord Study s conclusion that the New Museum can be operated without any additional real municipal revenues beyond an estimated 1.5% increase per annum (from the first year s base) to cover wage and other adjustments. o Confirm that significant, credible opportunities exist for the NVMA, with a New Museum at The Shipyards to raise 13-15% of its annual operating budget from unearned (contributed) sources and 22-24% of its budget from earned revenue sources. o Confirm that a New Museum can operate as an integral contributor to the Shipyards development, with hours of service that ensure continuity with other Central Waterfront spaces. o Demonstrate that the level of financial risk in operating a New Museum at The Shipyards is relatively low, and that options for mitigating that risk are available. o Reveal that the NVMA s revenue estimates (in percentage terms) are conservative compared to actual percentages of heritage organizations across the country. In addition, a New Museum in the Pipe Shop provides several other important benefits: o It will attract significant numbers of tourists to The Shipyards site. o It will have significant local economic impact and will be of more benefit to the community and surrounding businesses than would a retail operation in the same space. o It aligns with a guiding principle supporting the Community Vision ( building from the diversity of its people, landscape and history to inspire innovation and reinforce a strong sense of place ) and will help the City achieve some of the goals (especially 6.2 and 6.4) of its O.C.P. o It complements the mission and the focus of the Central Waterfront Development Plan and enhances the Shipyards character and identity, which is one of the area s most important public space components.

6 Page 6 of 31 Summary of Financial Models Two complete financial models have been developed. Each model includes a five-year summary budget estimate of projected revenues and expenses with operating assumptions and projections for each year. Each model includes expenses and revenues for all NVMA programs and facilities, including both the Museum and the Archives. 1. Base Case Model The Base Case model is founded on the assumptions and projections in the Business Case and Feasibility Study prepared by Lord Cultural Resources in The forecasts in that Study were prepared by Canada-based experts in the world s largest museum planning firm. They are considered very credible. The Lord Study was a marketing and attendance study which focused on earned revenue projections (admissions, rentals, gift shop, etc.). It did not look at all aspects of unearned (contributed) revenue. As a result, the bottom line of the Study s 5-year projections was titled Additional amount required from private and non-municipal government sources to break even. A more accurate title would be Additional unearned (contributed) revenue required. Operating estimates in the Financial Plan include detailed projections of all revenue sources (government, fundraising/sponsorship/membership, and earned revenue) and complement the marketing and attendance projections in the Lord study. The Base Case model includes nine assumptions which differ from those in the Lord study: 1. Operating Loss There is no operating loss. The amount shown in the Lord summary projections (Lord, p. 68) as additional amount required to break even is covered by several categories of revenue not included in the Lord study (sponsorship, private grants, endowment income) which are discussed in detail in this Report. 2. Revenues -- increased contributed revenue due to presence of a Development Officer, addition of endowment income, and implementation of an annual giving program. 3. Revenues increased fundraising revenue in years 2 to 5 due to establishment of signature fundraising events. 4. Revenues uplift in admissions revenue (10%) due to increased traffic generated by build-out of The Shipyards. 5. Revenues -- Increased earned income (other) for summer season sales of snack food and non-alcoholic beverages. 6. Revenues -- decreased rental revenue due to competition from other nearby venues.

7 Page 7 of Expenses -- addition of a Development Officer (0.6 FTE). 8. Expenses -- inclusion of a common area charge for use of the Pipe Shop building and site maintenance. 9. Lease value for the Pipe Shop is shown as an occupancy cost and offset by a corresponding facility grant. Uses NVMA s 2015 operating revenues and expenses as base numbers, extended to start in 2018 as Year One. Assumes the Museum s year-round operating schedule will follow the study s recommendations (Lord study 4.6.1): o 5 days/week (Tuesday to Sunday) 10 am to 5pm o 1 day/week (Friday) 10 am to 9 pm o 1 day/week (Monday) closed o Total: 46 hours/week Museum Admission fees (Lord study 5.2.1): o Adult (25-64): $7:00 o Senior (65+) and Youth (13-24): $5.00 o Child (2-12): $4.00 (must be accompanied by an adult) Assumes same audience mix as the Lord study (5.1.3): o North Shore residents (65% in year one to 45% in year 5) o School groups (15% in year one to 20% in year 5) o Tourists (20% in year one to 35% in year 5) Assumes attendance will be 10% per year higher than the Lord study projected, as a result of the build-out of The Shipyards development. Assumes member benefits will include free admission to the Museum. Assumes 50 major rental events per year (approximately one/week) on evenings when the museum is closed plus two dozen small rentals accommodated while the museum is open. Rental model: Museum will rent space ($1,200/event for the full museum) and will partner with other operators to provide events and food services for clients. Assumes the terrace area directly outside the Pipe Shop s south-facing main doors will become a museum-only seating area during the summer season where visitors will enjoy snack food and non-alcoholic beverages. Assumes active participation by NVMA in collaborative on-site programming like theatrical interpretation, walking tours, First Nations carvers/canoe-building, First Thursday type collaborations, night markets, etc. during operating hours.

8 Page 8 of Shipyards Model The Shipyards model proposes how the new museum will be an active tenant on the Shipyards site and will contribute to the overall vitality, energy and success of the central waterfront development. The New Museum will be a positive contributor to the Shipyards. It will: o strengthen and enhance the historic identity of the site; o provide distinctive local programming; o bring more people to the site at times that might otherwise be periods of low visitation (i.e. morning and afternoons); o attract cultural tourists (who spend more than average and stay longer at a destination); and o contribute to a mix of on-site attractions that reflect integrated CAREs (culture, arts, retail, entertainment, sports) offerings. The Shipyards financial model, grounded on many of the assumptions in the Lord study, builds on and extends the projections of the Base Case model. Building on the Base Case, this model makes seasonal adjustments reflecting enhanced hours of operation that align with the Shipyards proposed schedule. The Shipyards model also includes six assumptions which differ from the Base Case model: 1. Revenues -- increased admissions revenue due to additional hours of operation. 2. Revenues -- increased program fees due to addition of winter season evening programs. 3. Revenues -- increase in membership, sponsorship, and fundraising revenue taking into account extended hours of operation. 4. Revenues -- increased retail sales (gross) due to increased hours of operation for the Museum Shop. 5. Revenues -- decreased rental revenue due to decrease in number of evenings that the Museum will be available for rental bookings. 6. Expenses -- addition of two positions (Program Assistant and Admissions/Information/Retail Assistant) during summer season only and addition of part-time assistance in Admissions/Information/Retail area during winter season only.

9 Page 9 of 31 Assumes the Museum s operating schedule adjusts seasonally in order to maximize tourist attendance during the summer season and to focus on local/community visitors during the off-season. Shipyards hours of operation are assumed to be 10 am to 10 pm (primary hours 4 pm to 10 pm), with earlier closure on Sunday. Museum hours of operation will adjust seasonally: o Summer (tourist) season (May-September) 6 days/week (Monday to Saturday) 10 am to 9 pm 1 day/week (Sunday) 10 am to 5 pm Total: 73 hours/week o Winter (local) season (October-April) 5 days/week (Tuesday to Thursday, Saturday and Sunday) 10 am to 5 pm 1-2 days/week (Fridays and First Thursdays ) 10 am to 9 pm Tuesday, Wednesday, Thursday evenings (5 pm to 9 pm) themed third space 1 type programs with a community focus Saturday evenings reserved for rentals 1 day/week (Monday) closed Total: 62 hours/week On Tuesday, Wednesday, and Thursday evenings during the winter season, the Museum galleries will be closed, while the ground floor (lobby, multi-purpose room, Idea Exchange) will be the site of community programming. The gift shop will remain open. On these evenings, the Museum will function as a third space * and offer programming such as maker studios, film and video nights, speaker series, Philosopher Cafes, clubs, yoga classes and community events. This model assumes opportunities to deliver educational and community-based weeknight programs in partnership with local organizations like Capilano University, School District 44, the North Vancouver Recreation and Arts Commission, North Shore Neighbourhood House and the North Vancouver Arts Council. A range of alternate weeknight options for this space also exist, including such things as pop-up retail and food service opportunities, community dinners, and artisan markets. * A third space is: an informal social space aside from work or home; for people to have a shared experience; based on shared interests and aspirations; open to anyone Institute of Museum and Library Services

10 Page 10 of 31 Evening programming: Example of a museum with a third space -- the makeshop at the Children s Museum of Pittsburgh, where kids and families drop in to make, play and design things. Museum Admission fees (Lord study 5.2.1): o Adult (25-64): $7:00 o Senior (65+) and Youth (13-24): $5.00 o Child (2-12): $4.00 (must be accompanied by an adult) Assumes revenue of $125 per evening in fees generated by community programming on weekday evenings during the winter season. Assumes member benefits include free admission to the Museum. Assumes 40 major rental events per year (approximately three per month) plus several dozen small rentals accommodated while the museum is open. Rental model: Museum will rent space ($1,200/event net for the full museum) and will partner with other operators to provide events and food services for clients. Assumes the terrace area directly outside the Pipe Shop s south-facing main doors will become a museum-only seating area during the summer season where visitors will enjoy snack food and non-alcoholic beverages. Assumes active participation by NVMA in on-site programming such as theatrical interpretation, walking tours, First Nations carvers/canoe-building, First Thursdays, night markets, etc. during operating hours. Evening programming: Example of a museum offering yoga classes the Asian Art Museum of San Francisco.

11 Page 11 of 31 Base Case Model - Revenues Detailed revenue estimates for the Base Case model (year s one through five) are listed on the spreadsheet in Appendix Three. All totals include the full NVMA operation, not just the stand-alone museum. This chart summarizes the major revenue sources (FSM = Fundraising, Sponsorship and Membership): Revenue Source year Avg. Government 1,152,094 1,168,475 1,185,102 1,201,979 1,219, % FS&M 181, , , , , % Earned income 469, , , , , % Total 1,801,267 1,812,358 1,836,581 1,881,451 1,971, % These numbers align quite closely with the national percentage figures for museums and archives from the Government of Canada 2011 Survey of Heritage Institutions: Revenue NVMA % Business Plan Federal Source year Survey Government 64% 64% 60.2% FS&M 10% 13% 13.1% Earned income 26% 23% 26.7% The Base Case Model revenue projections are founded on the assumptions detailed below. Unless otherwise indicated, calculations are for Year One with projections for additional years shown on the spreadsheet in Appendix Three. Base Case - Unearned (contributed) revenue: As indicated in the Government of Canada 2011 Survey, all Canadian museums, especially those with a local or municipal mandate, receive a majority of their funding from government sources. The following table shows a 5-year government funding plan which is identical in both the Base Case and the Shipyards Model and confirms the Lord Study conclusion that the New Museum can be operated with no real increase in base municipal funding. Revenue Source Municipal 1,092,094 1,108,475 1,125,102 1,141,979 1,159,109 Federal nil nil nil nil nil Provincial 60,000 60,000 60,000 60,000 60,000 Total 1,152,094 1,168,475 1,185,102 1,201,979 1,219,109

12 Page 12 of 31 Government municipal The Lord study showed all revenues and costs in 2013 constant dollars (p. 62) and hence showed a flat line municipal grant of $1 million per annum ($500,000 each from the City and the District) in each of the new museum s first five years of operation. In reality, the NVMA is budgeted to receive $1,044,388 in 2015 due to increases since 2013 for things such as salary increases due to inflation, lease payments and utilities, etc. The updated estimates build from this 2015 base and apply a 1.5% annual increase (reflecting actual increases realized in the years 2011 to 2015) resulting in no real change to the municipal funding, but allowing for mandatory items such as increases due to wage settlements and lease payments over which the museum has no control. Government federal NVMA regularly receives project funding from federal sources, although it does not receive operating funds. Unlike art galleries which are eligible to apply for annual operating support from the Canada Council, no operating grant program exists for museums. Over the past five years, NVMA has received federal grants in amounts varying from nil to $75,000 per year. This pattern is expected to accelerate as more special project funding opportunities will be available at the new museum. However, since federal revenues vary according to their source (the federal department which administers each funding program) and because they are tied to project costs (which are not shown in the attached expense estimates) no federal operating funds are shown in either the Base Case or the Shipyards model. Government provincial The British Columbia Arts Council has funded the NVMA s Museum operations at the level of $30,000 annually for fiscal years 2014 and There is a strong likelihood that with a much larger, more accessible and more dynamic Museum this amount will increase. With the addition of a Development Officer, we will have internal capacity to apply for grants from other provincial programs, so both the Base Case and the Shipyards Model show an increase to $60,000 per annum. Fundraising, Sponsorship and Membership Through 100% volunteer activity, the Friends of the NVMA Society secured a total $19,691 in private donations and memberships in 2014 and $2,249 in endowment income for a total of $21,940. This represents just 2% of the total NVMA revenues compared to the national average of 13.1% and the British Columbia average of 15.6% as outlined in the

13 Page 13 of Government of Canada Survey of Heritage Institutions. There are two key success factors, covered in this Report, which will bring the NVMA closer to the national average: 1. Opening the door to the New Museum at the Shipyards, making it an interactive, high profile and accessible destination for North Shore, Metro Vancouver residents and tourists, will drive FSM revenue. 2. Building internal capacity to secure increased revenues from sponsorship, fundraising and memberships through the hiring of a Business Manager and creation of a Development team. Based on these strategies the 5 year business plan reflects an increase in total fundraising, sponsorship and membership revenues in year one to 10.1% at the Base level and 11.3% under the Shipyards model. A summary table of these revenues is as follows: Revenue Source Private Grants 15,000 25,000 45,000 45,000 45,000 Sponsorship 75,000 80,000 85,000 90,000 95,000 Fundraising Events 25,000 40,000 60,000 75, ,000 Memberships 37,375 34,808 32,122 32,765 35,179 Annual Giving 24,500 25,725 27,000 28,350 29,750 Endowment Income 5,000 5,500 6,500 8,000 10,000 Total 181, , , , ,929 Private Grants There are many private (family) and public foundations that exist to support heritage, education and community support organizations like the NVMA. Previously, neither the Friends Society nor the NVMA have had the capacity to approach these organizations with a request for funding. And, most importantly, because the Museum has not been easily accessible to the public and is located in a low profile location, any such request would not have the ability to deliver the level of community impact sought by donors in these situations. However, the opening of the new Museum and the creation of fundraising capacity provides the opportunity to change this situation. In the Government of Canada Survey of Heritage Institutions Survey it was identified that 0.8% of funding came from other registered charities. Based on the full NVMA budget, this would equal $15,000 in year one (2018). Work will begin on identifying and cultivating these prospects during the capital campaign and on submitting applications for support. Sponsorship (Program support) Sponsorship (also known as program support) represents the biggest opportunity for fundraising revenues for NVMA

14 Page 14 of 31 through the New Museum project. Increasingly, corporations are investing in and supporting their communities through sponsorship (as compared to philanthropic support) with the purpose not only of providing community benefits but also sharing their values and engaging their employees. Currently, the NVMA provides little opportunity to secure sponsorship, however, the opening of the New Museum and the introduction of fundraising capacity will change this model. A key to developing a successful sponsorship program is a strong understanding of the properties that exist within the New Museum that can be sold to corporations and paid for through their marketing budgets. Development of sponsorship opportunities is being done as part of the new museum planning process for galleries, exhibits and programs. Representative examples include: School and educational programs Living history (intangible cultural heritage) and multicultural programs Shipyard tours First Thursday types of collaborative site-based programs Children s programming Travelling exhibits Themed exhibits related to North Shore history Adopt an Artifact a program enabling individuals and corporate donors to receive recognition by sponsoring a specific artifact. For example, the Nanaimo Museum provides these opportunities at 3 levels: $5,000 (11 adopted), $2,500 (16) and $5,000 (11). Memberships The Friends of the NVMA Society operates as a membership organization and charges $30 for a family membership, with few tangible benefits. In future, however, the North Vancouver Museum and Archives will run a full membership program (overseen by the Business Manager) that will offer significant benefits including free admission to the Museum. Whereas current membership is purchased largely on the basis of affinity with the Museum mission or civic pride, future membership programs will be increasingly promoted on the basis of value for money including free admission and discounts on retail, programs and rentals. In the context of the new facility, a family membership fee of $60 is proposed. This should be especially popular for the young family market as young children will wish to attend on numerous occasions. Upper level members, because of their connection to the new Museum and with an effective stewardship strategy, are also significant prospects to become donors (see Annual Giving below). The Lord study (5.2.3) outlines a rationale for estimating membership levels. It projects the Museum will open with 575 memberships and that, like attendance in

15 Page 15 of 31 other newly-opened museum, this number will decline to a stabilized level of 475 over time. As explained in the Lord study (5.2.3), average membership revenue of $65 per member in Year one, with a growth of about 2% per year during the other years, is projected to reflect success in shifting lower level members to upper level membership categories. These estimates lead to the following Base Level projections Memberships Average revenue $65 $66 $68 $69 $70 Total Revenue $37,375 $34,808 $32,122 $32,765 $35,179 Annual Giving Program Annual giving is a program directed to secure philanthropic support, primarily from individuals who have a linkage and interest in the charitable cause and the ability to make a philanthropic gift, with the benefit of an official income tax receipt and, if approved, personal recognition as a donor. The primary donor market for the annual giving program in year one of the Base Case is: # % Avg. Gift Revenue Commission/Friends % 250 5,000 Members % ,500 Volunteers % 50 2,500 Attendees 55,000 1% 10 5,500 Total 24,500 A database will be developed in 2016 to track all members, donors and volunteers (current and lapsed) and an effective stewardship and recognition program will be developed to retain and grow the annual program year over year through effective donor and member retention. Based on this model it is expected that the program will secure annual growth of 5% and, under the Shipyards Model, an additional 10% due to increased membership and attendance. Endowment income As of December 2014 the Friends Society holds an endowment of $45,346 with the North Shore Community Foundation (NSCF). Under the terms of the agreement with the NSCF, funds generated by the endowment must be used for museum and archives programs. In 2014 this generated a total of $2,250 for community outreach activities and is expected to grow to $2,500 in The Friends also has a goal, through the introduction of

16 Page 16 of 31 a post Campaign endowment and planned giving program, to grow the endowment capital to $100,000 by 2018, which will increase annual revenues to $5,000. Base Case - Earned revenue: Earned revenue is a proven standard income source for museums as indicated in the Canadian Government 2011 Survey which showed this category to represent 26.7% of revenues for museum and archival organizations across Canada. Currently the opportunity for the North Vancouver Museum to generate such revenue is significantly limited due to its modest size, poor quality facility, and out-of-the-way location. However, as detailed in the Lord Study, the new Museum at The Shipyards will open the door to significant new revenue opportunities and the estimates for the Base Case are captured under five categories. Assumptions underpinning each category of earned revenue are detailed below this chart. Revenue Source Venue Rental 72,000 73,440 74,880 76,380 78,000 Retail Operations 133, , , , ,900 Admissions 232, , , , ,358 Program fees 20,000 20,000 20,000 20,000 20,000 Other earned 11,600 12,600 13,600 14,600 15,600 Total 469, , , , ,858 Venue rental The Base Case model assumes there will be 50 major annual $1,200 (net) plus several dozen small $350 (net) average. The Pipe Shop spaces available for evening rentals are the lobby and multipurpose space which combine to account for about 1,700 net sq ft. This space will allow for rentals of about 170 persons reception style and 85 seated at round tables. Some full-day rentals will be available for special events. More likely, rentals will be 4-6 hours starting at 6 p.m. For context the Bill Reid Gallery in Vancouver charges $1,500 (2013 price) for rental of a 1,500 sq. ft. space over a four hour period. Other rental opportunities include the flex programming space and the seminar rooms that can be used for birthday parties on weekends or for strata council meetings and other small gatherings.

17 Page 17 of 31 Venue rental revenue estimates: Rentals Major per annum Average net income 1,200 1,224 1,248 1,273 1,300 Major rental total 60,000 61,200 62,400 63,650 65,000 Smaller rental income 12,000 12,240 12,480 12,730 13,000 Total rental income 72,000 73,440 74,880 76,380 78,000 Retail operations (gross) The 2011 federal survey discussed above shows the average contribution to earned revenue from retail sales in heritage institutions across Canada is 9%. Figures from the 2009 Museum Store Association Retail Industry Report indicate the average for history museums (largely US) at $2.20 per visitor and $232 per sq. ft. of public retail space. The Lord Study (5.2.2) projects retail sales of $2.20 per visitor in Year 1 growing by 2% per year to reflect better product and market knowledge over time. This forecast takes into account sales to the numerous non-visitors on site who will have access to the retail store without paying for Museum admission, as well as discounts to members. The assumptions and estimates above lead to the following retail sales projections. The cost of retail goods sold is generally in the range of 50-60% of retail sales. We have estimated these costs at 55% each year and these costs are included within the expense projections below. Retail Sales Retail space sq. ft On-site attendance 60,500 55,000 49,500 49,500 55,000 Sales per visitor Total Sales $133,100 $123,200 $113,355 $115,355 $130,900 Sales per sq. ft Cost of goods sold $73,205 $67,760 $62,345 $63,445 $71,995 Admissions As a result of the increased activity in The Shipyards the Base Case uses attendance projections that are increased by 10% above those in the Lord study (5.1) which reflect varying levels of attendance for years one through five and include detailed calculations of weekday/weekend and design day attendance (Lord study, p.55), and attendance by market segment. Projections also assume that discounts will be introduced and will help to boost attendance, but will lower net admission revenue by a projected 6%. The Base Case uses the recommended admission charge for adults as $7.00 plus GST (vs. the Lord study

18 Page 18 of 31 which is calculated at $7.00 incl. GST, the same as the average admission charge shown in the 2011 Survey of Canadian Heritage Institutions. These estimates and assumptions lead to the following projections Attendance 60,500 55,000 49,500 49,500 55,000 Admission Revenue (gross) $247,445 $216,700 $185,130 $185,130 $205,700 Admission Revenue (net) $232,598 $203,610 $174,022 $174,022 $193,358 Per visitor $3.84 $3.70 $3.52 $3.52 $3.52 NVMA has a high level of confidence in these attendance projections. They are consistent with the results of a March 2015 visitation study of the New Museum (conducted by North Vancouver-based consumer testing firm Lux Insights) that found 79% of North Shore and Vancouver residents are likely to visit the Museum when it opens. Program fees Public and educational program fee revenues of $20,000 per year align with the Lord study forecast (5.2.5). NVMA generated approximately $9,000 from public program fee and photo sales in 2012, so with additional space (which is more accessible to individuals and to schools located off the North Shore) there will be enhanced opportunities to generate additional program revenue. Other earned Other earned revenue includes $5,000 as projected by the Lord Study (5.2.7) for film shoots, interactive donation box, and costumed photo opportunities, growing by $1,000 per year over the 5-year period. $6,600 in additional revenue is projected from Museum patrons consuming snacks and non-alcoholic beverages on the Museum terrace during the 22 week summer season ($50/day (net) x 6 days/week x 22 weeks).

19 Page 19 of 31 Base Case Model Expenses Expenses have been estimated using base figures from the NVMA s approved 2015 operating budget and extrapolated into corresponding amounts for year one (fiscal year January 1 to December 31, 2018). Assumptions underpinning the expense estimates are detailed below. Salaries, Wages and Benefits The Base Case model uses the Lord Study (5.3.1) as the basis of its staffing plan with the addition of 0.6 FTE for a Development Officer because of the important of unearned (contributed) income to the revenue mix of this model. The organization chart for the Base Case is shown in Appendix Three. The staffing plan includes positions, which are a mix of existing and new positions, and increases in existing positions. The museum-based positions total 13.1 FTE. With the addition of 2.2 FTE position in the Archives, the total NVMA staff complement is FTE. o Director (1.0 FTE) existing (mgt. pay band 5; may need to be reviewed) o Administrative Services Manager (1.0 FTE) existing (pay grade 20; reduced from existing p.g. 22 because supervisory responsibilities are removed and a new Business Manager will assume some of the job functions) o Administrative and Graphics Assistant (1.0 FTE) increase from existing 0.6 FTE position (p.g. 15) o Business Manager (1.0 FTE) new position (p.g. 28) o Development Officer (0.6 FTE) new position (possibly on contract) (pg 20) o Marketing and Membership Assistant (1.0 FTE) increase from existing 0.7 FTE position (p.g. 15) o Admissions/Information/Retail Assistants (2.5 FTE) new casual positions (p.g. 10) o Curator (1.0 FTE) existing (salary transferred from discontinued Exhibit Designer/Photographer position) (p.g. 23) o Exhibits and Collections Assistant (1.0 FTE) new (p.g. 17) o Education and Engagement Manager (1.0 FTE) existing (p.g. 23; reduced from Assistant Director position (p.g. 27) when the incumbent retires) o Education, Engagement and Volunteer Coordinator (1.0 FTE) existing (p.g. 18) currently titled Program Assistant o Program Assistants (1.0 FTE) new casual positions (p.g. 11) o Archivist (1.0 FTE) existing (p.g. 23) o Reference Historian (1.0 FTE) existing (p.g. 16) o Archives Weekend Attendant (0.15 FTE) existing (p.g. 10)

20 Page 20 of 31 For budget purposes, the model assumes that all positions commence in January 2018, and receive yearly salary increments of 2% in order to take into consideration cost of living and step increases. Occupancy As discussed in the Lord Study (5.3.2), occupancy costs include all costs, excluding salaries, associated with building repairs and maintenance, utilities, security systems and building insurance, as well as rent where applicable, for all NVMA facilities. Occupancy costs ($2,250 per annum) for the Rice Lake storage facility, a figure missing from the Lord Study, has also been added to this Financial Plan. In addition to the costs outlined in the Lord Study, the City of North Vancouver has directed NVMA to add a common area charge of $30,000 as an occupancy cost for the Pipe Shop building for site maintenance, janitorial, waste removal, pest control, security, landscaping, maintenance and repair and event programming for the common area around the building. Exhibitions As discussed in the Lord Study (5.3.3) and shown in the 2013 Exhibit Concept Plan, the new museum will not have a traditional temporary exhibition space. Instead, changes to the core exhibits will be made on an ongoing basis. Using a distributed exhibit model, small portable exhibits first shown at the Museum will later be circulated to public spaces throughout North Vancouver. The Base Case also assumes, as recommended by the Lord Study, that a reserve fund (of $50,000 p.a.) be established to build up over time and support larger-scale changes to the core exhibits in future years in order to maintain attendance levels. Exhibition Costs Base Level Year 1 Year 2 Year 3 Year 4 Year 5 Reserve for Exhibition Replacement and Major Upgrades $50,000 $50,000 $50,000 $50,000 $50,000 Distributed Exhibit Costs $15,000 $20,000 $25,000 $30,000 $35,000 Routine Maintenance and Outreach $15,000 $30,000 $35,000 $40,000 $45,000 Total Costs $37,300 $80,000 $100,000 $110,000 $120,000 $130,000 Programs Program costs of $40,000 per year, exclusive of staff salaries, are projected in the Base Case. This amount is consistent with estimates in the Lord study (5.3.4) Collections Care and Conservation The Plan uses the collections care number projected in the Lord Study (5.3.5) for the Museum collection and adds $8,600 per annum for care of the Archival collections (a figure that was omitted in the Lord study). The amount covers such items as conservation, collection handling supplies, mount-making and photography.

21 Page 21 of 31 General and Administrative Consistent with the Lord study (5.3.6), the Plan projects that general and administrative costs will be 13% of staffing costs in Year one (to take into account initial purchases for the new museum) and 12% in subsequent years. Marketing Non-staff marketing costs including advertising and promotion are consistent with those in the Lord study (5.3.7) which projects a per visitor expenditure of $1.50 in years two through five, with a $1.75 per visitor allocation in year one. Retail Cost of Goods Sold As discussed above under Retail operations (gross), the cost of retail goods sold is generally in the range of 50-60% of gross retail sales. The Base Case model assumes the cost of goods sold will be 55% of sales each year. Retail Cost of Good Sold Total Sales $133,100 $123,200 $113,355 $115,355 $130,900 Cost of goods sold (@55%) $73,205 $67,760 $62,345 $63,445 $71,995

22 Page 22 of 31 Shipyards Model - Revenues Revenue estimates for the Shipyards Model shown on the spreadsheet in Appendix Three are more positive than those for the Base Case because of the opportunities to increase all categories of non-governmental revenue. With The Shipyards development planned to become a year-round gathering place for local and regional residents, as well as tourists and visitors, the museum will actively participate in animating the site and adding to its vibrant mix of retail, restaurant, recreation, and cultural amenities. Detailed revenue estimates for this model (years one through five) are listed on the spreadsheet in Appendix Three. All totals include the full NVMA operation, not just the stand-alone museum. This chart summarizes the major revenue sources (FSM = Fundraising, Sponsorship and Membership): Revenue Source year Avg. Government 1,152,094 1,168,475 1,185,102 1,201,979 1,219,109 61% FS&M 213, , , , ,425 15% Earned income 516, , , , ,635 24% Total 1,881,733 1,889,506 1,912,478 1,962,245 2,062, % Assumptions on which the revenue estimates are based are detailed below. Shipyards - Unearned (contributed) revenue: Government municipal The municipal grants received from the City and the District of North Vancouver are projected to stay the same as in the Base Case model. Government federal Consistent with the Base Case model discussed above, no federal operating support is projected for the Shipyards Model. All federal funding takes the form of project support and, therefore, is not shown in the NVMA s operating budget. Government provincial Provincial grants are consistent with those in the Base Case model. Private grants Private grants are consistent with the Base Case model. Sponsorship Increased hours of opening will provide both greater benefits for existing sponsors and additional sponsorship opportunities. As a result, the sponsorship revenues over the 5 year period have been increased by an average of 40%, aligned with the increased operating hours. Fundraising events (net) Consistent with the Base Case model.

23 Page 23 of 31 Memberships The Shipyards Model is expected to generate a 10% increase in both memberships and membership revenues as a result of significantly increased access and benefits for members and their families. Annual Giving Under the Base Case model it is expected that the annual giving program, with effective stewardship and donor retention, will commence at $24,500 in year one and see annual growth of 5%. The Shipyards Model projects an additional 10% growth per annum due to the increased membership and attendance. Endowment income Endowment income is projected to remain the same in the Shipyards Model as in the Base Case. Shipyards - Earned revenue: Venue rental This model assumes there will be 40 major annual $1,200 net (a reduction from 50 events in the Base Case model due to a reduction in space availability) plus 24 small $350 net average. Rentals Major per annum Average net income 1,200 1,224 1,248 1,273 1,300 Major rental total 48,000 48,960 49,920 50,920 52,000 Smaller rental income 8,400 8,400 8,400 8,400 8,400 Total rental income 56,400 57,360 58,320 59,320 60,400 Retail operations (gross) The Shipyards model projects a 45% increase in the Museum s hours of operations beyond the hours in the Base Case (see admissions calculation below). However, since most incremental hours are in the evening, only a 10% overall increase in gross retail sales is projected. A corresponding 10% increase in the cost of goods sold is also projected. Retail Sales Base case $133,100 $123,200 $113,355 $115,355 $130,900 Shipyards model $146,410 $135,520 $124,690 $126,890 $143,990 Increase 10% 10% 10% 10% 10% Admissions The Shipyards Model uses attendance calculations in the Base Case as a starting point and projects that 2,392 hours of operation (46 hours/week x 52 weeks) will generate $232,598 in admissions revenue. The Shipyards model has 3,466 hours of operation (73 hours/week x 22 weeks plus 62 hours/week x 30 weeks) which represents 45% more annual hours than the Base Case. The Lord Study projects 55% of all admissions will take place on weekends, but only 88 of the additional 1,074 hours in the Shipyards Model

24 Page 24 of 31 occur on weekends. Also, most of the additional hours of operation occur during the evening (not a traditional museum-going time). For these reasons, an escalation factor of 16% has been used to project the yearly increase in Admissions revenues beyond those shown in the Base Case. Admission Revenues Base Case Attendance 60,500 55,000 49,500 49,500 55,000 Base Case Revenue 232, , , , ,358 Shipyards Model Revenue 269, , , , ,295 Increase 16% 16% 16% 16% 16% Shipyards Model Attendance 70,180 63,800 57,420 57,420 63,800 Program fees In addition to public and educational program fees of $20,000 from school programs and daytime and weekend programs, as projected in the Lord Study (5.2.5), this model includes revenue of $125 per evening in program fees on weekday evenings during the winter season. Ninety program evenings annually will result in $11,250 in additional annual program revenue beyond what is projected in the Base Case. Other earned -- Other earned revenues consist of $5,000, as shown in the Lord study and the Base Case, increasing $1,000 p.a. for years two through five, plus $7,700 in additional revenue from Museum patrons consuming snacks and nonalcoholic beverages on the Museum terrace during the 22 week summer season ($50/day (net) x 7days/week x 22 weeks). Shipyards Model - Expenses Expenses of this model build on the Base Case by adding expenses relating to the additional hours of operation and new programs that are features of the Shipyards model. Assumptions that distinguish expenses of the Shipyards model from the Base Case include the following: Salaries, Wages and Benefits This model includes two additional casual staff for the 22-week summer season (Program Assistant and Admissions/ Information/Retail Assistant). It also assumes that existing staff schedules will be adjusted to provide coverage as needed for the additional hours of operation. For the 30 week winter season two 4-hour shifts for Admissions/Information/Retail Assistants for three nights per week have been added. Over the course of a full year, the Shipyards Model adds 1.6 FTE to the Base Case (i.e FTE versus FTE). Occupancy Occupancy costs for the Shipyards Model, with its 45% increase in operating hours over and above the Base Case, are projected to increase by

25 Page 25 of 31 about 11% over the Base Case to account for additional janitorial services, cleaning supplies and utility usage associated with increased public use of the Pipe Shop facility. As with the Base Case, a common area charge of $30,000 has been included as an occupancy cost for site maintenance, janitorial, waste removal, pest control security, landscaping, maintenance and repair and event programming for the common area around the Pipe Shop. Exhibitions Costs to develop exhibits are the same for both the Base Case and the Shipyards Model. However, an additional 5% per year has been added to the Exhibitions expense in the Shipyards Model to account for higher maintenance costs that may result from longer hours of operation. Programs Because of the increased hours of public operation in the Shipyards Model, program costs are expected to increase 10% above those assumed in the Base Case. Collections Care and Conservation These costs remain consistent between the Base Case and the Shipyards Model. General and Administrative Consistent with the Base Case, this model projects costs reflecting 13% of salary costs in year one and 12% in subsequent years. Marketing Marketing costs are consistent with Base Case and have not been increased despite a projected increase in admissions. Retail Cost of Goods Sold As discussed above, the cost of retail goods sold is generally in the range of 50-60% of gross retail sales. The Shipyards Model assumes the cost of goods sold will be 55% of sales each year. Retail Cost of Goods Sold Shipyards Model Total Sales $146,410 $135,520 $124,690 $126,890 $143,990 Cost of goods sold (@55%) $80,525 $74,536 $68,728 $69,790 $79,145

26 Page 26 of 31 Program and Rental Space Options The Shipyards Model proposes community programming in collaboration with partner organizations on weekday evenings during the winter season in the lobby and multipurpose room (#1 and #2 on plan), and Idea Exchange (#3, called Galleria on the plan). Walls of the multipurpose room can be fully- or partially-opened or closed to maximize flexibility of spaces. The gift shop would remain open during those evenings, but the museum galleries would be closed. Rental Options are varied. Some rentals for example, the seminar room (#6) or the Multi-purpose room (#2) with walls closed can occur while the Museum is open to the public. Larger functions involving the Lobby and the Idea Exchange can be accommodated when the Museum is closed to the public. It is also possible to rent the entire building, including access to the core galleries on floors one and all of floor two. Event capacity and configurations are as follows: Banquet seating: 1 to 120 people Standing food/drink service: 1 to 175 people Seated lecture: 1 to 150 people Event types include: wedding receptions, banquets/dinners, private parties, corporate events, meetings, conference, conventions, lectures/speakers, retreats, performances, and filming/photo shoots. Pipe Shop Plan of the ground floor

27 Page 27 of 31 Financial Risk Management and Contingencies As a municipal museum, the NVMA is in the fortunate position that close to 60% of its revenues are relatively assured through municipal grants. This is very similar to the proportion of costs associated with the NVMA s regular staff and therefore relatively fixed. There is more opportunity to decrease the remaining portion of the expenses or increase the other revenue sources should that be necessary to balance the budget. One general financial risk is inflation. Again, the NVMA is in a relatively fortunate position in that the municipal grants are expected to rise with inflation. Consistent with the Lord study, the staff costs are projected to increase 0.5% per year faster than inflation in both service scenarios. The remaining costs in these scenarios generally are not projected to increase in response to inflation nor are the revenues, which we expect can be increased in line with inflation if necessary. NVMA currently has an operating reserve of close to $90,000 which provides some flexibility to absorb varying financial results from year to year and some time to respond to unfavourable financial result trends. Options are available to respond to different financial situations, to mitigate risk and implement contingency strategies if revenue targets are not met or if expenses exceed budgeted amounts. Options include: Strategies to Increase Revenues: o Implement price increases The Museum s admission prices were set at the average of Canadian heritage institutions in Since then, average admission prices have risen. There is room to implement a slight increase ($0.50 to $1.00) in admission prices without significantly affecting attendance levels. o Change the product mix in the Gift Shop to generate increased profits per visitor. o Sell related products such as a downloadable audio tour/podcast of the Museum that also includes a walking tour of the Lower Lonsdale and Shipyards areas. o Increase membership revenue by implementing a special low/discounted fee for members of affinity groups. o Increase admissions by exploring partnerships with local hotels to provide their guests with special admission opportunities.