Through Victoria’s Major Community Initiatives and Events Grant (MCIEG), the City is looking to invest $250,000 in the Other Guise Theatre Society so they can refinance and refurbish an arts hub space downtown.
However, recent developments regarding the downtown property secured by the Society have left the City to reconsider how, or if, they should give the additional funds to the would-be arts hub.
In 2023, the City provided $100,000 to the Other Guise Theatre Society to go towards the acquisition of 716 Johnson Street.
Then, on January 10th, 2023, the Society purchased the property for $2,394,000 and two mortgages were registered against the property.
Based on the Society’s December 2023 financial statement, $1,927,283 remains outstanding on the two mortgages.
According to the City, if the second mortgage was not paid in the amount of around $1.3 million by December 31st, 2024, then the sale of the property in question would be triggered automatically.
The Other Guise Theatre Society has been trying to secure the funds needed to pay the amount due, and now the City must consider if further investment is financially responsible with the risk that the arts hub may not open at all.
The additional funding would be coming from the MCIEG program, which was created by the City in February 2024 to provide financial support for major community initiatives and events that are not eligible for funding through other City grant programs.
The City is looking at whether or not they should give the Society the additional $250,000 through the MCIEG, and how best to go about giving this money to them while protecting their investment.
The space located at 716 Johnson Street intends to create a performing arts hub that includes black box theatre, rehearsal, office and food and beverage space to provide.
City staff have gone over the grant application from the Other Guise Theatre Society and consulted with colleagues in finance and real estate to come up with options that can be explored in order to protect the interests of Victoria, while also providing the funds for the hub.
The options City staff will present to city council this Thursday, January 16th will be:
- Issue the grant money as a forgivable loan
- Register a mortgage against 716 Johnson Street to secure use of the forgivable loan for certain purposes
- Secure the use of the money for certain purposes through an Irrevocable Letter of Credit (ILOC)
- Deny the grant request
- Approve the grant with conditions
The five options
If option one is what the city council decides, then the money will be issued as a forgivable loan.
This means that the funds will only be paid out if and when the Society proves it has paid off the second mortgage, the loan will not gain interest and the loan will have a 10-year term.
Additionally, for every year that the Society remains in good standing, does not become insolvent or bankrupt and operates the building at 716 Johnson as an arts hub with regular programing, 10% of the initial loan will be forgiven.
The second option is similar to the first but involves the City registering a mortgage against the property as well.
According to City staff, this could better protect their investment because if the Society ends up shutting down, they will have a better chance at regaining their funds.
The Irrevocable Letter of Credit (ILOC) option involves entering into a contract which dictates that the Society must operate for 10 years under certain conditions and only use the City funds for their intended purposes.
If the contract is breached, the Society would owe the City their money back.
According to the staff report, this option is not favourable by the society due to time constraints and the additional costs incurred from administrative obligations.
The fourth option would be just to deny the $250,000 grant application, which might bring about the end of the arts hub before it even began.
And the fifth option would see the grant application approved with additional conditions that would need to be laid out by staff.
Being that the MCIEG program is intended to be flexible and help the arts communities and major events when needed, City staff believe they have explored all viable ways to fund the Other Guise Theatre Society project if council chooses to do so.
Victoria’s city council will debate the merits of each option at length in the committee of the whole meeting held on Thursday, January 16th.
