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The numbers just don't add up for Mackay Park

Council have made it very clear that they will not be providing a Mackay Park project business case of their Concept D design as it is 'Commercial in Confidence'.

A business plan outlines the costs of the building, the expected revenue and the projected expenditures in running the facility from electricity to labour and depreciation.

Council advises that by revealing the projected attendances of the pool, gym, café and theatrette they will be giving an unfair advantage to anyone interested in leasing those spaces.

Therefore… the entire Business Plan is to remain secret including the projected costs of running such a facility.

Fortunately they released an earlier Business Plan which they used to secure the $51m in grants from the State and Federal Government. With little change of the provision of facilities those numbers still basically apply. The Otium Business case was drawn up in July 2017 so it is reasonable that costs have risen in the last two years.

What we know:

Council has secured $51m in grant funds To date they have spent an additional $4m in design and consultants They have lodged a DA that gives the cost of build and demolition of existing at $49.5m The Otium Business case in 2017 identified the cost of building the complex at $46m

Otium projected revenues and expenditures revealing that the facility would run at a loss.

Image source

Otium stated “It should be noted that the financial model does not incorporate sensitivity analysis or depreciation at this stage. This will be done after the base case assumptions and preferred design option have been approved by Council.”

It has been calculated that the rate of depreciation is $1.8m per year that is not budgeted for in rate revenue and will have to be found ‘somewhere’, either in increased rates or decreased services.

They also said “Further, once the preferred design option and financial modelling has been approved and finalised, an assessment of the economic impact of the facility should be undertaken by Council to support any applications for external funding.”

To date no such assessment of the economic impact of the facility has been done. This means the community are in the dark as to how much they will have to contribute to keep the facility open.

To determine the economic impact of the facility Otium speculated on usage of the facilities and allocated entry costs

Image Source All up in the first year Otium speculate that 276,000 people will visit the Centre (756 every day).

In this mix they speculate that 38,000 will visit the theatre returning an income of $286,414 based on the venue presenting a theatre/ event season (entrepreneurial program) consisting of 12 productions over 12 months.

Otium state: “For the purpose of budget analysis the following criteria was used: • 12 productions • 55% of capacity sold for each performance at an average ticket price of $35 full and $22 concession of the total sold 30% full price and 25% concession. • The ticket prices are used as an indicator only as some performances would be less i.e. children’s shows or morning music and others more expensive ie opera, large scale productions”

All up Otium projects an annual loss of $300,00 for the theatre however if there are no performances (as there are no commercial demands for such a space) the loss will be far greater.

From the projected Profit/Loss it appears that the only facilities that will turn a profit are the Gym, Health and Fitness programs and the Café.

How did they calculate the entry fees?

All fees and charges adopted by Otium were “based on similar facilities in regional locations by activity type. The fees and charges assumptions are listed by activity area in the 10-year financial model reports by activity area by casual visit, program visit or membership”.

Council have decided to withhold the latest Business Plan (if they have one) citing Commercial in Confidence however the above figures indicate that the Mackay Park Centre is scheduled to run at a $2m loss per year (including depreciation) even before it opens.

By comparison with the secrecy that surrounds Eurobodalla Council, the figures from the $36.6 million Stromlo Leisure Centre due for completion in the first half of 2020 are available and are of interest. The ACT Government is looking for a contractor to manage and operate the publicly owned facility which will service the 100,000 residents of Weston Creek, Woden and Molonglo communities and will include an eight-lane 50-metre competition pool capable of being split into 2 x 25-metre short course swimming pools, learn-to-swim pool, leisure pool and a splash pad and slide.

It will also offer a gym, male and female amenities, family change rooms, creche and a kiosk/cafe – which, according to the tender documents, the contractor must provide, offering a mix of food and beverage services, including healthy options.

The gym will be at least 700 square metres, with cardio equipment, pin-loaded weights, functional training, free weights, as well as a group fitness studio. The gym area will also have its own dry change rooms - male, female and unisex.

The Centre itself must offer a balanced mix of activities between sport, social, leisure, health, lifestyle and wellness-based programs as set out in the Yearly Service Plan.

It will open every day of the year except Good Friday and Christmas Day – Monday to Friday, 5:30 am to 9:30 pm; Saturday, 7 am to 7:30 pm, and public holidays 8 am to 6 pm.

Entry fees set under current guidelines will be: Standard casual entry $7.50 in 2019-20, rising to $8 in 2020-21; concession casual entry $5.30 and $5.60; pensioner casual entry $4, unchanged in 2020-21; disabled casual entry, free; family casual entry $19.55 and $20.40.

So we know that the figures for entry to the proposed Batemans Bay pool area are on the mark - so why the secrecy? Now it is just a matter of projecting what Council considers will be the daily visitation to determine the projected income for a prospective lessee.

127,276 visits per year! That is 348 visits per day ! Where did that number come from?

We know that in 2017/2018 Batemans Bay and Moruya Pools opened for seven months of the year, October 2017 – April 2018 and Narooma Pool operated 12 months a year (with scheduled maintenance closures). Total visits to all three pools was 100,700. Council does not avail the breakdown figures for each pool however from the following figures reflecting a seven month period each season it is clear that the 2015-2016 average of 105 per day applied to the whole year (37,796) does not come close to the Otium projection of 127,276. Therefore projected income is far less than anticipated. $1,090,349 anticipated with projected visits of 127,276 = $8.50 per visit By known and projected Batemans Bay pool figures we have 37,796 x $8.50 = a projected income of $321,266 - a long way short of $1,090.349 Council may well dispute all of this however for them to do so would require them to reveal their Business Plan, that they refuse to do.

Image: from the Eurobodalla Aquatic Strategy NOTE: The Aquatic Strategy said that the Swimming Pools Strategic Review, 2005 review (p7) indicated Batemans Bay  Opens from September to mid-April (32 weeks).  68,260 visits per annum, which translated to an average use of 305 per day. With a bit of annual adjustment it would be easy to extend 305 a day to 348. If that 2005 figure given to Otium is correct what does that make of the above chart 2011 - 2016 also provided to Otium by Council? Which data is correct? Otium did state "Readers should be aware that the preparation of this report may have necessitated projections of the future that are inherently uncertain and that our opinion is based on the underlying representations, assumptions and projections detailed in this report. OTIUM’s Aquatic Strategy dated February 2017 stated that:

“It identifies the potential catchments for each of Council’s three pools. The potential populations for each pool were listed as:

Batemans Bay Pool = 18,000 (45% of the total population)

Moruya Pool = 12,000 (30% of the total population)

Narooma Pool = 10,000 (25% of the total population)

Council advised that “In keeping with Council’s brief for the this project, a targeted stakeholder engagement process was undertaken in order to inform the Eurobodalla Aquatic Strategy.

It has been revealed that interviews for the Eurobodalla wide Aquatic Strategy were held with the following groups: · YMCA management and pool managers · Batemans Bay Chamber of Commerce · Eurobodalla Health Service Community Consultation Committee · Batemans Bay U3A · Members of Council’s Sunset Committee · Batemans Bay Indoor Aquatic Centre Committee · Batemans Bay Tigers Rugby League (Juniors) · Batemans Bay Tigers Rugby League (Seniors) · Bay Soldiers Club · Village Centre Batemans Bay · Range of other community/ cultural organisations It is IMPORTANT to remember that the commissioned Otium Eurobodalla Aquatic Strategy was adopted by Council with NO notice to the community nor any consultation with the community as a whole (other than those listed above) and was adopted only as an element of a wide ranging motion that was presented as a Mayoral Minute during an Extraordinary meeting.

The Otium Aquatic Strategy identified that “Given relatively modest projected growth of 6,749 to 2036, it will be important to ensure that future aquatic provision is sustainable. It will not be possible to provide a high level of contemporary aquatic facility provision in each township and product differentiation will be necessary.

· The much higher median age (54 years) in Eurobodalla compared to the NSW median age (38) suggests there is likely to be higher demand for indoor, heated program water that supports therapy and fitness activity.

· Conversely, the high number of tourists, many (39%) comprising families with children suggests there is likely to be high demand for leisure and adventure water during the high tourist season periods. Further, with Batemans Bay attracting the majority of tourist related overnight and day visitors to the Shire, the demand for leisure and adventure water in Batemans Bay is likely to be higher than in other localities.

· The significantly lower incomes compared to NSW and higher level of socio-economic disadvantage, suggests residents’ access to aquatic and leisure programs and services may be price sensitive. This is less likely to be an issue for the tourist sector.

In light of the above the Aquatic Strategy predicts a spike during the high tourist season periods with a seasonal drop-off as older people focus on the indoor, heated program water that supports therapy and fitness activity.

Now to return to the turnstyle predictions that drive projected income.

348 visitors to the pool every day - of which 64 will be Health and Fitness in the heated pool – every day, 365 days of the year!! Add to that 56 to the gym each and every day, also 365 days a year. Then the expected 3,226 visitors to each of the anticipated 12 theatre productions.

Council’s Business plan, if revealed, would substantiate that they do not expect any significant increase in pool usage (up from 304 peak season to 348 projected). With an entrance fee of $8.50 the Mackay Park pool is already predicted by Otium to lose over $0.5m per year. The proposed 350 seat Theatre has no evidence of any commercial demand that would provide 12 shows per year so the anticipated expected loss of $350,000 a year is very conservative given that no income is guaranteed and depreciation has been considered (estimated at $290,000 per year) With Otium’s already conservative estimated loss of the Centre at $969,000 per year from year 1 and the expected blowouts from non-contributory under-utilisation of the theatre and meeting rooms, matched with Council’s present considerations of installing and maintaining a free splash pad at Corrigans Beach, and the projected lease of the gym space at $3790 per week, it becomes evident why Councillors want to keep the financial details (if they have cited any) out of the public eye.

Once built, the reality of the financial burden will become evident as the expenditures and depreciation MUST be recognised in the annual budget. Council’s options will then be to reduce other services, to take out an inter-generational loan, to dip in to savings or to seek a Special Rate Variation.

One way or the other it looks like the Mackay Park project isn’t the Gift of free money, by way of grants, that councillors would like us to think with such throw away lines as “we are getting a $50m complex for the cost of a measly $10m” ).

Little do these councillors realise that ‘The Trojan Horse’ comes with the burden of ongoing maintenance and running costs. Once everyone realises it is unaffordable to patronise on a regular basis it will be more like a Donkey.

But for now the Great Beast is heralded as coming, to be led down the street by the Mayor and her Councillors as their great triumph ….. however when it passes by, with much civic applause, a foetid green myasma will linger and the community will be left to clean up the dung.

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