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Summary: This report receives the Coffey Commercial Advisory and the Interim Report of the Denmark Aquatic Centre Project Team and considers their request to engage Council staff to prepare further reports and make recommendations regarding future directions that the Team considers necessary, concerning the feasibility of an indoor heated aquatic facility in Denmark. Both of the reports have been previously provided to Councillors and therefore have not been re-copied with this Agenda. An electronic version of the documents can be downloaded from Council‟s website at www.denmark.wa.gov.au/ourcouncil/council_minutes/currentcouncilagenda under Attachment 8.2.2. Background: The report titled “Feasibility Study for a Sustainable Indoor Heated Aquatic Facility” which has been prepared by David Lanfear of Coffey Commercial Advisory in consultation with the Shire of Denmark Aquatic Centre Project Team. The second tabled report is titled “Denmark Aquatic Centre, Interim Report of the Project Team, 12 April 2011” (this report is a heavily marked up version of the first report with a comprehensive addendum). This report also concludes with a number of recommended future actions for the Project Team and recommends that the Director of Finance & Administration prepare a report on the estimated costs and annual deficits for the three aquatic facilities indentified in the Coffey report using the Shire of Denmark‟s normal business practices taking into account comments identified in the Project Team‟s Interim Report. The need for an indoor aquatic facility has been raised on a number of occasions and addressing it has become the prime objective of the Denmark Aquatic Centre Association Inc. (DACA) which currently has over 450 financial family memberships. DACA‟s interests are represented by the Denmark Aquatic Centre Committee Inc. (DACCI). The issue of an aquatic facility has been discussed by Council on numerous occasions (reports from 2006 - 2009 are attached) and two previous feasibility studies and a needs analysis have been undertaken. On the 19 June 2007 Council made the following resolution; “That while Council will not, at this point, offer any financial support for the building or operating costs of an indoor heated aquatic centre in Denmark, it recognises the many benefits that such a facility would offer to the Denmark community and therefore gives its strong in principle support to DACCI in its quest to raise funds for the project from a range of other sources. Further, Council
1) will nominate appropriate Officers to assist DACCI to identify possible sources of funding / grants; 2) Undertakes that when DACCI can demonstrate to Council‟s satisfaction that sufficient funds have been raised to make the project viable, it will: i) make available an appropriate site for the building of the facility; and ii) assume full responsibility for the building and operation of the facility. 3) DACCI can advise potential donors of the Council‟s in principle support for the project and of the undertakings Council has given; and 4) will append a statement of its in principle support for an aquatic centre to any formal applications for grants.” Res: 193/07 In response to this decision, Council further resolved (Res: 490808) in October 2008 to form a Project Team consisting of Shire staff and DACCI members to appoint and oversee a Project Officer/Consultant to complete a Needs Assessment into a Sustainable Indoor Heated Aquatic Facility. Jill Powell & Associates performed this study and reported to the Project Team in May 2009. Council on 26th May 2009, resolution 110509 decided; That with respect to a sustainable indoor heated aquatic facility, Council: 1) Receive the report of the joint Council / DACCI Project team, dated 8 May 2009, titled “Needs Assessment for a Sustainable Indoor Heated Aquatic Facility in Denmark”; 2) Receive the Jill Powell & Associates report titled, “Needs Assessment into a Sustainable Indoor heated Aquatic Facility”; 3) Acknowledge that there is a need for an indoor heated aquatic facility in the Denmark locality; and 4) Make application for a Community Sporting and Recreation Facilities Fund (CSRFF) Grant to undertake a Feasibility Study for a proposed indoor heated aquatic facility in Denmark and a net cost of $20,000 be included in Council‟s draft budget considerations for 2009/2010.
In response to this resolution, Council staff successfully obtained a Department of Sport Recreation CSRFF grant of $10,000 towards the study during the 2009/10 financial year and a Project Team was formed to oversee the Feasibility Study. The team consisted of two Councillors, two members from DACCI, the Director of Community and Regulatory Services; Chris Thompson (Regional Manager of the Department of Sport and Recreation) and Damian Schwarzbach, Council‟s Manager of Recreation Services who has acted as the Project Manager. The attached Feasibility Study is the outcomes of their deliberations with the consultant. Comment: The Consultant‟s report has indentified three development options which can be found in section 9.3 of the report being; • 6 lane, 25m pool with a toddler‟s area and a hydro therapy pool.
• 8 lane, 25m pool with a toddler‟s area and a hydro therapy pool.
• 3 lane, 25m pool with a toddlers area and a hydro therapy pool and further 96m2 of programmable space.
While the concept of a three (3) lane option being in the study has drawn sustained criticism from both DACCI, and most pro pool advocates, it has been retained to provide Councillors with a cost comparison of a smaller pool. The 3 lane pool remains Coffey Consulting preferred option and they have reiterated this in their most recent email dated the 5/8/2011 which is attached Out of the three options, the 6 lane pool was selected for a more detailed assessment as the Project Team believed that from the community‟s perspective it was the most widely accepted option. The estimated construction costs of all options can be found on page 66 of the report and are as follows: Option 1 - 6 lane pool with hydrotherapy: $8.17M. Option 2 - 8 lane pool with hydrotherapy: $8.95M. Option 3 - 3 lane pool with additional water space and hydrotherapy. $7.97M. Using the conservative scenarios found on page 68 of the report the projected annual deficits excluding depreciation and financing costs are as follows: Option 1 - 6 lane pool $240-357,000 per annum Option 2 - 8 lane pool $280-412,000 per annum Option 3 - 3 lane pool $214-326,000 per annum While these deficits may seem high at first glance they are not unreasonable when compared to the 2010-2011 budgeted operating deficits of the following local government aquatic facilities. Manjimup Indoor Aquatic Facility $425,957 ($311,459 in 2009-10) Busselton Indoor Aquatic Facility $811,000 ($562,000 in 2009-10) Bunbury Indoor Aquatic Facility $430,000 Margret River Indoor Aquatic Facility $450,000 Albany Indoor Aquatic Facility $900,000 ($1,251,461 in 2009-10) Note: These figures have been sourced by telephoning officers and detailed analysis of the respective Council‟s costings and figures has not been undertaken. The Department of Sport and Recreation (letter attached dated the 14 June 2011) have advised that in their opinion the report is of a high quality and covers the areas that would be expected in a feasibility report. They have also recommended that Council should prior to proceeding towards construction of a facility, verify the staffing costs (as they appear to be to light) and resolve the question of whether the community‟s preference is in fact for a six lane pool. They also advised that if Council intends to proceed with the project that it should perform its own due diligence on the projected operating costs and staffing structure including “what if” financial stress testing on the outcomes of the Study. The Chief Executive Officer and the Director of Finance & Administration, who both have extensive experience in the management of municipal swimming pools, have also assessed the consultant‟s report and are also of the opinion that the staffing costs appear to be to light. While the Project Team see the Coffey report as a structurally sound document that is a useful basis for further research the DACCI, members on the Project Team question some of the methodology and a number of parameters on which the calculations in the report are based. These concerns and comments are clearly marked up in the Team‟s revision of the report titled “Denmark Aquatic Centre, Interim Report of the Project Team, 12 April 2011” and its associated addendum. The Project Team are also of the opinion that the report should be subject to the business costing and consideration of Council‟s senior staff prior to its final presentation to Council for an in principle decision regarding the projects future. With this objective in mind, the Project Team have made the following recommendations to Council. Project Team Recommendations: The project team effectively has two sets of recommendations regarding the report. The first set of recommendations is a list of six further items that they would like to see further researched which are numbered G3-01 - G3-06 which and be found on the final page (p136) of the report that is titled “Denmark Aquatic Centre, Interim Report of the Project Team, 12 April 2011”. Items G3-01 - G3-06 read as follows: G3-01 There is a need to improve the statistical reliability of the benchmarks. This will involve: • preparing a sample of facilities that are more representative of the Denmark case; • differentiating between wet and dry usage in each member of the sample; • liaising closely with key DAC and DRC user groups – schools, Sporting clubs etc; • finding the most representative user profile for Denmark.
G3-02 There is a need to take a closer look at the DAC/DRC staffing structure. This will involve: • preparing some specific operational scenarios; • defining additional staff required; • costing the scenarios and examining options for varying levels of service provision.
G3-03 There is a need to review the hydrotherapy component of the facility. This will involve: • indentifying user groups; • preparing some specific operational scenarios; • defining additional staff required; • costing the scenarios and examining options for varying levels of service provision.
G3-04 There is a need to reconsider the proposed floor plan. This will involve: • engaging architectural input to review the draft; • determining the layout that ensures optimal functionality for wet and dry operations; • examining the options for reducing the capital cost; • defining the key factors fundamental to an environmentally sensitive design.
G3-05 There is a need to develop a comprehensive Environmentally Sustainable Design (ESD) strategy. This will involve:
• engaging with architects, engineers, and air-conditioning professionals etc as required; • preparing a concept plan having pre-determined environmental sustainability credentials; • submitting the revised concept plan to a quantity surveyor for analysis. G3-06 The revised concept plan needs to be subjected to rigorous risk analysis. Officer Comment on the Working Group‟s first set of recommendations: The Working Group‟s first set of recommendations can be split into two categories. The first (G3-01) relates to a desire to see statistical reliability of the Benchmarks that Coffey Consulting have used in their report verified and the second relate (G3-02 - G3-06) to a desire of the Project Team to present both Council and the Denmark community with a complete project model and have sufficiently detailed data to be able to fine tune the operation facility so that its operation is as efficient as possible. The Project Team‟s comments in its “Interim Report‟ which includes G3-01 - G3-06 have been referred to Coffey Consulting who have advised (email attached) that they stand by their work and have put considerably more work into the report than is the norm in the industry. They have also advised that they have responded to requests from the Project Team for further information and verification of details in the report on two previous occasions and commented that further accurate costing of the project is not practical until such time as the project has progressed to the next stage which is the preparation of architects plans. In considering the Working Groups comments and their recommendations numbered G3-01 - G3-06 Councillors should also note that the DACCI representatives on the group who themselves have considerable expertise, have offered to perform much of the research work that they seeking using the professional contacts that they have and the numerous retired professionals in Denmark. While this offer is welcome and has the potential the save Council significant amount of funds when compared to using private consultants it is unfortunately not independent and has the potential to undermine the transparency of Council‟s decision making process when it comes to making an in principle decision regarding the future of the project. Coffey Consulting however are correct in pointing out that researching items G3-01 - G3-06 are activities that are normally undertaken prior to going to tender once an in principle decision has been made to proceed towards the construction of a facility. A typical community infrastructure process proceeds as follows: Stage 1: Expression of the need for a facility Community members, lobbyists or Council‟s own town planning or corporate strategic planning process identifies a need. Stage 2: Community Consultation regarding the need for the facility. This process involves a decision to put the issue out into the community to raise awareness and to seek feedback. If there is sufficient interest then the project then proceeds to a Needs Analysis. Stage 3: Conducting Needs Analysis This process involves defining the level of need in the community for the facility and projecting its likely usage and likely demand on this basis. The Needs Analysis generates the first two “critical decision points” in that there must be sufficient community interest for it to be warranted and if it fails to identify a widespread need then the consideration of the proposed project proceeds no further. Stage 4: Preliminary Costing and Decision to Proceed to a Feasibility Study This step is also known as a prefeasibility study and can be either conducted externally using consultants or internally using local government staff. The process involves researching the construction cost and operating costs of similar facilities and then comparing it to Council‟s financial capacities under its 10 year financial plans to produce a likely cost per ratepayer of the proposed facility. The prefeasibility study stage is an important critical decision point in any community infrastructure decision as it determines whether the Council and/or the community is prepared to pay for the costs associated with building and operating the facility. If a project fails at this stage there is no benefit in the community spending further resources to research it further as it draws away funds (and time and energy) that could be spent on other projects. Stage 5: Independent Feasibility Study Once a local government has satisfied itself that a project is within its projected financial capacity and is needed by the community and needs to be provided within the next 10 years in the next stage in the process is to perform an independent feasibility study. The purpose of an independent feasibility study is four fold. 1) It assists decision makers in performing due diligence regarding the project and deciding whether a project proceeds to construction. 2) It is an independent set of eyes with industry knowledge that indentifies will factors, risks and opportunities that may have been missed in the prefeasibility study. 3) It further defines the project. 4) It satisfies the requirements of funding agencies such as the Department of Sport and Recreation.
The feasibility study stage is an important critical decision point where once a local government has applied its business costs it makes an in principle decision to either; initiate, postpone, schedule into the future or not proceed with a project. Stage 6: Further due diligence, stress testing and further design and research of factors, plant and equipment associated with the project. The purpose of this stage is to assemble all of the information that will be required to design a successful project that is efficient and meets the needs of end users. Stage 7: Decision to engage a project architect and to design the facility This step is another critical decision point as it is where form, size layout and facades of the project and the costs of bringing services to it are determined Stage 8: Decision to direct the architect to prepare the full working drawings. This is the final stage in designing and costing the project before it goes to tender. Stage 9: Decision to call tenders based on the full working drawings. This process involves a transparent and accountable process to determine whether the costs expected and budgeted meet the „market‟. Stage 10: Decision to accept a tender and proceed with the project The decision to accept a tender and commence the project is the final critical decision point in constructing a facility. Stage 11: Successful commissioning of the project and pursuit of any warrantee work. The successful commissioning of a facility and the pursuit of any warrantee work associated with it is a major part of successful project management. Stage 12: A year 4 minor refit to correct any minor problems that have occurred through poor design or construction. This need to program for a year 4 minor refit seeks to reviews the facility‟s operation and correct any minor problems that have occurred through poor design or construction is generally a reality with large and complex projects of this nature. In terms of the Denmark Aquatic Facility‟s project status, when compared to a typical community infrastructure project process, is that while Council (in resolution 193/07) has subject to a number of conditions given the concept in principle support to enable DACCI to fundraise it, in effect, skipped the prefeasibility study critical decision point in August 2008 when it chose to initiate its third feasibility study in lieu of making an in principle decision regarding the project‟s future. In addition to this the Working Group are proposing to perform a significant amount of further work on the project with the goal of presenting a fully considered project to Council before for an in principle decision regarding the project‟s future. While presenting a fully considered project to Council from a decision making perspective at first glance seems desirable it has some of the following potential problems associated with it. The first risk is that it is a process that, if conducted independently, will come at a significant cost to Council in terms of consultancy fees and staff resources and that these resources (and time) could be better spent elsewhere, if Council subsequently resolves not to proceed with the project if the community considers the project to be unaffordable. The second risk is that the more time and resources Council invests or allows the community to invest in the project the more obligated it will feel to proceed with project and the less able it will be to make an objective decision regarding it. The other important key aspect of the recommendations G3-01 - G3-06 is that there are no financial implications detailed, no responsibilities assigned and no dates of achievements / completion indicated (the normal who, how, when, and how much). At present it simply summarises and states the „what‟ and the „why‟. The primary concern of the CEO, with the recommendations, is that the Project Team has not indicated how they or Council can achieve these recommendations (for example, utilising in-house versus external consultants). It simply requests more time to achieve these tasks stating that they believe the final report of the Project Team must await completion of this work. It is the Officer‟s view that the Council and Project Team have sufficient research to make an informed decision on whether to proceed on the principle (of asking the community whether it wishes to invest in a facility), prior to investing more time, and potentially dollars, on more analysis, design and research. Project Team‟s Second Set of Recommendations: The Working Group‟s second set of recommendations relate to the referral to Council of the Working Group‟s report titled “Denmark Aquatic Centre, Interim Report of the Project Team, 12 April 2011” and are as follows: 1) That Council Administration Staff be requested to prepare three indicative Local Government funding scenarios for an Aquatic Centre in Denmark based on recent funding models as supplied by the Great Southern Regional Manager for the Department of Sport and Recreation.
2) The Interim Report of the Project Team (which includes the CCA Final Report in its entirety), subject to responses from David Lanfear and any other relevant factors identified by Senior Council Officers, be utilised in these calculations.
3) That the results and an explanation of this modelling be presented back to the Project Team in a meeting with the Director of Finance.
4) That the funding scenarios will be presented by the Project Team to Council for an “In Principle” decision regarding the project. Officer Comment on the Working Group‟s second set of recommendations: The funding models referred to in this recommendation are tabled in the attachment titled “Possible Project Funding Contribution Percentages” and range between 33.33% up to 83.33% of the project cost. In considering these funding scenarios Councillors should note that they are competitive and not guaranteed. Councillors should note the higher funding models may require Council to forgo funding in other areas. The alternate recommendation provide by Staff provides for greater scope than that suggested by the Project Team. Conclusion: Council pursuant to resolution 193/07 has, subject to a number of conditions, given the concept of an aquatic facility in principle support. Given this, it is now entirely appropriate that the CEO be authorised to request the Director of Finance & Administration to assess the financial analysis, assumptions and modelling of both the Consultant‟s report and the also the Project Team‟s Interim Report and its addendum. Thereafter it would be appropriate to ask the Project team to update the Council on its ability or likely timing to make a recommendation to Council on ‘a decision to implement, amend, postpone, stage development or abandon the proposal’ for the Aquatic Centre. Consultation: The preparation of the Consultant‟s report has involved a public meeting, a survey and dialogue with key stake holders and community groups. Statutory Obligations: Nil Policy Implications: Council has previously given conditional in principle support to the concept of an indoor aquatic facility in Denmark in Res: 193/07. Budget / Financial Implications: Aquatic facilities have significant construction capital, ongoing operating deficits, maintenance and mid life refurbishment costs associated with them. Any facility constructed in Denmark will have a significant impact on Council‟s financial capacity for the life of the facility. It is a Local Government industry reality that community aquatic facilities run at significant annual deficits. This is best evidenced by the fact that the Department of Sport and Recreation‟s interpretation of a “sustainable facility” is not one that breaks even or runs at a profit but rather one which runs within loss parameters that the community is prepared to pay for during the life of the facility. In considering the concept of what constitutes a “sustainable deficit”, Councillors should note that the debate should include not just the cost of meeting the deficit but also a consideration of what projects will have to be delayed or abandoned as a result of Council‟s commitment to the project. Strategic Implications: There are no known significant strategic implications relating to the report or the officer recommendation. Sustainability Implications: Environmental:
The consideration of an indoor heated aquatic facility in Denmark will have environmental implications. The industry norm is that heating represents around 10-15% of the cost of running a commercial swimming pool meaning that there are significant carbon footprint concerns associated with the construction of a heated indoor aquatic facility in Denmark. While the Consultant‟s report mentions green energy options it does not discuss them in detail. Further work will be required in this area if the proposal to construct a facility proceeds further. Economic:
There are no known significant economic implications relating to the report or the officer recommendation. Social:
There are significant health and well being benefits for the Denmark Community associated with the construction of an aquatic facility. Voting Requirements:
| Simple majority. PROJECT TEAM RECOMMENDATION | ITEM 8.2.1 |
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1. That Council Administration Staff be requested to prepare three indicative Local government funding scenarios for an Aquatic Centre in Denmark based on recent funding models supplied by the Great Southern Regional Manager for the Department of Sport and Recreation. 2. The Interim Report of the Project Team (which includes the CCA Final Report in its entirety), subject to responses from David Lanfear and any other relevant factors identified by Senior Council Officers, be utilised in these calculations. 3. That the results and an explanation of this modelling be presented back to the Project Team in a meeting with the Director of Finance. 4. That the funding scenarios will be presented by the Project Team to Council for an “In Principle” decision regarding the project.
| OFFICER RECOMMENDATION | ITEM 8.2.1 |
| That with respect to the Interim Report of the Denmark Aquatic Centre Project Team, Council; 1. Receive the Coffey Commercial Advisory report titled “Feasibility Study for a Sustainable Indoor Heated Aquatic Facility in Denmark”. 2. Receive the Interim Report of the Project Team. 3. Authorise the CEO to request the Director of Finance & Administration to; a) Comment on and assess the financial models, scenarios, assumptions and projections of the Coffey Report and Project Team Interim Report with respect to the proposed Aquatic Centre and its implications on Council‟s future Budgets and Long Term Financial Planning, with this assessment to be provided back to the Project Team by no later than 30 November 2011 and; b) Convene no later than 31 October 2011, a risk analysis seminar for the Project Team, Councillors and the Senior Staff of Council relating to the Aquatic Centre decision making framework through the Local Government Insurance Service (Council‟s Insurer) noting this is at no cost to Council. 4. Request the Project Team to report to Council by no later than 28 February 2012 on; a) Its assessment of the Financial Analysis prepared by the Council‟s Director of Finance & Administration and; b) The risk analysis prepared pursuant to part 3 and; c) Its ability or likely timing to make recommendation(s) to Council on how to proceed with the outstanding issues they note as requiring further study denoted as “G3-01” to “G3-06” and; d) Comment on its progress towards recommending „a decision to implement, amend, postpone, stage development or abandon the proposal‟ for the Aquatic Centre. 5. That Council consider including in the 2011/12 Budget the sum of $3,000 to fund an intrastate study tour of relevant aquatic facilities in Western Australia for interested and available members of the Project Team and the Director of Finance & Administration, with this tour scheduled to be undertaken in approximately October 2011 and open to others Councillors, to assist inform the attendees in their findings and financial analysis.
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