The cost to ratepayers

Launceston Municipal Ratepayers’ and Residents’ Association Inc MR

Regional Aquatic Centre Operating Costs

It is time Launceston City Council properly informed the community

Regional Facilities should be fully funded, from a capital and operational point of view, by State and/or Federal Governments, not by a single Local Government authority in isolation to the other LGA’s that form part of the region served, Senior Vice-President, John Henshaw, said today.

“In view of the Launceston City Council’s decision at yesterday’s meeting to proceed with the development of its $27.3 million Regional Aquatic Centre in spite of a 46% increase in cost from its 2006 budget for the project, the Association again repeats its outrage at the costs that the LAUNCESTON RATEPAYERS will have to bear over the 50 year life of the facility.”

“The Simply Great Leisure Group’s Windmill Hill Regional Aquatic Leisure Facility Financial Plan released by Launceston City Council in late December 2006 makes a series of statements which should be of great concern to ratepayers”.

“The report highlights the entry fee revenue and minor costs of operating the proposed Regional Aquatic Centre (RAC) but also deliberately ignores the other much greater costs to ratepayers. The report cleverly acknowledges that other costs exist but relies on the community at large not reading the detail in the report”.

“The strategy worked well. On December 20, The Examiner Newspaper ran an article stating that the RAC would make a loss in the region of $350,000, highlighting the base case, instead of the conservative case, being a loss of $575,100 per year. It further stated that adult entry fee would be $4.85 and compared this favourably with the Hobart aquatic centre adult entry fee of $5.15. What the Examiner neglected to mention was that the proposed entry fee of $4.85 does not include GST. With GST the RAC entry fee will be $5.30, a higher entry fee than Hobart”.

“Launceston City Council, in its press release of 19 December 2006 neglected to mention any of the other costs that will be borne by ratepayers”.

“The real total annual cost to ratepayers will be in the order of $2.40 million each year for the estimated life of the facility – 40 to 50 years. This annual figure comprises: cash operating loss of $450,000 (page 19) plus outdoor pool $170,000 (page 21) plus major maintenance and refurbishment of $100,000 (page 11) plus a conservative estimate of interest at 8.0% on $12.0M of $960,000 plus loan repayments of $240,000 plus a sinking fund of $500,000 to replace the facility at the end of its useful life”.

“As a Regional Aquatic Centre, the complex is designed to serve the 120,000 people resident in the region. However, Launceston ratepayers have never been properly told about the costs of the project and that they will be subsidising and paying off this Regional facility forever at the rate of some $86 per ratepayer per annum. Isn’t it about time all of the 28,0000 Launceston ratepayers were democratically and directly polled on this project? Or, do we need a 1,000 signature petition to hold a plebiscite to vote on the matter? ”

“It is true that $9.3 million will come from State and Federal governments and that now LCC will be asking the Federal government for an additional $2 million, however that is taxpayers’ money still being in part derived from the same Launceston residents, so the majority of the capital funding burden and all of the operational and financing cost burden will be borne by Launceston ratepayers. Frank Dixon has announced that he hopes to attract a naming sponsor who will fund what he concedes to be an annual operational deficit of $350,000 (being incorrectly stated to be the average amount by his calculation, but in any event, a figure disputed by the attached calculations prepared by the Association)”.

Should you wish to verify the basis of any of the figures contained within this letter for yourself and receive a copy of the Windmill Hill Aquatic Leisure Facility Financial Plan, then please contact us, and we can provide you with either a hard copy or electronic copy.

Acknowledged cash operating loss per year. The conservative estimate is $575,100, average best case is $350,700, for the sake of argument make this a round figure below the average of the two figures – $450,000 per year. (Table 2.2, page 19)
$450,000

Outdoor Pool. The base case estimate is for the outdoor pool operating only for the summer season. However, assume that the outdoor pool will be kept open all year to maintain the level of existing service to swimmers that prefer the current open air arrangement – $170,000 per year (page 21)
$170,000

Major maintenance and refurbishment. This is acknowledged as $500,000 every 5 years, to bring it back to an annual cost, assume an average of $100,000 per year (point iv, page 11)
$100,000

Financial Costs – Interest only. Assume that Council’s estimate of project cost of $22 million does not blow out. Council has secured $10 million from taxpayers. This leaves a $12 million deficit which Council will need to borrow. Assume a conservative rate of interest of 8% per year, without principal repayments. This equates to an interest only cost of $960,000 per year. (point vi, page 11).
$960,000

Financial Costs – Interest and principal Loan repayments. Assume a 20 year loan, 8% interest rate, a yearly repayment of $1,200,000
1,200,000

Lowest estimate of annual cost to ratepayers-not including principal loan repayments
$1,680,000

Realistic estimate of annual cost to ratepayers, including principal loan repayments
$1,920,000

Building and Plant Depreciation. Depreciation is a noncash expense that reflects the decrease in value of an asset as a result of wear and tear and age. Assume the pool has a 45 year life and at the end of that period it has no value and has to be demolished, a reasonable assumption given that this what is proposed for the Windmill Hill pool and was how the Mowbray pool was effectively treated. Accountants could argue about this, but to ratepayers, this is effectively an amount by which they are being impoverished each year. Assume straight-line depreciation method – $500,000 per year
$500,000

email: info@launcestonratepayers.intas.com.au

28th August, 2007