Late Items Agenda of Finance Committee

Finance Committee 4 18 October 2018

6. Reports

6.4 BUSSELTON CROQUET CLUB INC. - SELF-SUPPORTING LOAN REQUEST

SUBJECT INDEX:
STRATEGIC OBJECTIVE:	A City where the community has access to quality cultural, recreation, leisure facilities and services.
BUSINESS UNIT:	Finance and Corporate Services
ACTIVITY UNIT:
REPORTING OFFICER:	Manager Financial Services - Kim Dolzadelli
AUTHORISING OFFICER:	Director Finance and Corporate Services - Tony Nottle
VOTING REQUIREMENT:	Absolute Majority
ATTACHMENTS:	Attachment a BCCI Application ⇩

PRÉCIS

The Busselton Croquet Club Inc. (BCC) has requested that the City of Busselton provide a Self-Supporting Loan for $30,000, for a term of 10 years, to be used to support the club in its plan to rebuild two greens and add an additional (third) croquet green located at Churchill Park, Portion of Lot 410, corner Brown Street and Kent Street, Busselton.

BACKGROUND

The BCC is currently struggling to meet the playing needs of all members so an additional green will alleviate the pressure on space and provide a much improved playing surface which should also enable the club to generate some additional income by running State tournaments.

The BCC is located on Council property at Churchill Park, Portion of Lot 410, corner Brown Street and Kent Street, Busselton and currently has a lease in place for 11 years and 9 months expiring on 21 August 2029. Further to this Council passed the following resolution at its meeting of the 22 August 2018 which allows for a renegotiation of lease terms and also the extension of lease period expiring on 21 August 2029 with an option to renew for a further 10 years.

“AMENDED ALTERNATIVE MOTION

C1808/171 Moved Councillor J McCallum, seconded Councillor R Paine That the Council:

1. Enter into a deed of surrender of the current lease between the City of Busselton and the Busselton Bowling Club Inc., conditional on the Busselton Croquet Club Inc. obtaining sufficient grant funding to redevelop three croquet greens and a new lease being entered into in accordance with conditions stated in part (2).

2. Subject to part (1), enter into a lease, subject to the consent of the Minister for Lands, with the Busselton Bowling Club Inc. for a portion of Lot 410, Deposited Plan 216960, Volume 1850, Folio 572, 78 Adelaide Street Busselton, as shown outlined green on Attachment B, on the following terms:

a) The term of the lease will commence on the surrender of the existing lease and expire on 21 August 2029 with an option to renew for a further 10 years;

b) The rent to commence at $220.00 inclusive of GST per annum and increased annually by $5.00 inclusive of GST;

c) The permitted use will allow the Tenant to hire the Premises to other sporting and community groups, with hire to be incidental to the primary purpose of the lease.

Additionally the Bowling Club are to ensure that their insurance covers such use; and

d) Other terms to be consistent with the City's standard community group lease.

e) A condition apply during the term of the option that the usage of the leased premises and land for the leased purposes be actively maintained at or above a reasonable minimal level.

3. Subject to part (1) accept the surrender of the current lease between the City of Busselton and the Busselton Croquet Club Inc, subject to a new lease being entered into in accordance with part (4).

4. Subject to part (1), enter into a lease, subject to the consent of the Minister for Lands, with the Busselton Croquet Club Inc. for a portion of Lot 410, Deposited Plan 216960, Volume 1850, Folio 572, 78 Adelaide Street Busselton, as shown outlined red on Attachment B, on the following terms:

a) The term of the lease will commence on the surrender of the existing lease and expire on 21 August 2029 with an option to renew for a further 10 years;

b) The rent to commence at $220.00 inclusive of GST per annum and increased annually by $5.00 inclusive of GST; and

c) Other terms to be consistent with the City's standard community group lease.

d) A condition apply during the term of the option that the usage of the leased premises and land for the leased purposes be actively maintained at or above a reasonable minimal level.

CARRIED 9/0”

Croquet is useful for all ages and backgrounds as it is very inclusive, welcoming and friendly, and supports both mental and physical health as well as social connectedness, but is especially helpful for the more mature members of the community as they are not disadvantaged by low fitness levels and can still feel challenged by the activity and part of a growing community.

The BCC has a growing membership base, currently standing at 65 (up from 57 in November) and with three more waiting to join in the new financial year. The club is now the third largest in the state and the biggest outside of the metropolitan area.

The development of a third croquet green project has a total cost of $132,272 (ex GST). This includes $22,000 for the old clubroom/shed demolition. The City’s contribution towards this project is a third of the total project cost, i.e. $44,091. The City has allocated funds in the 2018/19 budget towards this project. The Club would be required to contribute one third of the cost which would include in-kind labour.

The Club will utilise the self supporting loan funds as part of its contribution of $44,090 to the project.

	Contribution towards Project	Cost ex GST
	Applicant Cash	44,090
	City - Busselton Croquet Club – 3^rd green budget allocation	44,091
	CSRFF grant application	44,091
	Total Project Cost	132,272

Council considered the merits of the project at its meeting held 22 August 2018 where the following resolution was made:

“COUNCIL DECISION AND OFFICER RECOMMENDATION

C1808/168 Moved Councillor C Tarbotton, seconded Councillor R Reekie

That the Council resolves to support the submission of an application for the Busselton Croquet Club

- Development of third croquet green - to the Department of Local Government, Sport and Cultural Industries Community Sport and Recreation Facilities Fund, and rates the application as a priority ‘B’ project, rank number 1.

CARRIED 9/0”

EN BLOC

STATUTORY ENVIRONMENT

Section 6.8 of the Local Government Act refers to expenditure from the municipal fund that is not included in the annual budget. In the context of this report, where no budget allocation exists, expenditure is not to be incurred until such time as it is authorised in advance, by an absolute majority decision of the Council.

RELEVANT PLANS AND POLICIES

The City of Busselton Strategic Community Plan 2017.

FINANCIAL IMPLICATIONS

Council made a provision of $150,000 in the 2018/19 Annual Budget Self Supporting loans, however the amount was a general allocation not specific to BCC. The fact that the proposed borrowing will be established as a self-supporting loan, with regular payments by the BCC there will be no net effect on Council’s position.

In addition the loan will not affect Council’s ability to borrow as self-supporting loans are not included in the debt ratio calculation.

The BCC have provided a copy of their financial statements to allow Council Officers to establish whether the Club has the ability to service the loan repayments. An inspection of the financial statements indicates that the Club is well placed to service the loan repayments over a ten year period.

Given the low amount of the loan being requested Officers are proposing that the loan be internally funded through the City’s Municipal fund which would require a Budget amendment as follows:

*Cost Code*	*Description*	Current Budget	Change	Proposed Amended Budget
Expenditure
Self-Supporting Loan Busselton Croquet Club Inc.	Loan Funding	0	30,000	30,000
100-10001-3680-0000	Budget Contingency Holding Account	73,968	(30,000)	43,968
Net Total		73,968	0	0

The loan would be granted on the basis of the prevailing Western Australian Treasury Corporation lending rate including Government Guarantee Fee at the time of actual Funding of the loan.

All interest and principal repayments would be formally agreed to prior to release of any funding.

Aside from the above it is the intention of Officers to present options to Council in the coming months with respect to the formation of a “Loan Borrowing Capacity Reserve” with the intent of reviewing other City held Reserve funds and more specifically the “Long Service Leave Reserve” to ascertain the appropriate level of cash backing and potential reduction of said Reserve in order to allow for future internal borrowing options. This methodology removes the need to actually borrow the funds from the WA Treasury Corporation and the associated administrative processes.

It also reduces the risk to the Busselton Croquet Club Inc. that in the event the State Government increases the Government Guarantee Fee percentage that is applied by the WA Treasury Corporation which would be passed onto the Club.

It is envisaged that other City Reserves will also be reviewed to establish if internal borrowings whereby funds are repaid inclusive of interest to the specific reserve can be achieved.

LONG-TERM FINANCIAL PLAN IMPLICATIONS

As above.

STRATEGIC COMMUNITY OBJECTIVES

Key Goal Area 2:

Well Planned, Vibrant and Active Places:

Our Community Objectives are:

2.1 A City where the community has access to quality cultural, recreation, leisure facilities and services.

Council strategies to support achievement of community objectives -

> Enhance our foreshores and reserves to provide a place where people can come together and engage in a range of social and recreational activity, and

> Ensure our sporting and recreational facilities meet the needs of our growing community.

RISK ASSESSMENT

The Clubs financial statements indicate that they have capacity to meet the repayments on the proposed loan, furthermore their membership is increasing which will further improve their existing sound financial position.

CONSULTATION

The BCC has consulted with their membership with respect to this proposal.

OFFICER COMMENT

The BCC has a strong and growing membership and is the third largest in the State and the largest outside of the metropolitan area. The Club also, through its financial statements, shows that they have capacity to meet the required level of loan repayments.

CONCLUSION

Due to the fact that the costs associated with the internal funding of the loan are offset by the income to be received from the BCC as per a Loan Repayment Agreement, officers recommend that the request be approved.

OPTIONS

Should Council not approve the request from BCC, they may consider the following options:

1. Reduce the scope of works,

2. Look at other fund or loan options, or

3. Not proceed with the upgrade to facilities.

TIMELINE FOR IMPLEMENTATION OF OFFICER RECOMMENDATION

Should the request be approved, action will be taken immediately to implement the recommendations of the Council.

OFFICER RECOMMENDATION

ABSOLUTE MAJORITY DECISION OF COUNCIL REQUIRED

That the Council:

1. Approve a self supporting loan, to be internally funded, to the Busselton Croquet Club Inc., for the amount of $30,000 for a term of up to ten (10) years for the purposes of rebuilding two existing greens and establishing an additional (third) croquet green on Churchill Park, Portion of Lot 410, corner Brown Street and Kent Street, Busselton;

2. Advise the Busselton Croquet Club Inc. that it must obtain all relevant development and building approvals from the City prior to any loan funds being disbursed,

3. Enters into a Loan Repayment Agreement with the Busselton Croquet Club Inc where,

i. The club acknowledges it is responsible for reimbursement to the City of Busselton of full costs associated with the loan, and

ii. The Loan repayment calculations are on the basis of the prevailing Western Australian Treasury Corporation lending rate including Government Guarantee Fee at the time of actual funding of the loan.

4. Amends the 2018/2019 Municipal Budget to recognise the relevant income, expenditure and any associated loan movements; noting that there will be no net impact on Councils projected Surplus position, and

5. Approves the following Budget Amendment to allow internal funding of the loan amount:

*Cost Code*	*Description*	Current Budget	Change	Proposed Amended Budget
Expenditure
Self-Supporting Loan Busselton Croquet Club Inc.	Loan Funding	0	30,000	30,000
100-10001-3680-0000	Budget Contingency Holding Account	73,968	(30,000)	43,968
Net Total		73,968	0	0

Finance Committee		10		18 October 2018
6.4	Attachment a		BCCI Application