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COUNCIL AGENDA

SUPPLEMENTARY ITEMS

 

 

 

8 September 2021

 

 

 

 

 


ALL INFORMATION AVAILABLE IN VARIOUS FORMATS ON REQUEST

city@busselton.wa.gov.au

 

 


CITY OF BUSSELTON

Late Items FOR THE Council MEETING TO BE HELD ON 8 September 2021

TABLE OF CONTENTS

 

ITEM NO.                                        SUBJECT                                                                                                                              PAGE NO.

16..... Finance and Corporate Services Report. 3

16.2        BUSSELTON PERFORMING ARTS AND CONVENTION CENTRE - CONSULTATION OUTCOMES. 3

 


Council                                                                                      3                                                              8 September 2021

16.             Finance and Corporate Services Report

16.2           BUSSELTON PERFORMING ARTS AND CONVENTION CENTRE - CONSULTATION OUTCOMES

STRATEGIC THEME

LIFESTYLE - A place that is relaxed, safe and friendly with services and facilities that support healthy lifestyles and wellbeing.

STRATEGIC PRIORITY

2.4 Establish a performing arts facility for the District.

SUBJECT INDEX

Busselton Performing Arts and Convention Centre

BUSINESS UNIT

Corporate Services

REPORTING OFFICER

Manager Governance and Corporate Services - Sarah Pierson

Director Finance and Corporate Services - Tony Nottle

Director, Community and Commercial Services - Naomi Searle

AUTHORISING OFFICER

Director, Community and Commercial Services - Naomi Searle

NATURE OF DECISION

Executive: Substantial direction setting, including adopting budgets, strategies, plans and policies (excluding local planning policies); funding, donations and sponsorships; reviewing committee recommendations

VOTING REQUIREMENT

Absolute Majority

ATTACHMENTS

Attachment a   Catalyse Community Engagement Report - Busselton Performing Arts and Convention Centre  

 

OFFICER RECOMMENDATION

Recommendation Option A

That the Council:

1.         Receives and notes the outcomes of the survey in relation to the Busselton Performing Arts and Convention Centre (BPACC); and

2.         Resolves to proceed with construction of the BPACC on the basis of the current and previously tendered design subject to value engineering options that do not materially affect functionality or performance of the centre; and

3.         Delegates power and authority to the CEO to accept a tender and enter into a construction contract not exceeding the value of $38 million, either through the public invitation of tenders or through utilisation of Regulation 11(2)(c)(i) of the Local Government (Function and General) Regulations 1996; and

4.         Acknowledges the community sentiment raised by some residents in relation to potential future rate increases and the City’s debt levels; and

5.         Requests that the CEO review funding options for the BPACC which may assist to mitigate concerns around rate increases and debt, including continuing to pursue State and Federal Government funding contributions, reviewing the use of City Reserves in lieu of Treasury borrowings, and reviewing Fees and Charges; and present funding scenarios as part of the next review of the City’s Long Term Financial Plan.

Recommendation Option B

That the Council:

1.         Receives and notes the outcomes of the survey in relation to the Busselton Performing Arts and Convention Centre (BPACC); and

2.         Resolves to proceed with construction of the BPACC on the basis of a modified design; and

 

3.         Authorises the CEO to:

(a)       instruct Kerry Hill Architects Pty Ltd to prepare revised detailed designs; and

(b)       publicly invite tenders for the construction of the BPACC on the basis of the revised designs; and

4.         Acknowledges the community sentiment raised by some residents in relation to potential future rate increases and the City’s debt servicing levels; and

5.         Requests that the CEO review funding options for the BPACC which may assist to mitigate concerns around rate increases and debt, including continuing to pursue State and Federal Government funding contributions, reviewing the use of City Reserves in lieu of Treasury borrowings, and reviewing Fees and Charges; and present funding scenarios as part of the next review of the City’s Long Term Financial Plan.

Recommendation Option C

That the Council:

1.         Receives and notes the outcomes of the survey in relation to the Busselton Performing Arts and Convention Centre (BPACC).

2.         Resolves not to proceed with construction of the BPACC at this time.

3.         Authorises the CEO to write to the Federal Government thanking them for the grant funding commitment of $10.35 million and outlining that the City cannot accept the grant; and

4.         Request the CEO to consider the future of the BPACC project as part of the next review of the City’s Long Term Financial Plan and / or review of the City’s Strategic Community Plan.

 

EXECUTIVE SUMMARY

This report presents the results of a recently undertaken survey in relation to the Busselton Performing Arts and Convention Centre (BPACC) and provides Council with three options with respect to the future of the project.

 

BACKGROUND

The provision of a performing arts and convention centre has been identified as a community need for fifteen years; over which time feasibility reports, project planning and comprehensive stakeholder engagement has occurred to ensure the viability, support and long term sustainability of the centre.  In 2019, as a result of this planning, the City received a $10.35 million grant from the Federal Government towards the BPACC.

 

The City does not currently have a purpose built indoor performance and convention venue capable of hosting large indoor events. The BPACC seeks to provide a venue which supports the City’s standing as the ‘Events Capital WA’, increases the vibrancy of the Busselton town centre by facilitating an improved night time economy, and enables our community to attend performances locally, as opposed to travelling outside of the District. It is the third pillar of a long held regional growth strategy, alongside the Busselton Foreshore Development and the Busselton Margaret River Airport redevelopment, and provides an investment into the arts and culture sector, that has traditionally experienced limited funding.

 


 

Located in a unique heritage setting, integrated with the Weld Theatre and ArtGeo Gallery in Busselton, the BPACC is designed to be a multi-functional venue and a place where people can watch live performances, participate in dance, drama or music recitals, and attend business events, award nights and graduations.

 

In March 2021, the City issued RFT 06/21 for construction of the BPACC. Tenders closed in May 2021, with prices coming in higher than expected due to the current construction environment.  As a result Council resolved at its Ordinary Council Meeting on 23 June 2021 (C2106/0136):

That the Council:

1.         Acknowledges receipt of the tender submissions for RFT 06/21 Construction of the Busselton Performing Arts and Convention Centre; and

2.         Declines to accept any tender; and

3.         Continues to pursue additional funding from State and Federal Governments; and

4.         If a commitment for further funding is not obtained within one month that would maintain or not significantly increase the current financial contribution by the City, reviews design options and associated impacts and undertakes a community survey to help inform decisions on the future of the project.

 

With no funding commitment from the State Government having been received, and no further funding from the Federal Government beyond its initial $10.35 million investment, the City reviewed design options for the building.  Having identified capacity to reduce the size of the building, while still retaining required functionality, the City then commissioned Catalyse Pty Ltd, an independent research company, to undertake a community survey, using random sampling as well as providing the opportunity for interested people to opt-in to the survey. 

 

The survey sought community views on the following options, in order to provide information that would assist and contribute to Council’s decision making on the future of the project:

 

·        Option A – Proceeding with construction of a performing arts and convention centre as per the tendered design at an estimated construction cost of $38 million.

·        Option B – Proceeding with construction of a performing arts and convention centre based on a modified design at an estimated construction cost of $33 million.

·        Option C – Not proceeding with construction of a performing arts and convention centre at this time.

OFFICER COMMENT

Survey Findings

The survey opened on Monday 26 July 2021 and closed at 5pm Monday 9 August 2021.  4,000 randomly selected invitations to participate in the survey were extended to residents and ratepayers; 3,000 by email and 1,000 by hard copy.  The ability for people to opt-in to the survey was also available with an opt-in survey link accessible via the City’s Your Say Busselton website. 

 


 

A total of 2,352 people completed the survey. The results of the survey were analysed and are presented in the Catalyse survey report at Attachment A. The survey submissions have been analysed and reported by:

·        residents;

·        out of area ratepayers;

·        visitors;

·        businesses; and

·        council affiliated. 

 

The resident sample has been weighted for age and gender (using ABS population data) to ensure it is representative of the City’s population demographic; with the out of area ratepayers, visitors, businesses and council affiliated samples being unweighted, with the exception of council affiliated, this is because they do not fit an ABS population profile.  Council affiliated respondents have been removed from the resident sample to ensure this remains free of any potential bias. 

 

The business sample contains both resident and non-resident businesses and hence is unable to be weighted (note however where a business respondent is also a resident they are also in the resident sample; in effect they wear two hats).

 

The resident random and resident opt-in sample are very closely aligned in terms of outcomes, and for this reason they have also been reported as a combined sample.  The combined resident sample has also been analysed and reported with breakdowns by housing tenure, location, age, gender and life stage.  It is noted that the resident random sample excludes youth (14-17 years).

 

The table below summarises the sentiment as to whether Council should proceed (based on selection of either option A or B) or not proceed (based on selection of option C) with the project:

 

 

Proceed (A or B)

Do not proceed (C)

Unsure / NR

Residents

45%

53%

2%

Random

44%

52%

 

Opt In

45%

53%

 

Out of area ratepayers

73%

27%

0%

Visitors

90%

9%

1%

Businesses

46%

52%

2%

Council affiliated 

71%

29%

0%

 

If Council is to proceed, Option A is preferred across all groups (and all demographic breakdowns) over Option B.

 

Analysis of the resident sample shows that males and gender diverse residents are the least supportive of the project proceeding, along with those in the 55 plus age bracket, and those living in rural and rural residential locations.  Support is strongest amongst resident youth and younger adults.  Support declines through the age brackets.  Residents with children in the household are more supportive than those without (50% support vs 41% support). The results do not vary significantly in terms of where people live within the District, with the exception of rural and rural residential residents. Owner-occupiers are less supportive of proceeding with the project than those renting / other, who are quite strongly supportive (41% support owner occupier vs 65% support renting / other).

 

Out of area ratepayers, visitors and council affiliated respondents are very supportive of the Council proceeding. Businesses as a subset sample (noting this includes both resident and out of area respondents) are less supportive. 

 

Qualitative analysis of the survey results provide insights as to why people selected option A, B or C.  In summary, respondents who selected Option A were primarily focused on the economic and social benefits that the centre will bring. They feel that a performing arts and convention centre is needed to support arts and culture, showcase local talent and attract performances and events, and as an investment for the future. 

 

Respondents who selected Option B did so on the basis that it is a cheaper option, and adequate for our needs.

 

Respondents who selected Option C were primarily focused on financial concerns. They feel that the cost of constructing a performing arts and convention centre is too high in the current economic climate, that it is not needed and that the project will have too much of an impact on rates.  Some of these respondents felt that the money should be spent in other areas. 

 

In terms of importance and usage, views are again polarised between very low / low importance and very high / high importance. Music concerts are of the most interest, followed by theatre performances, festivals, and comedy or cabaret shows.  Interest is fairly spread overall.

 

Decision Making Considerations

In deciding whether to proceed with construction of the BPACC and if so, to what extent, Council will need to consider a range of factors including:

1.         the project objectives and benefits (outlined below) and its role as a District pillar project;

2.         community sentiment;

3.         impacts on the City’s financial position;

4.         impacts on ratepayers;

5.         alignment to the Strategic Community Plan themes and strategic priorities;

6.         impacts of returning the Federal Government funding.

 

The BPACC project objectives / benefits are seen as:

·        Economic:

o   Injection of $6.6m annually to the local economy;

o   Creation of local jobs - 115 during construction and 44 through its operations;

o   Increased tourism and events offering;

o   Increased visitor spend and attraction of a more lucrative, higher spending business, incentive and exhibition travel market;

o   Activation of CBD and connection of the foreshore with the Busselton town centre.

·    Social:

o   Providing support for local artistic and cultural pursuits;

o   Providing opportunities for creative industries sector;

o   Broadening opportunities for creative youth;

o   Providing entertainment for youth;

o   Improved mental health and capacity to connect and engage;

o   Total social benefits valued at an estimated $7M.

The demonstration of support from visitors and out of area rate payers, as well as resident youth and younger adults, suggest alignment to these objectives.  Qualitative analysis also shows that those who support the project proceeding do so for the stated economic and social benefits, and are willing to pay for it through a rate increase if required. Economic development, promotion of employment opportunities, activation of town centres, and the provision of more things for youth to do along with more indoor activities are all outlined in of the City’s Strategic Community Plan 2021 – 2031 (SCP).

 

However, the survey results also indicate that there are many people, and just over half within the resident sample, who would prefer that the Council do not proceed, largely on the basis of concerns about rate increases and the financial sustainability of the City given the projected borrowings.  Strong and responsible management of ratepayer funds was a key matter raised through development of the SCP, along with increased attention to the needs of residents and ratepayers.  Financial implications of proceeding or not proceeding are outlined further below and are summarised in the financial implications section of this report.  It is noted that the State Government is continuing to review the BPACC business case and the City’s request for funding for the project, and so the financial implications presented are a ‘worst case’ scenario.

 

Given the nature of the project, that is, as an arts and culture facility, and that it is a significant investment, it is not surprising for views on the project to be polarised.  Ultimately, the decision before Council is a difficult one.  To assist Councillors with their deliberations, officers have outlined in the officer recommendation a number of potential recommendation options.  The impacts and next steps of each is detailed below.

 

Recommendation A - Proceed on the basis of the current and previously tendered design, delegating power and authority to the CEO to accept a tender and enter into a construction contract not exceeding the value of $38 million.

The estimated total project value on the basis of the previously tendered design is $44.5 million, as set out below. Also set out below is a potential funding scenario, assuming the City is unable to obtain further external funding.

 

In addition to confirmed external funding, the City has a number of pending grant applications as well as access to apply for some potential grant funding including:

 

Funding Program/Source

Estimated amount

Local Roads and Community Infrastructure Program (Tranche 4)

$1,400,000 - $1,900,000

Lotterywest Application – Community Spaces

$2,700,000

State Government funding request/contribution

$5,000,000 - $10,000,000

Other Federal Grant (Building Better Regions)

$1,500,000

Total potential funding

$10,600,000 - $16,100,000

 

This potential additional funding would reduce the need to borrow the full loan amount of $26.7 million.  In consultation with the Western Australian Treasury Corporation (WATC), the City has shown that it has spare borrowing capacity to more than adequately service the required loan amount while maintaining the appropriate benchmarks debt ratios. The final loan value would be able to be borrowed at a fixed interest rate of 1.96% over 20 years (interest rate confirmed as at 27 August 2021). 

 

Borrowings and associated repayments could be funded through increases to fees and charges or rates, or a combination of the two.  In addition, Council also has the ability to consider a review of key cash reserves held by the City, of which there is a current balance of $62.8 million. Council could consider accessing some of these funds to reduce the loan liability. The $26.7 million is therefore a ‘worst case’ scenario.

 

This ‘worst case’ scenario would increase the City’s loan borrowings (not including community self-supporting loans) from $27.85 million in 2020/21 to $53.85 million by the end of 2021/22.  To ensure the City’s debt remains within an acceptable level, the Debt Service Coverage Ratio (DSCR) is required to remain above the minimum standard of 2.0 as per the Department of Local Government Sport and Cultural Industries (DLGSC) Guidelines. The impact of the total projected borrowings on the City’s DSCR is depicted in the graph below and shows that the City’s DSCR will remain within acceptable guidelines.

 

 


 

As detailed in the survey information, in the absence of any other funding being utilised, an additional rate increase of up to 2% may be necessary, most likely in 2022/23.  This is additional to the 2.5% currently projected in the City’s Long Term Financial Plan (LTFP) and would result in an extra $37 per annum based on the projected average rate for 2022/23.  Any additional rate increase would be modelled into the next review of the LTFP along with any further utilisation of Reserve funds as mentioned above. The City’s LTFP currently provides for operating costs averaging approximately $1.2 million per annum, which has been reviewed by third parties. This is not expected to change significantly. 

 

In terms of entering into a construction contract, officers recommend that the CEO is provided with a delegation to accept a tender and enter into a contract not exceeding the value of $38 million, either through the public invitation of tenders or through utilisation of Regulation 11(2)(c)(i) of the Local Government (Function and General) Regulations 1996 (as outlined further in the Statutory Environment section of this report).

 

Recommendation B - Proceed with redesign and invite tenders on the basis of a modified design

The estimated total project value for a modified design is $40.05 million, as set out below.  Also set out below is a potential funding scenario, assuming the City is unable to obtain further external funding.

 

As per recommendation option A, the City would be able to borrow the required amount at fixed interest rates of 1.96% over 20 years. This would increase the City’s Council Loans (not including community self-supporting loans) borrowings from $27.85 million in 2020/21 to $49.85 million by the end of 2021/22.  Once again, the City would maintain its DSCR within the DLGSC guidelines, above 2%. This is depicted in the graph below.

 

 

Again as with recommendation option A, the City still has a number of pending grant applications that could deliver a further $8.6 – $11.1 million towards the project. The City would also be able to review use of its internal cash reserves as indicated earlier. 

 

In the absence of any other funding, an additional rate increase of up to 1% may be necessary to cover the additional borrowings and associated repayments. This would result in an extra $18 per annum based on the projected average rate for 2022/23. Any additional rate increase would be modelled into the next review of the LTFP along with any further utilisation of Reserve funds.  Operating costs averaging approximately of $1.2 million within the City’s LTFP are, again, not expected to change significantly. 

 

If Council was to proceed with option B, officers would recommend that Kerry Hill Architects Pty Ltd be engaged to prepare detailed designs, and that tenders be publicly invited, for Council’s consideration.

 

Recommendation C - Not proceed with construction of a performing arts and convention centre at this time.

If Council choose not to proceed with the construction of a performing arts and convention centre the City would advise the Federal Government of the decision, and explain that they cannot accept the grant funding commitment of $10.35 million.  The City would request that the Federal Government reallocate the funding towards an alternate project to facilitate economic development initiatives such as the Busselton Margaret River Airport terminal.  This would of course be at the discretion of the Federal Government and is considered unlikely given the airport (or other potential projects) were not submitted as part of the Regional Growth Fund funding round.  In returning the funding there is the real risk that the City’s ability to secure funding for this or other projects in the future would be jeopardised.   

 

While the project would be further considered as part of the next review of the LTFP and / or future review of the City’s SCP, the future development of a performing arts facility for the District would be unlikely in the medium term, given the significantly reduced funding (with loss of the Federal grant).  It is highly unlikely that the City would be able to afford a performing arts facility such as the one designed without this level of grant funding without significantly impacting on services and facilities for the community.      


 

Statutory Environment

The recommendation options presented support the general function of a local government under the Local Government Act 1995 to provide for the good government of persons in its district.

 

As noted in the report background the City publicly invited tenders in March 2021 for construction of the BPACC.  Tenders closed in May 2021 and Council declined to accept any tender.  Under Regulation 11(2)(c)(i) of the Local Government (Function and General) Regulations 1996, tenders do not have to be publicly invited (for the supply of goods or services) if, within the last 6 months, the local government has publicly invited tenders for the supply of the goods or services but no tender was submitted that met the tender specifications or satisfied the value for money assessment. 

 

Recommendation option A recommends that Council delegate power and authority to the CEO to accept a tender and enter into a construction contract, with the CEO able to utilise Regulation 11(2)(c)(i) and negotiate with interested suppliers (a number of whom have indicated interest).  Alternatively the CEO may again publicly invite tenders. 

 

Recommendation option B recommends that tenders be publicly invited.

Relevant Plans and Policies

The planning and development of a PACC for Busselton has been identified as far back as 2004 and further included in the City of Busselton Strategic Community Plan since 2010 (2013, reviewed 2015; 2017 and 2019) as a local priority project. The South West Regional Blueprint (February 2015) identifies the construction of a performing arts venue in the Busselton Cultural Precinct as a regional priority in support of burgeoning creative industries and events. 

Financial Implications

The financial implications of each recommendation option is discussed in the main body of the Officer Comment above.  In summary all options are within the financial capacity of the City, subject to Council increasing their loan borrowings or sourcing funding through external grants or use of internal reserve funds or review of fees and charges.  Dependent on the extent of the loan borrowings required an additional rate increase of up to 2% (over and above current LTFP rate projections) may be required.  The City’s DSCR shows the City has sufficient loan borrowing capacity and interest rates are comparatively very low.

Stakeholder Consultation

External stakeholder consultation was undertaken as described above in the main body of the Officer Comment.

Risk Assessment

An assessment of the potential implications of implementing the officer recommendation has been undertaken using the City’s risk management framework, with risks assessed taking into account any controls already in place. The following risks have been identified:

Recommendation A

Reputational damage with respect to resident perceptions of Council not listening.

Risk Category

Risk Consequence

Likelihood of Consequence

Risk Level

Reputation

Moderate

Possible

Medium

 


 

Recommendation B

Reputational damage with respect to resident perceptions of Council not listening.

Risk Category

Risk Consequence

Likelihood of Consequence

Risk Level

Reputation

Moderate

Possible

Medium

Reputational damage noting Option B was least preferred in the survey; mitigated however by it being cheaper and perhaps more palatable than Option A by those who do not want Council to proceed.

Risk Category

Risk Consequence

Likelihood of Consequence

Risk Level

Reputation

Minor

Possible

Medium

The cost and time delays associated with redesigning the building may see costs increase; mitigated however by the chance that prices may instead decrease.

Risk Category

Risk Consequence

Likelihood of Consequence

Risk Level

Financial

Minor

Possible

Medium

 

Recommendation C

Reputational damage with respect to those residents and respondents who would like to see the project proceed.

Risk Category

Risk Consequence

Likelihood of Consequence

Risk Level

Reputation

Moderate

Possible

Medium

Reputational damage with respect to Federal Government perception by returning the $10.35M.

Risk Category

Risk Consequence

Likelihood of Consequence

Risk Level

Reputation

Moderate

Possible

Medium

Loss of future financial funding with respect to returning the $10.35M.                            

Risk Category

Risk Consequence

Likelihood of Consequence

Risk Level

Financial

Moderate

Possible

Medium

Options

This report presents a number of optional recommendations for the Council.  It is for the Council to determine which recommendation they prefer.  Councillor/s will be required to foreshadow and move (with support of a seconder) their preferred recommendation for consideration and / or debate.

CONCLUSION

In summary Council is asked to consider three options:

·        Recommendation Option A - Proceed on the basis of the current and previously tendered design, delegating power and authority to the CEO to accept a tender and enter into a construction contract not exceeding the value of $38 million;

·        Recommendation Option B - Proceed with redesign and invite tenders on the basis of a modified design;

·        Recommendation Option C - Not proceed with construction of a performing arts and convention centre at this time.


 

TIMELINE FOR IMPLEMENTATION OF OFFICER RECOMMENDATION

Timelines for implementation are dependent on the recommendation option, and are broadly as follows:

·        Recommendation Option A – The CEO will commence further procurement immediately, and, subject to negotiations a contract may be entered into prior to Christmas 2021.

·        Recommendation Option B – Redesign will commence immediately.  It is anticipated that a request for tenders would not be issued until early in 2022.

·        Recommendation Option C – Council’s decision would be effective immediately, with the CEO writing to the Federal Government within one month.

 

 


Council

20

8 September 2021

16.2

Attachment a

Catalyse Community Engagement Report - Busselton Performing Arts and Convention Centre