2017-09-18 General Committee Agenda

GENERAL COMMITTEE MEETING AGENDA                                            18 SEPTEMBER 2017


7.     Next Steps
1.     Pending Council approval, the Economic Development Manager lead engagement with the
       successful Tenderer, working in collaboration with the Council’s Property branch to finalise
       a detailed Management Agreement, signed by the CEO.
2.     Develop a detailed set of agreed key performance indicators to be included in the
       Management Agreement, that clearly demonstrates the need to deliver on Councils return
       on its retail investment and incremental economic growth in the Technology sector.
3.     Economic Development Manager meets one-on-one with each Tenderer to review their
       submissions and discuss the potential for future alignment and collaboration.
4.     Budget implications are assessed including 2017/18 outside of budget funding request to
       be submitted to the Leadership Team for consideration in addition to 2018/19 budget
       requirements.

Previous Council Consideration

Nil.

Finance & Risk
Finance

Financial modelling has been previously undertaken resulting in the decision to proceed with the
construction of the Digital Hub. The original modelling outcomes were based on a lease
management approach and the assumption that the operation was self-funding (with no
contribution required from the general ratepayer) and that Council would achieve the required
4.5% on its investment in the building over a 20-year period.

The submissions received for the provision of management services for the Digital Hub
highlighted that there is a net cost in outsourcing the management services to achieve Council’s
Local Economic Plan diversification objectives relating to the digital sector. The additional costs
include staff and management costs, fit out and equipment costs, start-up costs, utility charges,
finance costs and sales, promotion and marketing costs.

The net calculated cash position for each submission was compared to the ‘base case’ in
Council’s financial model whereby an average annual cash return of approximately $160k was
achievable. Further cash flow modelling was based on the lease revenue and cost assumptions
submitted and included adjustments where required to allow for sensibility and to ensure
comparability between tenderers

The table below highlights the estimated investment gap for each tender received and the
required increase in the Tourism and Economic Levy to fund the cost of operating and managing
the Digital Hub (should the shortfall be deemed appropriate to be funded from the levy).




                                                                                    Page 33 of 36