2016 08 09 - S&O Agenda - Item 8, Att 2 - AEC Noosa Convention & Performing Arts Centre Pre-feasibility Review

PRE-FEASIBILITY OF CONVENTION AND PERFORMING ARTS CENTRES


While the proposal has the potential to source external funding assistance, Council must determine the relative
merits of this proposal relative to other projects that also have the capability to access State and/or Federal
Government funding contributions. It is also important to note that the competition for funding programs is extremely
high and any external funding is by no means guaranteed.


6.3          IMPLICATIONS FOR COUNCIL FINANCIAL SUSTAINABILITY

6.3.1        Operating Surplus Ratio
The operating surplus ratio measures the extent to which operating revenue covers operating expenses, and is
simply calculated as total operating revenue (excluding the influence of capital revenue) divided by total operating
expenses (including depreciation and interest).

The following figure shows that Council reported a positive operating surplus ratio of 1.6% in 2015/16. A projected
operational deficit for the project of approximately $3.9 million assuming it is fully funded by Council through
borrowings will move the operating surplus ratio into negative territory for the next decade and threaten the ongoing
financial sustainability of Council without higher than expected rate increases.

Figure 6.1. Operating Surplus Ratio, No External Funding

    4%

    2%

    0%

   -2%

   -4%
            2016    2017 2018 2019 2020 2021 2022 2023 2024 2025
                         Operating Surplus Ratio After Proposal

Source: Council, AEC.

Under the extremely optimistic funding scenario, with two-thirds funded by the Queensland and Federal
Governments, the proposal still has a significant influence on Council’s operating position with persistent operating
deficits.

Figure 6.2. Operating Surplus Ratio, $20 Million External Funding

    4%

    2%

    0%

   -2%

   -4%
            2016    2017 2018 2019 2020 2021 2022 2023 2024 2025
                         Operating Surplus Ratio After Proposal

Source: Council, AEC.


6.3.2        Net Financial Liabilities Ratio
The net financial liabilities ratio measures the extent to which Council can fund its liabilities through its operating
revenues, and is calculated as total financial liabilities divided by total operating revenue.

The following figure shows that Council is well below the net financial liabilities (NFL) ratio benchmark of 60%,
although the impact of the proposal is very significant increasing the ratio from 15% to 50%.



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