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


Figure 6.3. Net Financial Liabilities Ratio, No External Funding

   50%

   30%

   10%

  -10%

  -30%
            2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
                    Net Financial Liabilities 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 NFL ratio.

Figure 6.4. Net Financial Liabilities Ratio, $20 Million External Funding

   50%

   30%

   10%

  -10%

  -30%
            2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
                    Net Financial Liabilities Ratio After Proposal
Source: Council, AEC.


6.4          DISCUSSION ON DEPRECIATION
CCIQ Noosa (p.15) indicates that:
           While most venues run at a loss, this is often caused by the depreciation expense. As they are often built by Government capital grants
           and ultimately replaced by another government grant, this could be seen as an accounting conundrum given depreciation is a non cash
           item.

           The normal rule of thumb is that the Venue owner covers the considerable depreciation from general revenue, i.e. rates/taxes, possibly
           giving rise to an across-the-board rate rise.

Unfortunately, the assumption that depreciation is merely an ‘accounting conundrum’ fails to consider that Council’s
financial performance (and sustainability) is assessed on an annual basis via its operating position inclusive of
depreciation. Further, there is no guarantee that the replacement of community facilities will be funded by grants
in the future. In fact, grants are more targeted towards facilities that will enhance participation rather than replace
ageing buildings and equipment.

Whether or not an ‘across-the-board’ rate rise is acceptable to fund the proposed facilities is a question for Council
when considering other competing objectives and initiatives (including infrastructure renewal).


6.5          IMPAIRMENT EFFECTS
With part of the construction potentially involving demolition and/or remodelling of The J, this is likely to result in an
impairment in value to Council’s Operating Position in the Annual Report. Given there are no plans as yet, it is
difficult to determine the value of the impairment, which will be reliant upon the final design, the extent of the building
remodelling and the ability to reuse materials.

As mentioned earlier, The J was constructed with a combination of Federal Government, State Government and
Council funds. Conditions exist on the external funding provided for the existing facility, including the potential for
repayment of grants to the Federal Government should the facility’s value be written down prior to it reaching the



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