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


The proposed 700-seat Noosa Performing Arts Theatre would appear to be quite high relative to the local
population when compared with other regions, with the exception of the theatre component of the Gladstone
Entertainment Convention Centre – this is particularly the case given the facilities provided elsewhere on the
Sunshine Coast.

Financial Performance
All surveyed venues incur considerable operating losses, even when depreciation is excluded. Given the market
environment, such as outcome would also be highly likely for the proposed Noosa Convention Centre and
Performing Arts Centre.

The general range for the portion of operating costs before depreciation is recovered is 40% to 67%. When
depreciation is included, the extent of cost recovery falls further to 30% to 50%. The three international precincts
referenced by CCIQ Noosa (Banff, Canada and Carmel and Aspen, USA) also feature cost recovery levels within
this range and are only able to maintain operations through considerable operating grants and donations.

For the Gladstone Entertainment Convention Centre – which includes convention and performance arts
components of a comparable size to that proposed by CCIQ Noosa – the net operating loss is $2.344 million before
depreciation and $3.269 million after depreciation.


FINANCIAL ASSESSMENT
The following table provides a high level summary of the modelled financial performance of the proposed
Convention Centre and proposed Performing Arts Centre, as well as in aggregate, and compares the outcomes
with the 2015/16 budget for The J.

Table E.1: Estimated Potential Revenue Streams – Performing Arts Centre
    Item                                             Conv. Centre          Perf. Arts   Combined         The J
                                                                             Centre
    Total Operating Revenue                            $1,450,724      $1,030,675       $2,481,399    $466,625
    Total Operating Expenditure                        $2,285,402      $1,880,849       $4,166,251    $925,662
    Earnings Before Interest, Tax and Depreciation      -$834,679          -$850,174    -$1,684,852   -$459,037
    Depreciation                                         $571,429          $428,571     $1,000,000    $274,511
    Earnings Before Interest and Tax                   -$1,406,107    -$1,278,745       -$2,684,852   -$733,548
Source: AEC.

It should be noted here that financial performance would deteriorate should capital funds need to be borrowed to
finance the project.

This pre-feasibility financial assessment estimates that the cost recovery level would be:

      63% for the proposed Convention Centre (51% after depreciation).

      55% for the proposed Performing Arts Centre (45% after depreciation).

      60% for the two facilities in aggregate (48% after depreciation).

The modelled outcomes lie within the cost recovery range identified during the benchmarking assessment.

It should be noted here that this financial assessment excludes interest on any borrowings required to fund the
project. Full funding via borrowings would increase the loss by $1.2 million per annum at an assumed interest rate
of 4%.

A projected operational deficit for the project of approximately $3.9 million (including interest expense) assuming it
is fully funded by Council through borrowings will move the operating surplus ratio into negative territory and
threaten the ongoing financial sustainability of Council without higher than expected rate increases.




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