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Ratings Impact Analysis for Proposed Convention Centre

Ratings Impact Analysis Developed for Proposed Convention Centre


Commercial properties in the Queenstown CBD set to benefit the most from a proposed Queenstown Convention Centre, would contribute more in rates under the recommended rating model to be considered by the Queenstown Lakes District Council next week.

Chief Executive Adam Feeley said that in preparing the report a series of financial analyses were undertaken:

1. The capital costs were revised and a figure of $30.9 million was identified as a realistic “base case” for QLDC’s share of the forecast $55.5 million project.

2. The projected operating costs analysed in the 2012 feasibility report by Horwath’s HTL Ltd were also reviewed and a number of high and low case operating scenarios identified. Of the five scenarios, the “second worst case” scenario was selected as the most appropriately conservative set of assumptions;

3. Three models for allocating costs across ratepayers were then considered. The proposed model assumed the greatest percentage of costs being met by CBD businesses, and the smallest percentage being met by Wanaka residential ratepayers.

4. The financial impact of the operating losses over five years and the base case capital costs (i.e. $30.9m) were then put through the proposed allocation model.

The proposed model highlighted that 85% of ratepayers would face a rates increase of 0-3%, or in dollar terms approximately $10 to $130 a year, from the proposed convention centre, At the other end of the spectrum 2.5% of ratepayers would face increases between 15-26%.

“While a convention centre is likely to be a positive for the district as a whole in terms of economic benefit, the most direct beneficiaries of it are targeted for the most significant contribution to the cost of its development and operation” Mr Feeley said.

Mr Feeley said that the report endeavoured to present the most conservative possible picture of the financial implications of the convention centre.

“We have adopted a negative scenario for financial performance, and have not factored in the very significant revenue which will be generated from the sale or development from the remaining land at the Lakeview site. Our advice is that the overall financial performance could be considerably better, and consequently the ratings impact could be less. However, Council has signalled that it wishes to present a “warts and all” picture of the potential financial performance of a convention centre.”

The updated Horwaths report outlines financial performance scenarios ranging from the most optimistic (where the convention centre generates an operating surplus of $1.6 million) to the most pessimistic (an operating deficit of $1.2 million). The most likely result suggests that a convention centre would break even in its third year and produce operating surpluses of approximately $0.75 million p.a. by year five.

If the Council adopts the report recommendations, it will provide detailed information on the proposed convention centre in this year’s Draft Annual Plan and seek the community’s views on whether to proceed with the project. The Draft Annual Plan will be adopted for public consultation just before Easter.

ENDS

Click here to view the report and appendices under Item 05 on the Council’s website as part of the agenda for next Thursday’s Council meeting.

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