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Majority of Resident Precincts Query 2015 Financials

19/11/2013

Objections from the Precincts to the Manly Oval Car Park & Boy Charlton Swimming Centre Developments has been meet with a hostile response from Manly Council.

Read the Precincts letter sent on 28 October and then the response from Council received on the 7 November and you be the judge:

Firstly, here is a copy of the statement prepared by the Joint Precincts Group:

"The majority of Precincts have major concerns about the financial viability of the Manly Oval Car Park & the ‘Boy Charlton’ Swimming Centre developments.

Manly Oval Car Park

Based on an informative document on the Manly Oval car park viability prepared by Peter Greentree, a local resident with an extensive background in financial analysis and project evaluation using information available on the existing car parks in Manly and the information provided by Council from the KPMG Report to residents, the Precincts believe that it is not feasible to continue with the Manly Oval car park development.

As a result of this report & other issues on this matter expressed by Precincts, residents (many qualified in accountancy, major project financing and/or engineering) and the Manly Chamber of Commerce, the Precincts are concerned that:

The capital cost estimates for the construction of the Oval Car Park are too low and do not take into account any contingencies and other costs that would normally be included in a full quote by a developer. The only cost estimate is four year’s old and was from a Quantity Surveyors report – hardly grounds to use for the costs of the Manly Oval car park development. Even applying standard building industry cost inflation of 3%, the capital cost of the car park would be closer to $37m than the $31.5m Council is quoting if this quote was used. The cost to build a car park underground is dramatically higher than an above ground car park. As a result Precincts believe that Council should look for optional above the ground sites and an upgrade of the Whistler Street car park or work in with another development; e.g. Royal Far West or the Manly Civic Club developments on underground car parking facilities.
The income projections appear to be not realistic and are not supported by actual usage of the existing car parks. The KPMG Report states that if concessional parking was 50% (highly ambitious) this would result in a return below Council’s cost of funds. By inference, if concessional usage was consistent with the current usage of 75%, this would result in a major negative loss on the investment/loan costs. As a result the car park would not provide the revenue required to pay off the 50 year loan the council is going to use to fund this venture let alone cover its operating costs there is also no contingency for increases in interest rates after the initial 10 years. Any increases will impact significantly on repayment charges.
The Precincts do not support Manly Council acting as a property developer being responsible for the demolition of the Whistler Street car park and the building of a new commercial office block to replace this car park. This project requires a specialist independent developer to manage and Council should have minimal involvement in this type of project.

In summary the Precincts believe that the Manly Oval Car Park development exposes Council and residents to an unacceptable financial risk. The Precincts are very concerned about the cost to build the car park, the geo-tech issues. The Precincts believe that the projected revenue detailed by Council for the current Manly Oval car park development used to demonstrate the financial viability of this development is flawed.

We request that Council defers the Manly Oval car Park development and reviews the options for additional parking in Manly.

We understand that there are a number of options that could be considered.

The Precincts would like to work with Council to develop these options.

Boy Charlton Swimming Centre

The Precincts do not understand why Council will not discuss this matter with them or take on board the suggestions/comments on this development. The Precincts have outlined a number of ideas that could be introduced to make this development more appealing, more viable & more ‘user friendly’.

However because of the short lead time on the DA for this project the Precincts have not had the opportunity to properly discuss their recommendations with Council.

This project is highly expensive and most Precincts have major concerns about Council’s projections that patronage will treble to service the cost. Precincts do not believe that the attendance figure is achievable which will result in the Council not being able to deliver enough income to service the loan.

We also have observed that in the Council’s Ten Year Financial Plan, ongoing investment in capital expenditure decreases significantly from recent years implying that Council will run down its asset base to fund Manly 2015 and Boy Charlton. This assumption is both unrealistic and unsustainable, delivering a substantially more positive outcome for Council’s projected financial position than will likely be the case.

The Precincts recommend that the procedure to upgrade the Swim Centre is slowed down to allow for further discussion on this development.

Precincts desire a meeting with Council to look at the total viability of the current project with a view of deciding on a less expensive & more appealing swim centre.

Summary

In summary, the Precincts believe that Council is ignoring prudent risk management principles by moving too quickly on these major developments without taking into account responses from Precincts & residents on the financial viability and on-going risks associated with such large capital outlays. We implore the Council to take on board our comments and to look more closely at each of these projects to determine what other options are available which would reduce the amount of money required for funding."

Read the latest independent Financial analysis prepared by Peter Greentree: