The Stadium and the City Vol 2 Section C

THE STADIUM & THE CITY VOLUME 2 - TECHNICAL REPORT

SECTION C – GOVERNANCE AND FINANCIAL FEASIBILITY Prepared by the Major Stadia Taskforce May 2007

C-1

PERTH STADIUM C-2

CONTENTS 1.0

Governance and Venue Management

C-5

3.0 Impact on Sports

1.1

Background

C-6

3.1

AFL

C-40

8.1

Project Delivery

C-74

1.2

Negotiations To Date

C-8

3.2

Rugby

C-41

8.2

Transitional Issues

C-74

1.3

Current Situation

C-11

3.3

Cricket

C-42

8.3

Implementation Process

C-75

1.4

Governance Models For Major Australian Stadia

C-12

3.4

Other Hirers

C-43

1.4.1 Melbourne Cricket Ground Trust, Victoria

C-12

3.5

In Conclusion

C-43

1.4.2 Major Sports Facilities Authority (MSFA), Queensland

C-13

4.0 Funding and Delivery Options

C-39

4.1

Summary of Funding Requirements

C-46

1.5

Venue Management

C-15

4.2

Potential Sources of Funding

C-46

1.6

Taskforce Final Recommendations

C-18

4.3

Summary and Conclusions

C-50

C-19

4.4

Possible Delivery Options

C-50

2.1

General Assumptions and Definitions

C-20

4.5

Contractual Options

C-52

2.2

Operating Assumptions

C-27

4.6

Recommended Delivery Structure and Options

C-53

2.3

Revenue Assumptions

C-30

5.0 Risk Matrix

C-55

2.4

Cost Assumptions

C-30

6.0 Stakeholder and Community Consultations

C-61

2.5

Projected Stadia Operating Results

C-30

6.1

Consulted Stakeholders

C-62

2.6

Net Operating Result to Venue Owner

C-31

6.2

Community Consultations

C-62

2.7

Projected Hirer Net Revenue from Venue Operations

C-33

6.3

Stadium Website

C-63

2.8

Review of Masterplan Proposals

C-36

6.4

Survey

C-63

2.9

Sensitivity Analysis

C-37

7.0

Major Events and Their Impacts

C-38

7.1

Potential Major Events

C-66

7.2

Requirements of Major Events

C-67

7.3

Economic Impacts of Major Events

C-69

7.4

In Conclusion

C-72

2.10 In Conclusion

C-73

C-45

1.4.3 Sydney Olympic Park Authority (SOPA), New South Wales C-14

2.0 Financial Forecasts

8.0 Project Implementation

C-65

SECTION C C-3

PERTH STADIUM C-4

1.0 GOVERNANCE AND VENUE MANAGEMENT

1.1

Background

C-6

1.2

Negotiations To Date

C-8

1.3

Current Situation

C-11

1.4

Governance Models For Major Australian Stadia

C-12

1.4.1 Melbourne Cricket Ground Trust, Victoria

C-12

1.4.2 Major Sports Facilities Authority (MSFA), Queensland C-13 1.4.3 Sydney Olympic Park Authority (SOPA), New South Wales

C-14

1.5

Venue Management

C-15

1.6

Taskforce Final Recommendations

C-18

SECTION C C-5

1.1

BACKGROUND

The issue of governance concerns the ultimate decision making body or process which will determine the management of the facility. It is equivalent to a Board of management in commercial and statutory authority contexts. The body responsible for governing the major stadium would be different to the body which manages the facility on a day-to-day basis. That body would be appointed by the governing body (the Board) and would operate the facility in accordance with the governing principles and goals set by the governing body. Historically, management and sometimes even the ownership of major stadia have been closely associated with individual sports. This requires that sporting bodies, focused on the development of their particular sport and presentation of events are being also required to undertake major decisions regarding building maintenance and refurbishment. This approach does have the benefit of giving the sporting bodies a level of control over their venue which can be a crucial part of the infrastructure for their sport. The sports in WA are currently heavily involved with their respective venues. The WAFC manage Subiaco Oval under a 99-year lease agreement which expires in September 2090 and the WA Cricket Association holds the freehold title and manages the WACA ground. Members Equity Stadium (MES) is owned by the Town of Vincent and is managed by Allia Holdings Pty Ltd which until January 2006 was a subsidiary company of the Perth Glory Football Club, being the major tenant of that venue. In contrast, the performing arts such as the West Australian Ballet or the West Australian Symphony Orchestra perform at the Perth Concert Hall with management of the venue undertaken by a professional venue management company. The issue of governance has been a difficult matter in the Taskforce’s deliberations due to the overhang of history on these issues. Nevertheless, the Taskforce has concluded that a new approach needs to be taken in relation to the governance of the State’s major stadia. This is necessary as the proposed multi-purpose stadium will accommodate several major sports (AFL, Cricket and Rugby) as their “home” venue for the foreseeable future. In addition, the Government will be investing the vast majority of the cost of the stadium which would require it to include the new facility on its balance sheet (rather than on the balance sheets of the respective

sports codes). That in turn would require the Government to have governance control of the stadia. Senior officials at the Department of Treasury and Finance have advised the Taskforce that if the Government were to invest the majority of the capital in a new or redeveloped stadium it would require the assets to be recorded on the balance sheet of the State and for the Government to have overall control over the governance of the venue. Consultations with Rugby WA have indicated that the Western Force has experienced difficulties in negotiating hire arrangements with the WAFC and Allia Holdings Pty Ltd (MES) to host Super 14 matches at these grounds. In addition, the Football Federation of Australia (FFA) has also expressed concerns as to the terms and conditions imposed by Allia Holdings Pty Ltd with regard to accessing MES. As highlighted in the Interim Report, this is a direct consequence of the current governance arrangements in place across these venues. Table 1 provides an overview of the perceived existing management issues relating to current venue management arrangements for Perth’s major venues. Table 1: Existing Management Issues relating to the 3 Major Perth Venues Existing Management Issues relating to the 3 Major Perth Venues

Subiaco Oval

WACA

MES

• Crown land with Management Order to City of Subiaco which have leased the venue to the WAFC for 99 years (with 84 years remaining).

• The WACA owns the freehold of the WACA ground.

• The Town of Vincent owns the freehold of the ground.

• Venue management is considered a distraction for the sport whose primary role is to foster the development of the sport.

• The Town of Vincent has entered into a management agreement with Allia Holdings Pty Ltd.

• Major concerns raised by other sports seeking to access venue in regard to independence of management and cost to access the venue. • Perceived conflicts arising in the role of the WAFC as both a venue manager and the peak body for AFL in WA.

• Up until January 2006, Allia Holdings Pty Ltd was owned by Perth Glory who is currently the major tenant of the MES, giving rise to concerns regarding conflict of interest and independence when dealing with other major sports and tenants. • The company has since sold the franchise but separated the management of the stadium from the interests of the soccer team. • Concerns raised over fees charged to non-resident sports. • Non-resident sports franchises have also raised concerns regarding the cost of access to the venue.

Source: Interim Report

PERTH STADIUM C-6

Currently, the revenues generated through these venues are predominantly used to cover overhead expenses with any surpluses generally used to fund the development of the individual sport. In the past, limited funds have been set aside by the venue managers to fund cyclical maintenance and the cost of asset refurbishments over time. Consequently these venue managers have been reliant on the provision of government grants to cover such expenses. The Taskforce has unanimously agreed that an independent governance arrangement needs to be established for any new or refurbished stadium development. This decision reflects: •

The multiple tenants which will be using the facility making the new stadium a multi-use facility rather than a single purpose facility as is currently the case across the major stadia in Perth;

•

The domination of Government investment in the facility which would require it to take the asset to its balance sheet. It would be unique in those circumstances for the Government not to also have governance control of the asset;

•

The demands of other major sporting codes for independence in the governance arrangements to ensure all sports are afforded equitable access on a transparent basis; and

•

The consolidation of the oversight role of Government-funded venues into a single body such as a Trust or Authority ensures the management and operation of such venues is undertaken in a coordinated and consistently professional manner from a whole-

Figure 1: Public Perception on Governance of Major Stadia in Perth

of-Government, whole-of-community perspective. For example, a single oversight body will ensure that Government-funded and owned venues do not compete with each other to secure major national and international events to the disadvantage of the public interest. The Taskforce developed a survey as part of public consultation process details of which are presented in Appendix C. Interestingly, as highlighted in Figure 1, 74% of respondents have indicated that given the high degree of public investment required in stadium developments the venue should be governed independently from sports. In the case of a multi-use venue, the separation of the ownership / ground management function from that of tenant sport / hirer is critical to effectively and equitably manage the requirements for each event and to allow a coordinated approach to investment and refurbishment planning. Obvious tensions arise when a potentially competing national sport also controls the access to and pricing of the major venue in a city. A number of the national sporting codes consulted as part of this study highlighted concerns over the conflict that does arise when one sport controls access to a multi-use venue, i.e. the current Subiaco model. The WAFC claims that sporting codes dislike Trust structures however (other than the WAFC) the sporting codes consulted during this review have expressed their support for a Trust structure provided that members of the Trust are independent from any sport that is a tenant of the venue. To address the existing management issues the Taskforce concluded in its Interim Report that independence in the management of stadia is desirable. This is certainly the model today where governments have invested heavily in the development of major multi-sport venues in Sydney, Melbourne and Brisbane. South Australia is in a similar situation to WA, where the major stadia (i.e. AAMI Stadium and Adelaide Oval) are in need of redevelopment, are controlled by the sports and operate as single purpose grounds. Based on the recommendations made by the consultants (refer to Volume 2 Part 5 of the Interim Report) the Taskforce recommended in its Interim Report that: 1

The governance of national / international level sporting infrastructure should be independent of sporting codes and be managed through a trust or similar entity directly responsible to Government;

SECTION C C-7

2

That no public funds should be allocated to the development of a major stadium unless it is under the direct control of Government as above; and

1.2

3

Pending the resolution of preferred site(s), the resolution of governance control at the existing major venues (Subiaco Oval, WACA and MES) be negotiated with the current managers, having regard for existing agreements, the contributions that have been made in the past; and the opportunities afforded to the sports from a new development.

To promote the Taskforce’s goal of independent stadium management the consultants developed an indicative governance framework (refer to Figure 2) that was tabled and discussed with all prospective hirers of the major stadium.

Further, the Interim Report suggested that the State Government ensure that requirements for all sports are considered equitably when determining public investment in stadia. The State Government has accepted the Interim Report. The Taskforce and its consultants identified the preferred key governance outcomes for the major stadium which are presented in Table 2: Table 2: Taskforce’s Preferred Key Governance Outcomes for Major Stadium Taskforce’s Preferred Key Governance Outcomes for Major Stadium

• Fairness and equity to all venue users; • Increased transparency and accountability; • Reduction of unnecessary competition between State funded venues as far as is practicable; • Maximisation of the financial, economic and social benefits for all stakeholders; • Effective risk management (e.g. asset, operational, financial etc.); • Protection of the Government’s significant investment in the venue and allow effective asset management; and • Generation of sufficient returns to fund lifecycle asset, maintenance and refurbishment costs. Source: Perth Stadium Consulting Team

NEGOTIATIONS TO DATE

Figure 2: Indicative Governance Model presented to Prospective Major Stadium Tenants

While the Taskforce and the consultants have received a favourable response in principle to the proposed governance model (i.e. an independent governance and venue management solution) from Rugby WA, Football Federation of Australia (Perth Glory), WA Rugby League and the WACA, the WAFC has rejected the proposed solution. All sports indicated the desire to have a formal process to engage with the Trust and venue manager. While Rugby WA have indicated their support for the appointment of an independent Trust to oversight the governance and management of the stadium as well as the appointment of an independent venue manager they also suggest the establishment of a Stadium Management Committee to also oversight the management of the venue. Membership of the Committee is proposed to include Government representatives as well as sporting code (hirer) representatives. We would suggest that the establishment of a Stadium Management Committee is an unnecessary layer of management which further complicates the structure and process. In addition the inclusion of sporting code representatives has the potential to give rise to conflicts of interest and questioning of the independence of decision making. Having said this the Taskforce recognises the fundamental need to ensure that key sporting codes need to be afforded direct communication access to the Trust and venue manager. The WAFC has been unprepared to relinquish the lease and the level of control they currently enjoy over Subiaco Oval and its associated revenue streams. The WAFC preferred position is for Subiaco Oval to be redeveloped as the major new stadium at public expense and for the Commission to retain the existing lease and management rights to the new venue

PERTH STADIUM C-8

Table 3: Key Elements of the WAFC “All Stadia Management Model” Key Elements of the WAFC “All Stadia Management Model”

• The proposed governance model applies whether a multi-sport venue or a primarily single sport venue is developed; • Subiaco Oval is the preferred location however the proposed governance solution would also be applicable if the stadium is developed at an alternative location; • The WAFC agree to the establishment of a Trust to oversight the management of the major stadium in accordance with an agreed Constitution, however the WAFC require control of the Trust through majority membership; • The WAFC require the right, along with other venue hirers, to veto any proposed changes to the Constitution with none of the sporting codes indicating the requirement for veto rights; • The WAFC be the venue manager for the estimated economic useful life of the new stadium – 20 years with a further option of 20 years (at WAFC’s discretion). The operations of the venue manager to be oversighted by the Trust to ensure compliance with the provisions of the agreed Constitution So in essence under this model the WAFC would oversight their own venue management activities; • After the expiration of the term of the management rights the ongoing control of the venue reverts to the WAFC under the terms of the lease over Subiaco Oval which expires in 2090; • The management agreement with the WAFC cannot be effectively terminated for nonperformance as under the WAFC governance model, the management rights to the venue would revert to the WAFC under the terms of the lease; • The WAFC is to receive a management fee with any profits to be reinvested into the development of football across WA; • The WAFC to be guaranteed the current levels of revenue generated from Subiaco operations; • The WCE and FFC to only pay rent on any incremental revenue generated at the new stadium; and • AFL will be given preferential access to the venue during the AFL season. Source: Perth Stadium Consulting Team

Table 4: Key Factors considered by the Taskforce in Response to the WAFCs Proposed Model Key Factors Considered by the Taskforce in Response to the WAFCs Proposed Model

• The existing lease and governance arrangements in place over Subiaco Oval which the then Government provided to the WAFC (at no cost) to assist Football resolve their financial problems at the time; • Football being the anchor tenant of any multi-purpose major stadium but in which other national codes would also be tenants; • The venue will likely be Government (i.e. taxpayer) funded – in this case the stadium would be included on the Government’s balance sheet which would necessitate it to have governance control; • The WAFC will be a major benefactor of the new stadium and would therefore be adequately compensated for the early termination of the current lease and management arrangements over Subiaco Oval; • The stadium is to provide benefits to all sports in WA in general and the wider community; • The likely conflicts between hirers of the stadium relating to access and pricing; • The need to protect the Government’s investment in the venue (i.e. asset maintenance and capital replacement over the life of the venue), and • Greater expertise existing within Government for the planning, design and project management (a whole-of-Government approach) to major stadia. Source: Perth Stadium Consulting Team

until 2090. In the event that an alternative site is to be developed, the WAFC is seeking lease and venue management rights over the new facility until 2090 under its existing terms for Subiaco. The Taskforce and its consultants met with the WAFC on several occasions to discuss the issue of governance and wrote to the WAFC outlining the Taskforce’s position and requesting provision of relevant financial information to assist it in its considerations. The Taskforce agreed to sign a confidentiality agreement (subject to minor amendments) requested by the WAFC in order to access financial information, however that was not followed through by the WAFC and only limited financial information relating to the venue operations at Subiaco Oval has been provided to the Taskforce to date. The WAFC provided the Taskforce in November 2006 with a counterproposal on governance for the major stadium titled “All Stadia Management Model” with the key elements outlined in Table 3. In an effort to find a workable governance and management model with the WAFC, the Taskforce considered a range of factors prior to responding to the WAFC with an alternative, compromise solution. These factors are presented in Table 4. The Taskforce advised the WAFC that it considered it unacceptable for the WAFC to have control of the Trust and the management of the venue, and have the right to “veto” any proposed changes to the Constitution which documents the agreed principles of the venue management and operations. After considering the factors highlighted previously and in an effort to seek mutual agreement with the WAFC, in November 2006 the Taskforce proposed a revised governance model which is outlined in Table 5. A major concern to both the Taskforce and the WAFC during these negotiations was that football should be better off from the development of a major new stadium. Table 6 provides a summary of the Taskforce’s assessment of the net benefits to WA Football (WAFC, WCE & FFC) of a major new stadium. The WAFC consistently rejected the Taskforce’s approach to governance of the major stadium including the proposals outlined above. The WAFC equally has insisted that it should retain its lease notwithstanding its requirement of Government to fund the

SECTION C C-9

development (or redevelopment) of a new stadium. During the negotiations the WAFC raised the prospect of the Government paying the WAFC significant compensation to terminate the existing lease and management rights arrangements. However, when asked to provide the Taskforce with an estimate of compensation payable and the basis of its determination, the WAFC has refused to do so. Alternatively, the WAFC has requested that the Taskforce provide the WAFC with an offer of compensation, however as noted previously, the Taskforce are of the view that the WA Football are in fact better off if a new major stadium is built, and that there is no basis for additional compensation. Another aspect raised during the negotiations on governance of interest is the possibility of the independent Trust being comprised of representatives of the major sports which would use the stadium. Such governance models have been used in the past although they are far less common today. The Taskforce considered this approach but rejected it as it has been found to produce inferior governance outcomes. The members of any governance body should be appointed for their individual skills and expertise not on the basis that they might represent a sporting code or body. That is common industry practice and relevantly is how the major AFL clubs in Western Australia appoint their board members.

Table 6: Key Benefits for Football in WA associated with the Major Stadium proposed by the Taskforce.

Key Benefits for Football in WA associated with the Major Stadium proposed by the Taskforce. Status Quo

Major Stadium

Total Capacity

43,082

60,000

Public Admission Seats

39,647

54,600

Corporate / Function Seats

3,435

5,400

Clean Stadium

a

a

Average Attendance WCE*

40,744

55,000+

Average Attendance FFC*

36,569

50,000

a

a

Priority Access Rights during Season Remaining Economic Useful Life (EUL)

5-10 years

• The venue will be a “clean stadium” with the venue being provided to hirers free of any seating and membership restrictions and corporate suites (and other corporate facilities) and signage available for sale by the hirer under the terms of each hiring agreement; and • As shown in Table 6 following the WAFC will be in a financially better position under the new arrangements and, in turn, is expected to terminate the existing lease and management rights agreement over Subiaco Oval. Source: Perth Stadium Consulting Team

The total number of public admission seats will increase by 37.7% at the 60,000 seat major stadium. The capacity of corporate facilities will increase by 57.2% at the 60,000 seat major stadium. The venue will remain a clean stadium for all hirers. The average attendance for WCE matches is projected to increase by 35.0% at the 60,000 seat major stadium. The average attendance for FFC matches is projected to increase by 36.7% at the 60,000 seat major stadium. The AFL teams will continue to have priority access rights to the venue (e.g first access to book events). The EUL of the new stadium will be approximately 3 times

years

greater than the EUL of some of the stands at Subiaco Oval. limited cost compared to significant costs associated with an

Cost of extension of EUL to

+$600m

extension of the EUL of Subiaco Oval which is assumed will

-

need to be funded by the WAFC. Funding of this investment by the WAFC may require significant increases in ticket

Key Elements of the Taskforce’s Amended Governance Model Proposed to the WAFC

• Football, as an anchor tenant of the venue, will have priority access rights to the venue during the football season;

60,000 seat major stadium.

30-40

Table 5: Key Elements of the Taskforce’s Amended Governance Model Proposed to the WAFC

• The WAFC will actively participate in the design and development of the stadium;

Total capacity of the venue will increase by 39.3% at the

Football will be provided priority access to a new venue at

Football

• The WAFC will become the venue manager of the new stadium based on standard commercial terms and conditions for an initial period of five years with a further five-year option subject to satisfactory performance;

Commentary

prices. The WAFC is currently responsible for maintaining the existing stadium at Subiaco Oval. In contrast, the WAFC

Obligation to maintain the

a

stadium asset

r

would be relieved of this obligation at the 60,000 seat major stadium with the Government (as the owner) having responsibility for maintaining the asset.

State of the Art facilities for teams and spectators

r

a

Additional Potential Annual Return to Football - Average Year

-

+$3.0m

The new venue will provide the AFL teams, their spectators and, in turn, football as a whole, state of the art facilities. Football in WA are forecast to derive potential additional revenues of $3.0m from the new venue in an average year.

*WCE and FFC average attendances are based on mid-points of attendance forecasts presented in the WAFC’s “Subiaco Oval Redevelopment” document dated 21 October 2005. Function room seats for the status quo are based on dining capacities presented in the WAFC Masterplan. Source: Perth Stadium Consulting Team

PERTH STADIUM C-10

1.3

CURRENT SITUATION

In their final submission to the Taskforce, (received 15 March 2007) the WAFC confirmed that they do not support the establishment of a Trust and proposed that Football should retain total control over the governance of the redeveloped Subiaco Oval by way of the existing lease over Subiaco Oval which expires in 2090. The WAFC would be accountable to the Minister for Sport and Recreation by way of a revised Operating Agreement. The WAFC also proposed a number of potential refinements to the existing operating structure at Subiaco Oval including: •

Separate reporting of stadium performance to provide greater transparency;

•

Establishing a number of key performance indicators (KPI’s) to be assessed by an independent body;

•

Agreed pricing principles and the establishment of a further regulatory body to resolve non-football pricing disputes;

•

Clearly defined priority access arrangements for all users;

•

Establishment of a regulatory body to resolve access and scheduling issues outside Football’s priority access period;

•

An agreed maintenance schedule;

•

Establishment of a Capital Improvement Fund; and

•

The documentation of User Agreements to address issues of pricing, access, scheduling etc.

It is interesting to note that the WAFC is of the view that the only means by which they can have certainty of their position going forward is to have control over the governance and management of the redeveloped stadium and they suggest that they will protect the interests of other key sports by way of User Agreements and appropriate resolution procedures. So in essence, the WAFC propose different governance and management models for Football to that of other users. The Taskforce’s governance recommendations propose one consistent arrangement for all sports and include the use of user agreements and dispute resolution mechanisms.

Further, the WAFC seek to retain the management rights to the redeveloped Subiaco Oval and are critical of other operators (private and public) on the basis of the inefficiencies of their operations and conflicting profit motives. However, the WAFC estimate that the operating costs for the redeveloped Subiaco Oval would be in the order of $7.0m per annum which is generally in line with the consultant’s forecasts of stadium overheads for the new stadium, details of which are provided in Section C2.4. Further, the WAFC then suggest that they would seek an “operator management fee” for managing the venue which is essentially the same profit element that they criticise other operators (private and public) for seeking. So in summary, the WAFC claim they are the best operator for the redeveloped Subiaco Oval on the basis of being cost efficient and not profit motivated yet their forecasts of venue overheads are in line with the Taskforce’s overheads forecast and the WAFC wish to receive an “operator management fee” yet the quantum of which is not disclosed.

Table 7 provides a concise summary of the current positions of the WAFC and the Taskforce with respect to the governance arrangements for a new major stadium. In summary, at the time of completing this Final Report, the Taskforce has achieved general support amongst prospective tenants (Rugby WA, WACA and FFA) of any new government funded stadium of the Taskforce’s preferred governance model, provided that there is a mechanism to ensure key tenants are able to raise any matters of concern directly with the Stadium ownership body (Trust or Authority). In contrast, the WAFC do not support the Taskforce’s governance model and propose an arrangement which would perpetuate the current arrangements whereby the WAFC would continue to control the new venue through to 2090.

Table 7: Current Positions of the WAFC and the Taskforce

Current Positions of the WAFC and the Taskforce Issue

Taskforce

WAFC

• Establishment of independent “Trust” to oversight stadium operations

✓

✘

• Empowerment of Trust to review and decide all material transactions with respect to the stadium

✓

✘

• Establishment of independent regulatory and performance assessment bodies

✘

✓

• The Government appoint the Trust with members appointed on the basis of their relevant professional skills and experience. Membership of the Trust to specifically exclude representatives of venue tenants and hirers

✓

✘

Considered appointment of WAFC as manager on standard commercial terms and conditions

WAFC appointed on non-standard uncommercial terms and conditions

• Independent, professional venue manager

✓

✘

• The Trust to be controlled by the WAFC

✘

✘ No longer support a “Trust”

• Term of venue management agreement

5 + 5 subject to performance

20 + 20 years

✘

✓ until 2090

Believe that the WAFC and Football WA will be significantly better off once a new and expanded stadium is developed, therefore do not believe any significant compensation should be payable to the WAFC, but do recognise the intangible value of “control” held by the WAFC

Not preferred outcome, however unofficial advice of WAFC’s expectations is that significant compensation should be payable

• Lease over stadium • Compensation for termination of current lease and management rights – value yet to be determined due to lack of information provided by the WAFC

Source: Perth Stadium Consulting Team

SECTION C C-11

The Taskforce unanimously agrees that it is appropriate and timely for a new approach to governance of major sporting stadia in Western Australia. This is necessary as the Government will be required to invest the vast majority of capital funds in the stadia which on prudential grounds means it must have control of the facility. It is also appropriate given the multi purpose nature of the major stadium with multiple tenants and uses. Accordingly the Taskforce re-confirms the key governance recommendations outlined in its Interim Report. Namely: 1.

The governance of national / international level sporting infrastructure should be independent of sporting codes and be managed through a trust or series of trusts under the direction of Government;

2. The trust members should be appointed on the basis of their relevant business and professional skills and background and be independent of key venue tenants/hirers; 3. That no public funds should be allocated to the development of a major stadium until it is under the direct control of Government; and 4. Major tenants should be afforded direct access to the trust/ authority to resolve any matters of concern which cannot be effectively resolved with the venue manager

1.4

GOVERNANCE MODELS FOR MAJOR AUSTRALIAN STADIA

The development of more independent and accountable management arrangements have been developed in parallel with the development of major stadia in Australia, with Trusts and Authorities generally controlling the management of major government funded venues. The following section provides an overview of the governance models currently in place at the Melbourne Cricket Ground in Victoria (as an example of a Trust structure) as well as the Major Sports Facilities Authority (MSFA) in Queensland and the Sydney Olympic Park Authority (SOPA) (as examples of Authorities), all responsible for major government investment in infrastructure over the last 10 to 15 years. South Australia, where the investment in the development of stadia has been limited, has a similar governance structure to WA with sports in control of the major venues. This is currently also creating problems in resolving ongoing development opportunities for the stadia and the related sports (i.e. cricket and AFL).

1.4.1

Melbourne Cricket Ground Trust, Victoria

As presented in Appendix A of this document (and highlighted in table three of volume one of the Interim Report) Government funded venues in Australia are predominantly governed by Trusts. Originally, Trust structures included representatives of the sports who have since been replaced by Trustees who represent a broad range of business and professional interests, reflecting the scale and complexity of the stadium business. The MCG has been selected as an example of an existing venue in Australia governed by a Trust with the key governance elements highlighted in Table 8. The Board of the MCG Trust currently consists of nine members who are independent from any sport which is a tenant of the MCG and who manage the venue on behalf of the Government. An overview of the current members of the MCG Trust is provided in Table 9.

Table 8: Key Governance Elements of the MCG Trust

Key Governance Elements of the MCG Trust Role

• To manage, control and make improvements to the Ground at the Trust’s discretion; • Carry out any other function conferred on or given to the Trust by or under any other Act; • With approval of the Minister the Trust: - Can delegate its function or powers to the Melbourne Cricket Club; and - Can grant leases for up to 99 years and licenses for up to 50 years; • Can enter into management contracts for the Ground or appoint the Melbourne Cricket Club as the ground manager

Composition

• Currently nine Directors including the Chairperson – represents the maximum number permitted

Appointment

• By the Governor in Council, i.e. Cabinet - one Director has to be appointed as Chairperson

Duration

• Appointment cannot be longer than five years but members can be re-appointed

Terms

• Directors are entitled to be paid the remuneration and allowances decided by the Governor in Council; and • A Director holds office on terms decided by the Governor in Council

Termination

• Governor in Council can terminate appointment at any time

Decision

• Each question is decided by a majority of vote

Source: MCG Act 1933

Table 9: MCG Trustees

Melbourne Cricket Ground Trustees John Wylie

Carnegie, Wylie & Company

Anne-Marie Corboy

CEO HESTA

Rod Fehring

CEO Lend Lease Communities Asia Pacific

Bob Herbert

Former CEO of Australian Industry Group

Ross Inglis

CEO Australian Jockey Association

Chris Lovell

Managing Partner, Holding Redlich, Lawyers

Kate Palmer

CEO Netball Victoria

Bruce Thompson

CEO Keycorp Ltd

John Cain

Former Victorian Premier

Source: Perth Stadium Consulting Team

PERTH STADIUM C-12

1.4.2

Major Sports Facilities Authority (MSFA), Queensland

The Queensland Government has adopted an alternative model and established the MSFA to manage and promote the use of the State’s major sports, recreation and leisure facilities. The MSFA oversees a range of major sports and entertainment venues throughout Queensland, some of which it manages in house and others it manages by way of contract management. Similarly, to Perth the major sports venues in Brisbane (i.e. Suncorp Stadium, The Gabba) are dispersed around the city and not consolidated in one location as is the case with multiple sports and entertainment venues located at Sydney Olympic Park. Table 10 provides a summary of the major facilities under the control of the MSFA:

Table 11: Key Governance Elements of the MSFA in Queensland

Key Governance Elements of the MSFA

Members of the MSFA Board of Directors

Role

Wayne Myers – Chair

Held senior management positions in large national and multinational companies (e.g. NEC, AT&T, Lucent & AAPT), currently Managing Director of Sirocco Technologies Group Ltd, Director of Unitab Ltd and Ergon Energy Corp. Ltd

Vernon Wills – Deputy Chair

Background in the investment and finance industry, served as a Director of public listed companies within the finance, investment and mining industries

Jacqueline D’Alton

Specialist in Wholesale Term Funding & Capital at Suncorp Metway Ltd

Geoffrey Trivett

Managing Director of valuation and property consultancy company G D Trivett & Associates

• Directors are entitled to be paid the remuneration and allowances decided by the Governor in Council; and

Desmond Hancock

Former National General Manager (Marketing and Sales) of Rothmans Australia

• A Director holds office on terms decided by the Governor in Council

Nerolie Withnall

Former Partner at law firm Minter Ellison and holds Directorships on a number of Boards

Vicky Wilson

Director of the Queensland Academy of Sport, netball commentator, former captain of Australian netball team

• Decide the objectives, strategies and policies to be followed by the Authority; and • Ensure the Authority performs its functions in a proper, effective and efficient way

Composition

• Currently seven Directors – represents the maximum number permitted

Appointment

• By the Governor in Council, i.e. Cabinet - one Director has to be appointed as Chairperson

Duration

• Appointment cannot be longer than three years

Terms

• A Director is appointed on a part-time basis;

Table 10: MSFA Major Venues

Venue

Management Arrangements

• The Brisbane Cricket Ground (Gabba)

• Staff appointed directly by the Trust

Termination

• Governor in Council can terminate appointment at any time

• Suncorp Stadium

• Contracted to a professional venue management company

Meetings

• Board meetings are to be held at least twelve times p.a. or if a quorum of Directors asks to hold a meeting; and

• Dairy Farmer’s Stadium Townsville

• Staff appointed directly by the Trust

• Brisbane Entertainment Centre

• Contracted to a professional venue management company

Decision

• Queensland Sports & Athletic Centre

• Staff appointed directly by the Trust

Source: MSFA Act 2001

• The Sleeman (Aquatic) Centre

• Staff appointed directly by the Trust

• Gold Coast Stadium

• Staff appointed directly by the Trust

Source: Perth Stadium Consulting Team

The consolidation of the oversight role of Government funded venues into a single body such as the MSFA, ensures the management and operation of such venues is undertaken in a coordinated and consistently professional manner from a whole-of-government, whole-of-community perspective.

Table 12: Members of the MSFA Board of Directors

Source: Perth Stadium Consulting Team

• The Minister may nominate an officer of the appropriate Department to attend Board meetings • Each question is decided by a majority of vote

To ensure the control of venues is independent of any sport the Directors on the Board of the MSFA have strong commercial expertise across numerous industries but do not represent an individual sport as highlighted in Table 12.

For example, a single oversight body will ensure that Government funded and owned venues do not compete with each other “against the public interest” to secure major national and international events. In addition, such a model provides the opportunities for economies of operation, both from an ownership and management perspective. An overview of the key governance elements of the MSFA is provided in Table 11.

SECTION C C-13

1.4.3

Sydney Olympic Park Authority (SOPA), New South Wales

The NSW Government in July 2001 established the SOPA which is responsible for the management of public assets of the Sydney Olympic Park, Homebush Bay. In addition to the management of the sports venues, SOPA is also responsible for the management of open space, parklands and developments within the Sydney Olympic Park.

Table 13: Key Governance Elements of the Sydney Olympic Park Authority

Key Governance Elements of the Sydney Olympic Park Authority

Members of the SOPA Board of Directors David Richmond – Chair

Former Director-General of Olympic Coordination Authority

- The development and use of Sydney Olympic Park including the provision and management of infrastructure; and

Chris Christodoulou

Deputy Assistant Secretary of the NSW Labour Council

- Cultural, sporting, educational, commercial, tourist, recreational, entertainment and transport activities and facilities

Penelope Figgis

Vice-Chair, Australia and New Zealand IUCN World Commission on Protected Areas

• Protect and enhance the natural and cultural heritage of SOPA;

Gabrielle Kibble

Chair of Sydney Water

• Provide, operate and maintain public transport facilities within the Park; and

Jack Cowin

Founder and Executive Chairman of Competitive Foods Australia Pty Ltd, Director of the TEN Television Network, Chairman of investment bank CIBC of Australia

• The Authority cannot employ any staff – staff within the Government service can be employed to enable SOPA to perform its functions.

John Coates

President of the Australian Olympic Committee

Brian Newman

CEO Sydney Olympic Park Authority

Composition

• Currently seven Directors.

Source: Sydney Olympic Park Authority

Ministerial Control

• SOPA is subject to the control and direction of the Minister for Tourism and Sport and Recreation in the exercise of its functions.

Board

• A minimum of four members including the CEO plus three members appointed by the Minister.

Role

SOPA anticipates that by 2025 the Park will provide commercial and residential facilities to support a population of 15,000 residents. SOPA is governed by the SOPA Act with Table 13 highlighting the key elements of the Act. Similar to the MSFA, members of the Board of Directors at SOPA are independent from any sport and have an extensive commercial background as is presented in Table 14.

Table 14: Members of the SOPA Board of Directors

• Promote, co-ordinate and manage:

• Liaise and maintain arrangements with Olympic organisations. Employment

• At least one appointed member must represent the private sector; and

As with the MSFA, SOPA oversight a number of publicly funded major venues and predominantly outsource the venue management role as presented in Table 15. Table 15: SOPA Major Venues

Venue

Management Arrangements

• The Minister appoints one member as the Chairperson and may appoint a member as the Deputy Chairperson.

• Telstra Stadium

• Contracted to professional venue management company

CEO

• Responsible for the day-to-day management of affairs in line with specific policies and general directions by the Board.

• Acer Arena (previously Superdome)

• Contracted to professional venue management company

Duration

• Appointment cannot be longer than five years but members can be re-appointed.

• Aquatic & Athletic Centres

• Previously contracted to SCG Trust, now SOPA, pending a redevelopment

Terms

• A Director is appointed on a part-time basis.

• Golf Centre

• Private Lease

• Directors are entitled to be paid the remuneration and allowances decided by the Minister.

• Sports Centre

• State Government

• Sydney International Tennis Centre

• Tennis NSW

• Sydney Showground

• Royal Agricultural Society

• Waterview Convention Centre

• Private Lease

Termination

• The Minister can terminate an appointment at any time.

Decision

• Each question is decided by a majority of vote.

Source: SOPA Act 2001

Source: Perth Stadium Consulting Team

Similar to the MSFA, members of the Board of Directors at SOPA are independent from any sport and have an extensive commercial background as is presented in Table 14.

PERTH STADIUM C-14

1.5

VENUE MANAGEMENT

The days of the venue owner “handing the keys” of the stadium to the hirer no longer exist. The increasing sophistication of venue operations and event requirements necessitates professional venue management capability including the requirements of professional facility management to meet international standard benchmarks. Typically, a professional venue manager will have responsibility for:

Event Management and Planning The sophistication of the venue and the event requirements demand that the facility manager is responsible for the preparation of the venue for events; co-ordinating the requirements of hirers; and delivering services to an international standard. The hirers have commercial imperatives which must be met and part of this is ensuring the high quality, low risk presentation of their events. Poor service, dirty or poorly maintained facilities have a real impact on the attractiveness of an event, and this combined with the increasing requirements of the event organisers, the valuable sports people and the discerning public, necessitate professional and experienced venue managers, who understand the requirements, and can deliver efficiently without increasing the costs of the event.

Security and Emergency Management While this has always been a part of well-managed venues, the profile of emergency management and security has been elevated over the last five years with the increased threat of terrorism and in particular the threat level at high profile major events. As such, a sophisticated risk assessment, emergency management plans and associated crisis management plan together with the day-today implementation of security and risk management strategies is essential. This demands that the facility management team stay abreast of international trends and technological and other advances and be able to respond appropriately to changing threat levels over time and between different types of events. The requirement for venue managers is to provide the required security while delivering an event.

It is important that the requirement for security is recognised in the development of the facility, in particular the development of the access control system, the separation of the front of house and back of house activities and the ability to effectively monitor all areas through CCTV.

Risk Management Risk management across all areas of business has emerged as a particularly important component of management over the last five to ten years. Event management is seen as a high risk business, with rapid increases in insurance costs as a result. The importance of maintaining adequate risk management systems across the business and particularly during events is necessary to manage this important cost area for venue owners. This can be achieved by the use of fully documented policies and procedures and certification under ISO standards for quality assurance and risk management.

Technology The increasing level of technology provided in stadia across a range of areas such as scoreboards and video replay screens, turf management, signage, lighting, lifts and escalators, air conditioned areas, media and for the actual events requires venues to have a high level of technical capability. The facility manager works with the hirers to provide the services they require for the presentation of their events and the general operation of the stadium.

Asset Management The development of a stadium is a considerable capital cost and a comprehensive asset management plan for day-to-day or routine maintenance as well as programmed maintenance and capital replacement is required post-construction. The asset management plan should be developed on the life cycle costing model and sufficiently funded prior to completion of the construction of the project, in accordance with international benchmarks and the WA Government’s Asset Management and Life Cycle Cost Guides prepared by the Department of Sport and Recreation. This approach will protect the value of the initial investment in the long term and ensure the appropriate on-going presentation of the venue throughout the life of the building. The “ad-hoc” and “catch up”

SECTION C C-15

approach to asset management, with the routine deferral of required maintenance, is no longer appropriate or acceptable within the industry, where events are big business and very dependent on commercial success.

Turf Management Turf management has become a major issue for venues. This is impacted by the limited sun on parts of the turf with the increased size of the stadium roofs, the increased number of major events played on the ground, and the sensitivity of the highly trained sports persons to variations in turf surfaces, particularly if there is an increased risk of injury. Television appearance is also important, and even if the ground is not a problem for the players, a patchy surface does not look good on television. Problems at Telstra Dome and initially at Suncorp Stadium indicate how damaging this can be to the image of a venue as well as the impact on the actual event. Turf issues need to be adequately addressed in the design stages of the venue, with input from the venue operators as well as specialist turf providers, and require experienced field managers and adequate operational funding to enable turf replacement and enhancement as required.

Multi-use and Multi-Sport The commercial imperatives of venues require that stadia are no longer single sport developments, but must cater for multi-sports and even multi-events. A major impact on this has seen the move away from ownership and management by a single code. The Brisbane Cricket Ground (the Gabba) is a good example of how this can be changed without a major disruption to the incumbent code and any loss of revenue. Over the last ten years the Gabba has moved from a venue managed by a Trust that was dominated by the interests of the major hirers, particularly cricket, to a Trust representing business interests, to the current management by the Major Sports Facilities Authority. This has enabled the sports to now have responsibility for the presentation of their events, and enabled the development of the second tenant, the Brisbane Lions, without competition or conflict between the two hirers.

Food and Beverage Food and beverage is of great importance. Firstly, in terms of the satisfaction of patrons – poor quality food is very memorable and will impact the future attendance of patrons, and also their expenditure levels. Secondly, in terms of financial viability of the venue, food and beverage provides a significant contribution to the operating result. The days of the “beer with the pie and sauce at the footy” are gone – although these items are still in high demand. The requirement now is for quality and variety for the general public, with a range of outlets and eating environments, through to the highest standards for corporate suite holders, who may pay significant money for the privilege of attending events at the venue for a year. This has required a complete change in the food and beverage facilities and their operation, again an important consideration during the planning and design stages of the stadium where input from a specialist catering consultant and the operator is required. Expenditure per head is a key operational indicator, so efficient delivery of food and beverage to maximise expenditure can be as important as the quality and range of the final product.

Corporate Facilities Corporate suites and boxes have been part of stadium developments for about 20 years. In addition there are also typically a range of corporate hospitality and membership options for those wanting an enhanced event experience. The mix should provide a range of options for companies of various sizes and requirements from high worth individuals to the regular footy fanatic. The mix, pricing and revenue from these facilities will vary depending on the market of the particular city, profile of events and the event agreements. Recent trends in facilities include the introduction of “corporate seating” options where companies can purchase two or more seats in quality areas with access to lounge and dining facilities, and recognition of the need to provide flexibility in the range of product available. The sale of the corporate suites was seen as an opportunity to generate revenue by the owner to fund the development of stadia. However, the requirement of hirers to sell all corporate opportunities and have, as far as possible, a “clean” stadium to maximise their revenue means that sales and appropriate revenue sharing arrangements must be in place to meet the requirements of both the venue and the hirers.

PERTH STADIUM C-16

Media There is an ever-quickening pace of change confronting sports event presenters and stadia. This is both in terms of the information detail demands of the media who cover these events and the associated technological complexity of its presentation. It is not practical for most events to overlay the technical facilities to service current requirements on a one-off basis. It is much more practical for such facilities to be permanently incorporated in the stadium and made available as required for each event. More importantly, it is more effective for the stadium’s technical staff to provide a consistent interface with media technical staff and also to manage the ongoing evolution of the systems and facilities required. The presenters of the sports events will continue to deal with the media representatives and provide the information on the event and access to players for example, but in the same way as it is perceived that sporting codes should be left to focus on fostering their sport, they should not be distracted with the technology interface behind the scenes nor the capital demands of changing technology.

Commercialisation The commercialisation of sport, as well as venue development and operation, is driving the requirements and decision making for the development and operation of venues. This is also reflected in the competition for major events between venues and in the way venues are managed with increasing focus on the operating result as well as the standards of management.

However, in recognising this experience, it should be noted that a stadium operation in an operating commercial precinct can also be negative. It is difficult for regular customers to access businesses and parking restrictions on event days can impact on local businesses. Depending on the type of business, turnover can actually decrease during events. Activity around stadia should therefore be carefully planned with consideration to the actual event day operation as a priority – recognising the requirements for: traffic movement; public transport; buses and coaches; emergency vehicles, deliveries; and crowd movement before and after events.

Operator Input into Design The recognition of the value of operator input during design is one of the most important trends in stadium development over the last decade. The increasing sophistication of venue management and events and requirement to meet international benchmarks and commercial targets has led to operational input becoming imperative, even for the most experienced architect. The operator needs to test and challenge the design and its fit out from every perspective of service delivery including cleaning, food and beverage or security; cost effectiveness in the long term and particularly in evaluation of the trade off between capital cost savings and long term maintenance and capital replacement costs. For example, the cost of cleaning can be significantly impacted by platforms that are not sealed or seats that are positioned so that areas cannot be cleaned effectively. These issues could be easily identified and rectified in the planning stage to avoid additional costs that will multiply throughout the life of the project.

Event Experience The total event experience has become as important as the event itself, with consideration given to the full spectrum from the arrival at the venue through to the departure. For major events, such as the Rugby World Cup, this was supplemented by stalls and street entertainers in the actual precinct which provides a festival atmosphere. At Suncorp Stadium, the local Caxton Street outlets in particular are a popular destination before and after events and have become an integral part of a Suncorp Stadium event.

SECTION C C-17

1.6

TASKFORCE FINAL RECOMMENDATIONS

•

The Issue Under its Terms of Reference, the Taskforce was required to consider what the most appropriate ownership and governance arrangements would be for a new stadium or stadia. The main criteria being to ensure the long term interests of WA’s sporting bodies, the community and the Government are best served. During its deliberations the Taskforce took the following into account: •

Government best practice in other jurisdictions where similar major investment has been made;

•

Previous experience of the WA Government in providing major capital grants for sporting infrastructure;

•

The views of all key sporting codes and the broader WA community; and

•

Obstacles to WA's major sporting bodies working together for mutual benefit and to efficiently and effectively utilise large scale government funding (historically this has been difficult).

As a result of its enquiry the members of the Taskforce unanimously agreed that an independent governance arrangement must be established if the Government is investing the majority of the capital cost of the new development. This decision reflects: •

The multiple tenants who will be using the proposed multipurpose facility;

•

The possible changing nature of users and their needs over the entire life cycle of the stadium;

•

The demands of most sporting codes (with the exception of WAFC) for independence in governance arrangements;

•

The need for an independent body to take responsibility for all aspects of risk management that such a large investment will require;

•

The need to ensure that there is: -

Financial transparency;

-

Equitable and flexible access for all tenants; and

-

A focus on ongoing investment in maintenance and operational upgrades for the economic / operational life of the facility.

The scale of Government investment in the facility which would require the Government to: -

Include the new facility on its balance sheet (rather than on the balance sheets of the respective sports codes);

-

Take responsibility over its overall governance; and

-

Be accountable for publicly funded infrastructure investment.

Governance and management issues of new facilities have become critical matters for Government. It is imperative that its actions, decisions and associated accountability frameworks are in the public interest, especially those involving considerable public funds. The Taskforce considers it is imperative that any injection of public funds requiring substantial commitments by the Government must be for the benefit of the wider community and not for a single group or body now or in the future.

Governance Recommendations Based on the extensive research and stakeholder consultation the Taskforce confirms its previous recommendations (see Interim Report) for the governance and management of Government funded, major sport and entertainment infrastructure.

2

A Government-appointed Trust should be established by the Government with Trust members selected/appointed on the basis of their relevant business and professional skills and background. All Trust members should be independent of key venue tenants/ hirers.

3

The Government should establish a single Trust/Authority to oversee WA’s major Government funded sports and entertainment infrastructure.

4

No public funds should be allocated to the redevelopment/ development of an existing or new stadium unless it is under the direct control of the Government appointed Trust/Authority.

5

Major tenants should be afforded direct access to the Trust / Authority to resolve any matters of concern which cannot be effectively resolved with the venue manager.

While the Taskforce and the consultants have received in-principle support for the proposed governance model from Rugby WA, the Football Federation of Australia (soccer) and the WACA, the WAFC has rejected the proposed solution and seeks to retain its control over the governance and management of the venue, irrespective of location, for the remaining term of its lease over Subiaco Oval, i.e. until 2090. The Taskforce has assessed the merits of the WAFC proposal and rejects it on the basis of the Government’s own prudential guidelines and the principles of independent and professional governance and management of such facilities. For the reasons stated here, the Taskforce strongly urges the Government to adopt its governance recommendations.

These recommendations with minor amendments are listed below and further reflect the Taskforce’s strong commitment to the recommended governance approach: 1

The governance of Government funded national/international level sporting and entertainment infrastructure should be independent of sporting codes and other major hirers. This was supported by 74 per cent of respondents to a survey of Perth residents hosted on the Perth Stadium website.

PERTH STADIUM C-18

2.0 FINANCIAL FORECASTS

2.1

General Assumptions and Definitions

C-20

2.2

Operating Assumptions

C-27

2.3

Revenue Assumptions

C-30

2.4

Cost Assumptions

C-30

2.5

Projected Stadia Operating Results

C-30

2.6

Net Operating Result to Venue Owner

C-31

2.7

Projected Hirer Net Revenue from Venue Operations

C-33

2.8

Review of Masterplan Proposals

C-36

2.9

Sensitivity Analysis

C-37

2.10

In Conclusion

C-38

SECTION C C-19

This section provides an overview of the financial forecasts that were developed for the stadia options available to Government. It should be noted that while this section presents the assumptions applied in the developing the financial forecasts, it should be read in conjunction with Volume 1 and 2 of the Interim Report as it does not replicate the information previously presented to the Taskforce. Further it should be noted that commercially sensitive information that has been used in developing the financial forecasts for the stadium have been excluded from the following sections and are included in a separate Section of this report (Section D) and are not available for general distribution.

2.1

GENERAL ASSUMPTIONS AND DEFINITIONS

Role of the Major Stadium The rationale for the development of the Perth Stadium is to provide a venue for major events and for the teams participating in national competitions. This strategy will enable WA to compete effectively for a “fair share” of major events and bid for additional events as the opportunity arises. On this basis, it has been proposed that the event profile will include events that occur in Perth attracting attendances of about 25,000 people and above. This will include international events, such as the Rugby Union Test and International Cricket Test and One Day matches, as well as and the home games of the WCE and FFC AFL teams. The Western Force also requires 35,000 seats and a high level of corporate facilities which could be provided at the proposed Stadium. Unlike a community venue where the success is largely measured by the number of events and activities, the success of a major venue will be measured by its ability to successfully host major events. In actuality, a large number of events has the potential to have a negative impact, both financially and operationally on a major venue. The days of the “caretaker manager”, where the keys of the stadium can be handed over to a tenant are in the past. In modern state-of-the-art stadia, the infrastructure investment, security requirements and technology requires that every event be professionally managed and controlled. This requires a certain level of staff, including food and beverage staff, which need to be rostered for the event; preparing the ground and cleaning the stadium before and after the event, erecting or covering signage; and managing the ticketing requirements. The rationale of playing small capacity events at the stadium also needs to be evaluated in terms of the scale of a 60,000 seat facility which is overwhelming for an event of only 5,000 or less patrons. An “empty stadium” provides a negative feel for the event and for the venue.

PERTH STADIUM C-20

The use of the venue must be effectively and discernibly managed. For example, staging additional events may have the potential to impact on the quality of the turf. Poor turf quality historically attracts media criticism and can significantly impact on the reputation of a stadium. Therefore any decisions regarding additional use of the venue should factor in the likely associated costs arising from the use. Logically, major events are more cost effective than smaller events. Regular training by “home” teams is also normally not provided, particularly at venues where there is more than one home team, and therefore more than 10 or 11 events in a season. Team training, in addition to a heavy event schedule, puts the turf at risk and restricts the management team’s ability to hold additional events as they arise, or undertake turf or other venue maintenance between events. It is assumed that a training run would be provided prior to each event for each team, as per normal hiring arrangements. Additional events will also impact other operating costs. In such a situation, the full time stadium operating team designed to manage, for example, 30 events a year can be put under stress with the requirements of additional events. They may need to engage additional permanent staff, which is not reflected in the event day costs of the actual event, and cannot be offset by the additional revenue. These impacts are felt across the whole operation including the events team; rostering; reporting and financial management; public relations and communications. These significant impacts are not necessarily in direct correlation with the profile or size of the event. There are instances where small events have been accommodated in larger venues. For example, Queensland Cricket events, including some Pura Cup events are accommodated at the Gabba, a much smaller venue than that proposed for the new Perth Stadium. This arrangement is more the result of history and the location of the Queensland Cricketers Club at the ground, than any other reason. Similarly, the MCG still host state-based cricket events, again the result of history and the position of cricket at this particular ground. Also, Telstra Stadium has attracted a number of Rugby League teams to host events at the Stadium to support the value of the annual corporate suite and boxes and memberships all sold by the stadium. The incremental cost (of these events) was offset by the value to the corporate sales and membership.

In the Perth context, with no incumbent tenancy issues and no sales of corporate suites or memberships by the stadium on an annual basis, there appears to be no requirement to include additional events that may unnecessarily impact the operation of the stadium financially or its ability to host the major core event profile. Similarly, training should not be conducted at the major venue except for the regular training slots for each team included as part of a hiring agreement. As with small events, training increases the wear and tear on the turf – the most valuable asset of the stadium without associated net benefits. Just as the teams in other cities generally train on their home training ground, with their associated club facilities, so it is envisaged for Perth that each hirer that plays in the major stadium, would also have a home base which provides the individual home base for the team. From time to time the WA Government may seek to host a small event at the stadium which is not operationally or financially viable, and which would be accommodated to meet the community or social requirements of the Government at that time. The Taskforce recognises that Subiaco Oval is the home ground for the WCE. In keeping with the Taskforce’s “better off” commitment, it is proposed that if Subiaco Oval or Kitchener Park is the preferred site for the development of the 60,000 seat major stadium, then the Government would fund the development of a dedicated, state of the art training facility at an existing WAFL standard venue such as Leederville Oval (which is currently used by WCE as an alternative training venue). If either the East Perth or Burswood site is selected as the preferred location for the major venue, then Subiaco Oval could potentially be re-developed as a home ground for the WCE. In keeping with this recommendation, the financial forecasts for the various venue options are all based on the assumptions that the venue(s) will be used to stage major events only and will not be used as a home ground or training venue (or to stage large numbers of smaller events).

SECTION C C-21

Basis of Assumptions and Sources of Information The assumptions applied to the financial models are generally based on financial and operational data provided by relevant sporting codes in Perth, Ogden IFC, the MSFA in Queensland, and publicly available data from comparative venues across Australia.

Stadium Options

negotiation of hiring and contractual arrangements and preparing the venue for opening. These costs have been included in the capital cost budgets detailed in Section D2; •

The stadium will be offered to hirers as a “clean” stadium, a definition of which is provided in Table 22 following later in this Section;

•

To some degree the financial results of the venue are dependent on the on-field performance and therefore crowd support of its key hirers, i.e. the on-field performance of WCE, FFC and the Western Force. Further, on-field performance and therefore crowd support is likely to vary year by year and is therefore difficult to predict with any degree of certainty. Accordingly, for the purposes of this assessment we have provided financial forecasts for an “average year” of operation of the venue over its first 25 years of operation. This in turn has been based on a detailed analysis of historic and forecast attendances for all major events staged at the venue. Details of this assessment are provided in Volume 2 Part 2 of the Interim Report and are summarised in Section C2.2;

•

Industry standard hiring arrangements have been assumed which are based on precedent arrangements but are ultimately dependent on negotiations with hirers, which could result in the mix and revenue outcomes for the stadia owner and hirers varying from those used. It should be noted however that the rental assumptions for the major stadium have been increased to offset the revenue forgone by the owner following the detailed consultations with the individual sporting codes which have suggested that a “clean” stadium model (with no stadium membership program) would be the preferred solution for all sports;

•

It is not expected that the projected attendances will be subject to a “ramp up demand” period as prospective hirers are established franchises, some of which are currently experiencing significant turn-away demand;

•

It is assumed that 5% of all tickets will be complimentary;

•

Under all stadium options, a minimum of 10% of the stadium capacity will be available for general admission, i.e. non-season ticket holders and corporate attendees;

•

No additional AFL franchises will be established in Perth over the next 20 to 30 years;

As previously outlined in Section C1, the governance impasse with the WAFC resulted in the number of venue options under consideration increasing from the original terms of reference for Stage 2. The stadium options under consideration are presented in Table 16.

Key Assumptions The following overarching key assumptions have been applied in the development of the financial forecasts: •

In accordance with the recommendations made with respect to ownership and governance in Volume 1 of the Interim Report and re-confirmed previously in Section C1 it has been assumed that the ownership of the venue will be vested in a Trust;

•

The responsibility for the day-to-day management and operation of the venue will be contracted to a professional venue management operator, engaged to operate the stadium on behalf of the owner and will be paid a management fee;

•

The new stadium / stadia is assumed to be completed by late 2011 and to have a structural life of 50 years. Major refurbishments will be required at 20 year intervals together with an annual asset refurbishment allowance equivalent to 1.5% of capital costs;

•

The options presented are not site specific;

•

It is assumed that there will be no new competitive facilities developed to cater for the events proposed for the stadium option, and that any existing venue will be decommissioned if not redeveloped as part of the final stadium development strategy;

•

The operating cash flows are pre-funding and do not include pre-opening costs associated with establishing the operation,

PERTH STADIUM C-22

Table 16: Stadium Options Under Consideration

Table 17: Potential Sources of Revenues / Expenses Associated with Major Venue Operations

•

There will be no WA team competing in the NRL in the short to medium-term, however it should be noted that the WA Rugby League has recently announced the participation of the Western Reds in a second-tier rugby league competition from 2008 – this competition has been excluded from this analysis and could present potential additional event days for a 25,000 seat rectangular stadium; and

•

All revenue and cost assumptions are stated in 2006 $ terms and are exclusive of GST.

Potential Sources of Revenues / Costs associated with Major Venue Operations There are a range of potential revenue sources that both the venue owner (State) and hirers can derive from the operations of major venues. Similarly, the owner and hirers face a range of costs associated with owning and operating / hiring the venue. Table 17 provides an overview of the different revenue and cost sources associated with major venue operations and the general allocation of such items between the venue owner and hirer.

Table 18: Venue Memberships of Major Stadia in Australia

While there are some generally accepted industry benchmarks for rental levels and cost apportionment, such as a 15% rental plus venue related event costs, it is rare that any rental arrangement is this simplistic and will depend on the facilities available to the hirer to sell, the size of the venue, and the competition between venues. Ultimately the revenue share between the hirer and the owner is the outcome of negotiations, where the deal may be made in a number of different ways to provide return and risk and incentive for both parties, recognising that rather than an owner and hirer relationship this is actually a partnership. Under the proposed hiring arrangement for the stadium / stadia, the venue hirer would pay the venue owner a rent based on a percentage of gross ticket revenue and corporate sales and will retain the remaining revenue associated with admissions, corporate suites / boxes, function rooms and merchandise sales. Revenue for the venue owner will include the rent paid by the hirer (or a share of the revenues) and the revenue associated with naming rights, signage / advertising, pourage rights, catering rights and venue memberships (if available). The hirer has to reimburse the owner for venue related event day expenses.

The permutations and combinations of the commercial arrangements are numerous however in reality there is a symbiotic relationship between the venue owner and hirer. The owner will benefit from the success of its hirers, and the hirers will benefit from a well maintained and well operated stadium. State ownership of the stadium on behalf of the people of WA, will ensure the appropriate balance between commercial imperatives and social and community objectives. This relationship is further strengthened when the owner is effectively the State (on behalf of the local community) which has a broader range of social and community objectives other than merely a short-term profit motive.

Venue Memberships The financial / commercial objective of the venue owner is to achieve a break-even position for the stadium operations and to generate a small surplus to contribute towards ongoing capital costs of the venue (assumed at 1.5% of capital costs). Given the fixed nature of venue ownership costs the preferred position of the venue owner is to secure revenue streams with a smaller degree of volatility and, in turn, greater certainty. As highlighted in Table 18 venue memberships have traditionally provided a significant revenue stream for the venue owner with all major stadia across Australia having some form of venue memberships in place, with the exception of Subiaco Oval. Venue memberships are a popular product for major multi-sport venues, as they provide access for all events, and are highly sought after by both sporting fans and those who particularly want to attend the major events with access to the best possible seats and additional facilities and services. Membership packages typically appeal to middle to high income sports fans and corporate clients, who choose the informal atmosphere that a membership offers, with the option for dining if desired, rather than the more formal atmosphere of the corporate suite. In Australia, about 10% to 20% of seats are allocated to memberships, and in all stadia, venue owners have had to manage issues with individual hirers to protect the rights of their members, both in terms of the perceived competition of the membership program with other programs they may offer and other issues such as empty seats in prime areas when members do not attend events. This is particularly the case in sold out events.

SECTION C C-23

Table 19: Venue Memberships at Major Stadia in Australia

An overview of the number and types of memberships available at major Australian stadia is presented in Table 19.

Table 20: Types of Membership Packages offered for Events at Suncorp Stadium

Types of Membership Packages offered for Events at Suncorp Stadium

The key benefits of venue memberships are: • • •

A secure revenue stream for the stadium owner irrespective of the on-field performance of individual teams; The timing of the revenue, i.e. venue memberships are generally sold at the beginning of the season; and The market appeal of the product and, in turn, the premium that venues can charge for the membership package.

Venue memberships offer access to all events held at a venue whereas club memberships are limited to a particular sports code. Venue memberships are sold at a significant price premium compared to club memberships, as highlighted in Table 20 and Table 21. As such, the threat to the membership base of an individual sport is limited, particularly where there are a number of sports and no other opportunity for purchasing a single package across all events.

Hirer

Owner

Issuer

Price of Premium Membership

Queensland Reds

$119 - $330

Queensland Roar

$235 - $345

Brisbane Broncos

$455 - $655

Suncorp Stadium

$1,100 - $3,058

Table 21: Types of Membership Packages offered for Events at the Gabba

Types of Membership Packages offered for Events at The Gabba Issuer

Price of Premium Membership

Hirer

Brisbane Lions

$257 - $433

Trust

The Gabba Trust

$990 joining fee + $490 p.a.

PERTH STADIUM C-24

In a venue where a significant number of events experience turnaway demand (e.g. presently at Subiaco Oval) venue memberships can disadvantage the hirer as these could otherwise be sold by the club. At the new stadium, turn-away demand is projected to occur at only a few blockbuster events with average attendances for the WCE assumed at 53,500 and the FFC at 48,500. The potential impact of not having venue memberships at the 60,000 seat major stadium would result in a decline of stadium revenue of approximately $4.5m (plus a decline in F&B revenue) assuming 3,000 venue memberships are sold at an average price of $1,500 per membership. Some potential alternatives to venue memberships include: •

Fixed match day rent for major hirers;

•

Increase of the stadium owner’s share of gross admission, F&B and merchandising revenue (fixed or sliding scale);

•

Increase of the stadium owner’s share of corporate suite / box sales revenue; or

•

Retention of a certain number of corporate suites by the stadium owner.

To cover its overhead expenses and long-term maintenance costs the venue would have to charge an additional fixed match day rent equivalent to the amount (i.e. $4.5m) that venue memberships would generate. Therefore, most alternative arrangements to venue memberships simply represent an increase in a venue’s share of another revenue source, although the increased share has resulted in rental levels that are far higher than industry benchmarks which may impact the ability to secure events. As previously outlined, the sports codes in Perth have expressed their concern in regards to venue memberships. It was perceived that venue memberships would conflict with the policy of providing the venue(s) to hirers as “clean” stadia. As such the sports perceive the preferred solution would be to pay a greater share of another revenue source to the venue manager which has been incorporated into the financial models as previously highlighted. Further, the consultants have converted the 3,000 venue members into public seating attendees during stage 2 (i.e. our attendance projections have not been impacted by this change) and increased the rental to 24%

of gross ticket sales (from previously 10%), and 10% of the gross revenue of all corporate sales made by the hirer. Alternatively, consideration could be given to a way to better manage the impact of the membership program so that it can still be provided to meet a recognised market opportunity, which cannot be provided by individual sports or events, and deliver a revenue stream for the owner. This includes further consideration of the number of members and the conditions and inclusions of the membership program to minimise impacts on the sports and events, including the limitation on membership rights for specific major events such as the Bledisloe Cup or other major international events, without completely jettisoning such a lucrative, highly sought after and widely accepted program. The current financial model includes a rental of 24% against gross ticket sales. If the sporting codes agree to introduce a stadium membership program then the stadium’s share of gross ticket sales would revert back to approximately 10% as assumed in the Interim Report. However, if it is agreed not to proceed with a membership program and this rental rate is reduced during negotiations, the impact on the stadium operating returns will be significant. It is therefore recommended that no firm decision be made on stadium memberships until such time as the level of acceptable rental is agreed in principle with major hirers.

Definition of “Clean” Stadium As previously outlined, in the Interim Report it was proposed that the stadium owner will sell 5% of all seats (3,000 seats for $1,500 each) as venue memberships, generating an annual revenue stream of $4.5m for the venue owner. However, the results of detailed consultations with the individual sporting codes have suggested that a “clean” stadium model would be the preferred solution for all sports. As highlighted earlier, from a financial perspective the venue owner has to recoup the foregone venue membership revenue by charging higher fixed rents, increase its share of other revenue sources in hiring arrangements, or a combination of both.

SECTION C C-25

Therefore, the revised financial forecasts are based on the assumption that the stadia will be offered as “clean” stadia. The definition of “clean” stadium presented in Table 22 has been assumed for the purpose of this study. Table 22: Definition of “Clean” Stadium

Definition of “Clean” Stadium

Exclusions Depending on the final design and location of the venue(s) potential additional revenue sources and cost items may eventuate, however these have not been included. Such items could include: •

Revenue from any car parking around the venue. One of the key principles of the venue design and operation is the active promotion of the use of public transport with a targeted public transport usage of 50-70% by patrons. This is reflected in the design of the stadia and associated transport infrastructure together with the recommended policy of integrated ticketing which will mean the cost of all public transport on the event day is incorporated in the ticket price. In accordance with standard industry practice the venue owner and hirers bare no net costs or revenues associated with an integrated ticketing policy. Accordingly it is not expected that any material revenue will be generated by the venue from car park operations;

•

Potential revenue generated from commercial tenancies included in the stadium development, i.e. retail outlets, offices etc. The quantum of these will depend on the final design of the venue(s) but are not expected to be material;

•

Revenue from non-event day function room hire and stadium tours. Revenues from these activities are not expected to be material and will depend on the final location, event profile and competition in the market place;

•

Any revenues associated with the sale of surplus properties (for development purposes) adjacent to the stadium have been excluded from the forecast operating cash flows and have been considered in determining potential sources of funding for the venue; and

•

Any asset ownership costs such as the cost of the Trust operation, building insurance, land taxes, rates etc. have been excluded as these will be dependent on the design of the venue and / or its location.

• The venue is provided to hirers free of any seating and membership restrictions, i.e. the venue will be provided to hirers as a 60,000 seat stadium including all corporate facilities, excluding those required for the owner and major sponsors, such as a naming rights sponsor; • The owner has the right to the sell the naming rights for the venue / and or individual grandstands with all revenue retained by the owner (refer to Section C 2.3 for further detail on naming rights); • The owner has the right to sell pourage rights and retain the revenue associated with these rights and will provide access rights for an alternative sponsor supplier to minimise potential conflicts with hirers; • The owner has the right to undertake or sell catering rights and retain the associated revenue; • The owner may negotiate to share some of the revenue associated with naming, catering and pourage rights with venue hirers (on a case by case basis) as part of the overall stadium hire arrangement; • Revenue from signage that is visible to TV cameras flows to the hirer whereas signage revenue generated from sections of the venue that is not visible to TV cameras (e.g. stadium exterior or concourse level) of the venue remains with the owner; and • Revenue from TV and other broadcast rights are retained by the venue hirers with any access / installation costs to be borne by the hirer.

PERTH STADIUM C-26

2.2

OPERATING ASSUMPTIONS

Stadia Seating Configuration In Volume 2 Part 2 of the Interim Report the consultants recommended a capacity of 60,000 seats for the major stadium based on a series of capacity and configuration considerations that were presented to the Taskforce. The key considerations are presented in Table 23.

Table 23: Key Capacity and Configuration Considerations for Major Stadium

Key Capacity and Configuration Considerations for Major Stadium • The capacity needs to be large enough to secure major events and to compete effectively with the Eastern States for events, particularly with Suncorp Stadium (52,500 seats) and Telstra Dome (53,400 seats); • The capacity needs to be large enough for the major stadium to be considered for major events, such as Rugby Internationals and Test Cricket, yet designed to be intimate enough to not have a detrimental impact on the atmosphere at regular events. Ideally stadia should operate at more than 50% capacity for the average regular event so as to ensure a vibrant atmosphere. Suncorp Stadium (52,500 seats) and Telstra Dome (53,400 seats) provide examples of venues with capacities and facilities that cater well for both major and regular events; • The larger the stadium, the further you are from the action on the field which would reduce the atmosphere and the intimacy of the live event and hence the desirability factor of attending an event; • The WA AFL market is relatively young when compared to Victoria. Trends from Victorian AFL teams suggest that the above average growth for WCE and FFC is not likely to continue indefinitely as attendances are likely to reach market maturity / a saturation point: - Average annual attendance growth for AFL fixtures in Victoria has slowed since 1987, for example from 2000-2005 the average annual attendance growth across all Victorian clubs was only 0.36%. This compares to an average annual growth rate of 1.82% across all AFL teams which indicates that the Victorian market has reached maturity. For example, the traditional clubs of Essendon, Collingwood and Richmond have recorded strong growth rates from the late 1980s to mid 1990s, however from 2001 to 2005 the average annual attendance for Collingwood has declined by 3.53%, Essendon by 2.26% and Richmond by 4.94%. • The WAFC suggests that under a scenario of moderate on-field performance the WCE are projected to reach an attendance of 55,000 by 2013 and 60,000 by 2020 whereas the FFC are projected to reach an attendance of 40,000 by 2010 and 46,000 by 2020; • The WCE and FFC will be the anchor tenants of the new venue. The operating models developed by KPMG assume that the WCE season matches will record the highest average attendances of all hirers and are projected to be 53,500 in a stabilised year. KPMG has developed attendance projections for both AFL clubs in stage 1 under two scenarios: - Continued growth in club attendances at long-term average rate for five years for the WCE (2.85%) and FFC (4.19%), then mature market growth rate based on recent growth by Victorian clubs (0.36%). Based on these assumptions the WCE would reach an average attendance of 49,250 and the FFC of 47,250 by 2027. - Continued growth in club attendances at long-term average rate for five years for the WCE (2.85%) and FFC (4.19%), then growth in line with Perth’s average annual projected population growth rate for the period from 2005 to 2025 of 1.36% (Source: Western Australian Planning Commission, WA Tomorrow No. 6). Based on these assumptions the WCE would reach an average attendance of 58,300 and the FFC of 56,000 by 2027. • There is value in some level of scarcity of tickets for major events. Scarcity is beneficial as: - It promotes success through sold out events; - Encourages patrons to purchase season tickets to ensure access to events; and - It justifies a premium ticket price for major events – “demand management”. • It should be noted that whilst consideration was given to retain the additional seats for the Olympic Games, Telstra Stadium reduced capacity from 115,000 for the Olympic Games to 84,500 seats; • In the medium to long-term Perth is likely to remain a two AFL team town; • The cost of construction and maintaining excess capacity seats is significant; and • There is not a direct relationship between population size and stadium size. For example, Wembley Stadium London (90,000 seats) is smaller than the MCG although the population of London is much larger.

SECTION C C-27

After considering the above factors the Taskforce has requested the consultants to design the major stadium with an initial capacity of 60,000 seats which is expandable to 70,000 seats to meet future demand. The seating mix / configurations assumed for the purposes of preparing financial forecasts for each stadia option are presented in Table 24 and are aligned to the facility briefs developed for each of the venues. As highlighted in Table 25 the 60,000 seat major stadium would have a 39% greater overall capacity than the current Subiaco Oval with public and general admission seats projected to increase by 38% and corporate seats (including function rooms) by 57%. Further, the multi-purpose 60,000 seat major stadium is designed to provide 22,000 operable / retractable seats to cater for the needs of rectangular sports, in particular rugby. These seats will provide rugby spectators with an uncompromised viewing experience. In comparison, neither the existing Subiaco Oval nor the proposed masterplan for Subiaco Oval proposed by the WAFC incorporate the specific needs of rectangular sports in the form of retractable / operable seating. For a detailed discussion on operable seating please refer to Section B5.

Event Days It is assumed that the multi-purpose 60,000 seat major stadium will be host to AFL, International Cricket, Rugby Super 14, International Rugby and International Soccer. As such, it is believed that the multi-purpose 60,000 seat major stadium will host a minimum of 40 event days per annum. However, if it is decided to develop a purpose built 35,000 seat rectangular stadium as well as, or in preference to (pending the outcome of governance discussions with the WAFC), the 60,000 seat oval stadium then the event schedule will be spread over the various options. Table 26 provides a summary of the forecast event schedule under the various stadium configuration options.

Table 24: Seating Mix Assumptions

Table 25: Seating Configuration – Major Stadium vs. Subiaco Oval

It should be noted that the total event days included in the financial analysis represent “base event days” for each of the venues. There are additional potential events which may be held at the different stadia from time to time (e.g. Finals matches, Bledisloe Cup matches, concerts, club promotion days etc.). Such events have been excluded from the financial forecasts due to their dependence on either on-field performance of hirers or agreements with national sports bodies. In order to confirm the event capacity of the proposed multipurpose 60,000 seat stadium the event calendar presented in Table 27 includes both the “base event days” included in the financial model as well as a number of potential additional events which may eventuate.

Table 26: Event Day Assumptions – Average Year

As shown in this annual calendar (based on actual matches scheduled for 2006-07) the 60,000 seat multi-purpose stadium can accommodate both the base events (these are included in the financial forecasts) as well as a number of potential events which are largely dependent on the on-field performance of the anchor tenant sporting franchises, i.e. AFL finals, Pura Cup finals etc. In addition there is scope for the venue to host other one-off events such as concerts and other entertainment events such as the Edinburgh Tattoo and additional soccer internationals, an international rules event, a NFL Exhibition Game etc.

PERTH STADIUM C-28

Table 27: Projected Multi-purpose 60,000 seat Major Stadium Event Schedule – Actual Year

Sample Event Calendar for a 60,000 seat Multi-use Stadium based on the 2006/07 Year Dec-06 1

Jan-07

Feb-07

Mar-07

Apr-07

May-07

Jun-07

Jul-07

Aug-07

Twenty20

2

Sep-07 WCE Rd 22

Force Rd 1

WCE Rd 10

3 4

Twenty20

Force Rd 13

5

WCE Rd 6

6

WCE Rd 18 Soccer Intl

7

WCE Rd 2

10

Force Rd 6

Tour Match

12

FFC Rd 11 Super 14 Semi Finals

Twenty20

13

FFC Rd 19

FFC Rd 7

14

FFC Rd 3

15 16 17

Projected Average Attendances

Rugby Test

11

AFL Semi Finals

FFC Rd 15 Cricket Test Match

Force Rd 7 A-League Final

18

WCE Rd 20

19

Super 14 Final

20

Potential Pura Cup Final

21 22

WCE Rd 8 WCE Rd 16

AFL Prel. Final

WCE Rd 4

23 24

Force Rd 4

25

NAB Cup

WCE Rd 12 FFC Rd 9

28

Force Rd 12 ODI 1

FFC Rd 17

29 30

FFC Rd 5 ODI 2

31

Force Rd 8

FFC Rd 13

FFC Rd 1 Base Event Days

The average attendances adopted in the financial model are based on the attendance projections that have been determined and documented in Volume 2 Part 2 of the Interim Report. These attendance projections have been developed based on historic attendances at sporting and other events in Perth and across Australia, the utilisation of existing venues in Perth, population growth projections and future directions of the major sporting codes as identified from consultations with the individual sports.

FFC Rd 21

26 27

Nov-07

AFL Qualifying and Elminiation Finals

WCE Rd 14

8 9

Oct-07

In accordance with our recommended operating model (refer Section C1) in determining the base and potential event schedule for the major venue it has been assumed that with the exception of pre-event “familiarisation” training sessions, the 60,000 seat major stadium will not be used as a regular training venue for any sporting franchise hirer and will not be used as “home ground” for any sporting franchise.

Based on the base event days previously presented, the projected event and annual attendance in an average year of operation (over the first 25 years of operation of the new venue(s)) are outlined in Table 28.

Potential Additional Events

Source: Perth Stadium Consulting Team

Table 28: Average Attendance Assumptions – Average Year

In October 2005, the WAFC provided the Taskforce with high and moderate growth projections for the FFC and WCE based on an academic study highlighting the impact of on-field performance on club memberships and population growth (Source: WAFC Subiaco Oval Redevelopment, Update to the Major Stadia Taskforce, 21 October 2005). The WAFC suggests that: •

Under a scenario of moderate on-field performance the WCE are projected to reach an average attendance of 55,000 by 2013 and 60,000 by 2020 whereas the FFC are projected to reach an average home game attendance of 40,000 by 2010 and 46,000 by 2020; and

•

If the clubs were to experience strong on-field performance the WCE could reach average home game attendances of 67,500 and the FFC of 57,500 respectively by 2020.

The projections adopted by the WAFC however indicate indefinite growth and as previously mentioned evidence from Victorian teams suggests that attendances are likely to reach a saturation point. Further, the projections do not account for seasons in which either team could experience a poor on-field performance which could alienate less loyal football supporters. Based on the WAFC’s projections to 2020 under a moderate on-field performance scenario a stadium capacity of 60,000 would be sufficient to accommodate the average attendances for both the WCE (60,000) and the FFC (46,000). However, based on the results of our detailed analysis of historical attendances at all AFL fixtures over the last 20 seasons (refer to Volume 2 Part 2 of the Interim Report), together with an assessment of forecast population growth for Perth, we have adopted more conservative projections of average home game attendances over the next 25 years of 53,500 for the WCE and in the case of the FFC, we have assumed an average home game attendance of 48,500 which is slightly higher than the 46,000 assumed by the WAFC under a moderate on-field performance scenario. The projections for Twenty20 Cricket have been revised downwards from the Interim Report as it was assumed in the Interim Report that one international Twenty20 match would be held at the 60,000 seat major stadium per annum. Further information recently provided by Cricket Australia has indicated that the annual event is likely to be a domestic cricket event which, in turn, is likely to translate into lower attendances. Further, the projections for the Cricket Test Match have been lowered from the projections presented in the Interim Report. Firstly, given the recent Test Match outcomes, it is now assumed that the event will be played over an average of four event days as opposed to five event days as assumed in the Interim Report. Secondly, a comparison to other venues indicates that crowd attendances at Cricket Test matches fluctuate strongly based on the strength of the opponent. For an average year, the revised average attendance at Cricket Test matches are now assumed at 15,000 per day at the 60,000 seat major stadium and 13,000 per day at the 35,000 seat

SECTION C C-29

stadium. These forecast attendances are in line with the performance achieved by Test Match cricket at better quality venues on the East Coast of Australia, i.e. Gabba (Brisbane). Taking into account the record of the Western Force in its inaugural year, the average home game attendances of more mature East Coast rugby franchises, forecast population growth etc., average home game attendances in an average year of performance (over the next 20-30 years) for the Western Force has been set at 28,000 for the 60,000 seat major stadium. Marginally lower average home game attendances have been assumed for the 35,000 seat rectangular venue due to the impact of “turn-away” demand associated with staging blockbuster events in a smaller venue. The Perth Glory is projected to attract a crowd of 12,100 per season game in an average year over the next 25 years which is higher then the record low average attendance of approximately 7,500 in 200607 but lower than the previous record attendance of 14,700 achieved in 1999-2000. The projected attendances for the same event are assumed to be lower in a smaller venue than at the 60,000 seat major stadium (e.g. Western Force in a 35,000 seat venue) as one to two blockbuster matches per season in the 60,000 seat major stadium (greater then 35,000 spectators) are likely to result in higher average attendances for the season than would be the case in a smaller venue.

2.3

REVENUE ASSUMPTIONS

The consultants have provided the Taskforce with the revenue assumptions applied in the analysis of the financial feasibility of the various stadium options. However, the ability to achieve these forecasts will depend on the results of the myriad of commercial agreements which will need to be conducted with respect to the ownership, governance and operations of the venue. The Taskforce has determined that the detailed revenue assumptions provided by the consultants are commercial in confidence. The sporting codes have provided the Taskforce with confidential information relating to their current operations and the Taskforce considers that the release of this information will potentially compromise the future operations of the individual sporting codes. Further, the Taskforce considers that the release of this information will potentially compromise the Government’s future position in respect to dealing with this project. As such, this confidential information has been included in a separate Section D3.

2.4

COST ASSUMPTIONS

2.5

PROJECTED STADIA OPERATING RESULTS

This section presents the projected stadia operating results. It should be noted that the Taskforce has considered that the public release of more detailed information has the potential to compromise the Government’s future position with respect to dealing with this project. As such, further information has been provided in Section D5. Table 29 provides a summary of the estimated total revenues and expenses (before revenue and expense sharing arrangements) that will be generated by the different stadia options. The multi-purpose 60,000 seat major stadium is estimated to generate total revenues of $93.7m and incur total expenses (including match day expenses) of $14.1m. The subsequent sections present the stadia operating results after allocation / sharing of revenues and expenses between the venue owner and hirers based on the previously outlined assumptions.

Table 29: Projected Stadium Profit and Loss Statement before Revenue / Expense Sharing Arrangements – Average Year

The consultants have provided the Taskforce with the cost assumptions applied in the analysis of the financial feasibility of the various stadium options. However, the ability to achieve these forecasts will depend on the results of the myriad of commercial agreements which will need to be conducted with respect to the ownership, governance and operations of the venue. The Taskforce has determined that the detailed cost assumptions provided by the consultants are commercial in confidence. The sporting codes have provided the Taskforce with confidential information relating to their current operations and the Taskforce considers that the release of this information will potentially compromise the future operations of the individual sporting codes. Further, the Taskforce considers that the release of this information will potentially compromise the Government’s future position in respect with dealing with this project and, as such, this confidential information has been included in a separate Section D4.

PERTH STADIUM C-30

2.6

NET OPERATING RESULT TO VENUE OWNER

Net Operating Result to Venue Owner after Venue Overhead Expenses Table 30 presents the forecast net returns after venue overhead expenses (before lifecycle maintenance costs) that each venue will potentially generate to the owner in an average year of operation (over the next 25 years). The key findings from these forecasts are as follows: •

•

•

As a result of the consolidation of the event calendar into a single venue the multi-purpose 60,000 seat stadium generates the largest net revenue (after stadium overhead expenses) of all the venue options. Conversely the spreading of the event schedule over multiple venues reduces the net revenues generated by the 60,000 seat major venue; The 35,000 seat cricket rugby venue (Option 3) and the dedicated 35,000 seat rugby stadium (Option 4) are forecast to not generate sufficient revenues to cover their overhead costs with a forecast net operating deficit of $1.2m and $1.5m, respectively. The dedicated 25,000 seat rectangular stadium (Option 5) is also forecast to generate a net deficit of approximately $1.7m in an average year of operation; and As noted previously, and as shown at the bottom of Table 30 if a single venue management model is adopted to manage multiple venues, potential savings in venue overheads in the order of $1.16m (Options 1 and 5) to $1.68m (Options 2a and 4 or Options 2b and 3) could be achieved.

Net Operating Result to Venue Owner after Venue Overhead Expenses and Lifecycle Maintenance Costs In addition to the initial capital costs associated with the provision of major public infrastructure such as stadia, there is an ongoing requirement to set aside additional funds to meet the long term lifecycle maintenance costs of keeping the asset in a fit for purpose condition. These lifecycle maintenance costs are estimated to be in the order of 1.5% of the value of the initial capital expenditure, escalated to take account of increases in underlying costs. Accordingly, for the purposes of this assessment we have adopted 1.5% of the estimated stadium capital costs (escalated) of the various venue options (details of which are provided in Section D2), a summary of which is provided in Table 31. Table 32 provides a summary of the forecast financial results for each venue option (in an average year) after allowance for lifecycle maintenance costs. The capital cost estimates for the various stadia options incorporate forecast escalation in building costs and therefore represent estimated construction costs on completion, which is assumed to be in September 2011, based on the East Perth site (refer Section B10). Therefore in order to compare like for like $’s (2011) it is necessary to index the estimates of net stadium revenues detailed earlier in Table 30 which are in 2006 $’s terms by forecast inflation (3% per annum) through to 2011.

Table 30: Projected Venue Profit and Loss Statements after Venue Overhead Expenses

Table 31: Projected Stadia Development and Lifecycle Maintenance Costs

Table 32: Projected Venue Profit and Loss Statement after Overhead Expenses and Lifecycle Maintenance Costs

The key findings from these forecasts are as follows: •

The multi-purpose 60,000 seat stadium (including and excluding Super 14 as a hirer, i.e. Options 1 and 2a) are the only venue options which are forecast to potentially generate sufficient net revenue to cover both their respective overhead costs and fund their required contribution to a reserve to meet lifecycle maintenance costs. However, while Option 2a is projected to generate a net operating surplus of $1.88m in $’s 2011 (in an average year) it would require the development of a dedicated 35,000 seat rectangular stadium (i.e. Option 4) which is projected to incur a net operating loss of $5.64m per annum; and

SECTION C C-31

•

None of the rectangular venue options are forecast to generate sufficient net revenues to meet their overhead costs and fund their respective lifecycle maintenance reserves. In fact, under Option 3 being the 35,000 seat cricket / rugby venue, Option 4 being the dedicated 35,000 seat rectangular stadium (with Super 14, Perth Glory and Provincial Rugby as the key hirers) and Option 5 being a 25,000 seat rectangular stadium with only Perth Glory and Provincial Rugby as hirers, revenues generated by these venues are insufficient to meet their respective overhead costs let alone their respective lifecycle maintenance costs.

In summary, the results of the preliminary financial analysis indicate that the development of multiple venues will not only require the Government to fund significant additional capital costs but will also need to provide ongoing funding to meet the lifecycle maintenance costs associated with two major venues. A further analysis of the financial implications of the development of both a dedicated oval and dedicated rectangular venue is provided in the following paragraphs.

Combined Stadia Options

Table 33: Combined Stadia Option A: Oval 60,000 Seat Major Stadium & 35,000 Seat Rectangular Stadium

Based on the venue options under consideration there are two potential combined stadia solutions available to Government. As previously mentioned, the combined management of the 60,000 seat major stadium and either a 25,000 or 35,000 seat rectangular venue could generate significant savings in overheads of approximately $1.16m (Options 1 and 5) to $1.68m (Options 2a and 4) in 2006 $ terms. It should be noted that a third potential combined stadia solution has been considered (i.e. Options 2b and 3). However, as previously mentioned, during Stage 2 of the study the sports (WACA and Rugby WA) have withdrawn their support for combined cricket/ rugby venue (i.e. Option 3). Therefore, such a combined stadia option has not been further investigated.Table 33 and Table 34 provide an overview of the net stadia operating results to Government under each of the two available combined stadium options if these savings were to be proportionately attributed to the individual venues. Option A: 60,000 seat Major Oval Stadium and 35,000 seat Rectangular Stadium

Table 34: Combined Stadia Option B: 60,000 Seat Multi-purpose Major Stadium & 25,000 Seat Rectangular Stadium

Under such a scenario the 60,000 seat major oval stadium would host the events of AFL, Rugby International, International Cricket and International Soccer whereas the Western Force, Perth Glory and Provincial Rugby would play at the 35,000 seat rectangular stadium. Table 33 provides a high-level summary of the combined forecast financial results of this combined stadia option, after allowance for venue overheads and lifecycle maintenance costs of both venues. Combined, the two venues are projected to generate a net operating result of $6.91m (in 2011 $’s terms) however after taking account of potential overhead savings of $1.95m (in 2011 $ terms) from the joint management of both venues net operating result is forecast to increase to $8.86m. However, the inclusion of the projected lifecycle maintenance cost contributions of $12.62m would result in a projected net operating deficit of $3.7m in an average year of operation of these two venues.

PERTH STADIUM C-32

Option B: Multi-purpose 60,000 seat Major Stadium and 25,000 seat Rectangular Stadium Under a second scenario, Option B, the multi-purpose 60,000 seat major stadium would be the home of AFL, Western Force, International Cricket and Soccer Internationals, whereas Perth Glory and Provincial Rugby would be held in a dedicated 25,000 seat rectangular stadium (MES). Table 34 provides a high level summary of the combined forecast financial results of this second multistadia option, after allowance for venue overheads and lifecycle maintenance costs of both venues. This option would result in a projected combined net operating result of $9.23m (in 2011 $s terms) resulting in a higher combined net operating result compared to Option A. This combination is projected to provide lower joint management overhead savings of $1.35m (in 2011 $s terms) but, on the other hand, is projected to incur lower lifecycle maintenance costs of $11.67m when compared to Option A. After the inclusion of lifecycle maintenance costs this combined stadia option is projected to incur a net operating deficit of $1.09m in an average year. As such, the projected net operating result under Option B is $2.66m greater than the projected net operating result under Option A. The preceding analysis clearly demonstrates that the development of a multi-purpose 60,000 seat major stadium and a dedicated 35,000 seat rectangular stadium is likely to require ongoing financial support of the State Government to fund the shortfall in contribution to the lifecycle maintenance costs of both venues. The analysis further suggests that the development of a multi-purpose 60,000 seat major stadium and a dedicated 25,000 seat rectangular stadium is also likely to require an ongoing contribution to lifecycle maintenance costs of both venues by the State Government.

2.7

PROJECTED HIRER NET REVENUE FROM VENUE OPERATIONS

This section presents the projected net revenue (in an average year) for the individual hirers of the different stadia options under consideration based on the previously outlined assumptions. The net revenue presented is based on the hirer’s share of revenue generated from events held at a venue minus the associated event day expenses (which were assumed to be fully paid by the hirer). Where possible the consultants have provided commentary on how the projected net revenues compare to the current revenue generated by the teams / codes at current stadium facilities in Perth. It should be noted that more detailed tables outlining the projected net revenue for venue hirers are presented in confidential Section D6.

FFC Table 35 provides an estimate of the net revenue that FFC will generate from staging their home games at the new 60,000 seat stadium in an average year of operation. It is projected that in an average year the FFC would generate net revenues of $13.76m (including 1 NAB Cup match but excluding potential finals matches) from playing at the 60,000 seat major stadium while the venue owner is projected to generate a net revenue of $3.36m from hosting the FFC’s matches. It should be noted that the above revenue estimates specifically exclude the following: •

Signage revenues that would accrue to FFC under a “clean” stadium policy;

•

Ticket premiums associated with the sale of a range of membership packages which would also accrue to the FFC. The admission revenue calculations provided are based on the face value of tickets and specifically exclude the premium charged for various packages such as season memberships, centre line clubs etc.; and

•

Club merchandise revenue sold through retail channels outside of the venue. The merchandise sales calculations provided are based on the merchandise sales within the venue.

Table 35: Projected Net Revenue from Venue Operations – Fremantle Football Club – Average Year

Further, as highlighted in Table 32 previously it is forecast that in an average year of operation the multi-purpose 60,000 seat major stadium option including and excluding Super 14 as a hirer (i.e. Options 1 and 2a) are the only stadium options which have the capacity to generate sufficient revenues to cover their respective stadium overheads and also make the forecast required contribution (1.5% of capital costs) to ongoing lifecycle maintenance costs.

SECTION C C-33

Table 36: Projected Net Revenue from Venue Operations – West Coast Eagles – Average Year

Table 37: Projected Net Revenue from Venue Operations – Western Force – Average Year

WCE

Western Force

Table 36 provides an estimate of the net revenue that the WCE will generate from the staging of their home games at the new 60,000 seat stadium in an average year of operation.

Table 37 provides an estimate of the net revenue the Western Force will derive from staging its Super 14 home fixtures at the new 60,000 seat stadium.

It is projected that in an average year the WCE will generate net revenues of $14.99m from playing at the 60,000 seat major stadium while the venue owner would generate net revenues of $3.69m from hosting these matches. As in the case of the FFC the above net revenue projections exclude the following additional and potentially significant revenue sources which will accrue to the WCE as a result of having the opportunity to play their home games in a new 60,000 seat stadium:

Table 38: Projected Net Revenue from Venue Operations – ARU (Rugby Internationals) – Average Year

•

Signage revenues that would accrue to WCE under a “clean” stadium policy;

•

Ticket premiums associated with the sale of a range of membership packages which would also accrue to the WCE. The admission revenue calculations provided are based on the face value of tickets and specifically exclude the premium charged for various packages such as season memberships, centre line clubs etc.; and

•

Club merchandise revenue sold through retail channels outside of the venue. The merchandise sales calculations provided are based on the merchandise sales within the venue.

The Western Force are projected to generate net revenues of $7.88m from playing at the 60,000 seat major stadium and $8.98m from playing at a dedicated 35,000 seat rectangular venue. As with the case for the FFC and WCE these forecasts specifically exclude signage revenues, membership / package premiums and (venue external) club merchandise sales that would accrue to the Western Force under the proposed “clean” stadium policy.

ARU (Rugby Internationals) Table 38 provides an estimate of the net revenue that the ARU will generate from the staging of Rugby Test match at the new 60,000 seat stadium in an average year of operation. If the annual International Rugby Test match is held at the 60,000 seat major stadium it is projected the ARU would generate net revenues of $2.65m in an average year. The venue owner is forecast to derive rental revenues of $660,000. At the time of writing this report no comparative data was available, however it would be reasonable to conclude that the ARU would be financially better off at the new stadium given a 57% increase in the number of corporate seats and a 37% increase in public / general admission seating available at the new stadium in comparison to the current facilities at Subiaco Oval.

Provincial Rugby Table 39 provides an estimate of the net revenue that Provincial Rugby will generate from staging their home games at the 35,000 or 25,000 seat rectangular venues. Provincial Rugby is projected to generate net revenues of $1.23m from playing at a 35,000 seat stadium and $1.18m from playing at a 25,000 seat rectangular venue. At the time of writing this report we have been unable to obtain comparable financial and operational data.

PERTH STADIUM C-34

Cricket Australia / WACA (International Cricket) Table 40 provides an estimate of the net revenue that Cricket Australia / WACA will derive from staging international cricket fixtures at the new 60,000 seat stadium or the 35,000 combined Cricket / Rugby venue. Cricket Australia / WACA are projected to generate net revenues of $5.82m from international cricket events scheduled at the multi-purpose 60,000 seat major stadium whereas the venue owner would generate $1.16m from these events. In a 35,000 seat combined cricket / rugby venue Cricket Australia / WACA would generate net revenues of $5.74m and the venue owner $874,000. As is the case with international rugby events, Cricket Australia effectively control the staging of international cricket events in Australia. At the time of writing this report we have been unable to obtain comparative operational and financial data with respect to the staging of international cricket at the WACA. However, we believe that expanded capacity and significantly improved standard of facilities and services would enable Cricket Australia and the WACA to be financially better off by staging international cricket events at a new stadium (60,000 or 35,000 seats) than at the existing WACA facility. The increase in average attendances at international cricket events staged at the Gabba since its redevelopment clearly supports the view that Cricket Australia / WACA will benefit from staging their major event at the new venue.

FFA (International Soccer)

Table 39: Projected Net Revenue from Venue Operations – Provincial Rugby – Average Year

Table 41 provides an estimate of the net revenue that the FFA will generate from the staging of an international soccer match at the new 60,000 seat stadium in an average year of operation. As previously outlined it has been assumed that 1 international soccer event will be hosted at the 60,000 seat major stadium. It is projected that this event would generate $1.20m for the FFA and $287,000 for the venue owner. At the time of writing this report the consultants did not have access to any comparative data on games held previously at Subiaco Oval.

Table 40: Projected Net Revenue from Venue Operations – Cricket Australia / WACA (International Cricket) – Average Year

Perth Glory Football Club Table 42 provides an estimate of the net revenue that Perth Glory will generate from staging their home games at the 35,000 or 25,000 seat rectangular venues. Perth Glory is projected to generate net revenues of $1.34m at a 35,000 seat venue and $1.30m at a 25,000 seat venue. Table 41: Projected Net Revenue from Venue Operations – FFA (International Soccer) – Average Year

At the time of writing this report the consultants did not have access to any comparative data on games held previously at MES after the inception of the A-league in 2005-06.

Summary In summary, where reliable comparable historical data is available (WAFC, WCE, FFC, Western Force), it is estimated that all key hirers will be financially better off from staging their home game events at the new stadium / stadia (60,000 seat stadium or 35,000 / 25,000 seat rectangular venues) in comparison to the revenues derived from staging these events at the existing Subiaco Oval. Further it should be noted that this comparative financial analysis excludes the potentially significant additional revenues that these sporting franchises will derive from signage, ticket premiums achieved from various season membership packages and merchandise sales derived from sales outside the venue.

Table 42: Projected Net Revenue from Venue Operations –Perth Glory – Average Year

SECTION C C-35

2.8

REVIEW OF MASTERPLAN PROPOSALS

•

Review of WAFC Masterplan The WAFC has not provided the Taskforce with a business plan for its proposed Masterplan for the redevelopment of Subiaco Oval. As such, the Taskforce was unable to undertake a review of the projected operations of the 55,000 seat stadium proposed by the WAFC. Limited information included in the Masterplan proposal suggests that the WAFC estimate that the operating costs for the redeveloped Subiaco Oval would be in the order of $7.0m per annum, however the WAFC do not provide a detailed breakdown of these costs. The estimated overheads costs by the WAFC are generally in line with the consultant’s forecasts of stadium overheads for the new stadium, details of which are provided in Section D4.

Rugby Union

Further, while the business plan suggests that international rugby test matches would be held at the venue, the Taskforce is of the view that significantly higher attendances for “blockbuster” rugby test matches could be achieved at a multi-purpose 60,000 seat major stadium.

-

Capital Costs

The business plan suggests that in a generic year 10 the following average attendances (per event day) would be achieved:

•

Western Force (Super 14): 35,000 for season games and 19,000 for pre-season games;

-

Rugby Test: 35,000

-

Australian Provincial Championship: 14,000 for season games and 5,500 for pre-season games; and

-

Community Events: 5,000.

Soccer -

Perth Glory: 34,883 for season games and 20,000 for preseason games;

-

Soccer Internationals – Socceroos: 35,000;

Review of MES Business Plan

-

Soccer Internationals – Perth Glory: 15,000; and

Rugby WA in consultation with Perth Glory, Rugby League and Football West (Soccer) have developed a business plan for a 35,000 seat rectangular stadium at MES. The following provides an overview of this business plan (please refer to Appendix D of this Section for a copy of the complete MES business plan provided by Rugby WA):

-

Community Events: 10,000.

Event Schedule and Attendance Projections The business plan suggests that the venue would host premier events such as the Super 14 and A-league competitions (i.e. Western Force and Perth Glory), second tier competitions (e.g. National Rugby Union Club Competition), international / test level matches and community / entertainment events. Rugby WA suggests that combined these competitions would have a need for 61 events in 2008 growing to 91 events by 2012 and 94 events by year 10. However, Rugby WA has received advice from a turf management consultant which suggests that the optimum level of use would not allow the stadium to host all of these events. The optimum usage level being 56 events by 2008, 66 events by 2012 and 70 events by year 10.

•

Rugby League -

•

35,000 for season games and 20,000 for pre-season games.

Concerts / Entertainment Events -

25,000 per event.

The Taskforce believes that the average attendance projections adopted in the MES business plan are optimistic. For example, there is currently no West Australian rugby league team that competes in the national NRL competition yet the business plan projects that the competition would achieve full capacity crowd attendances for 14 season games by year 10. Similarly, it is assumed that every Western Force season game would attract a full capacity crowd of 35,000 patrons. The Taskforce perceives this assumption as optimistic considering that the NSW Waratahs, one of the traditional rugby franchises, achieved a long-term average attendance of approximately 30,000 per game. In comparison, the Taskforce has assumed that an average attendance of 26,500 per game for the Western Force in a 35,000 seat venue (in an average year).

The sinking fund contributions within the MES business plan are estimated between 0.75% to 1% of stadium development cost in the first 3 years of operations and then gradually increasing to 3% by year 10 and thereafter. Further, the MES business plan estimates stadium costs (for the purpose of determining sinking fund contributions) of $120m. The Taskforce has been advised by its consultants that the current day costs of developing a 35,000 seat rectangular stadium (excluding external costs such as transport infrastructure etc.) at East Perth are estimated to be $207.6m and that sinking fund contributions would be in the order of 1.5% per annum. Consequently, the MES business plan assumes a sinking fund contribution of $3.6m in current day costs (in year 10) compared to $3.1m assumed by the Taskforce. Venue Overhead Expenses The MES business plan assumes venue overhead expenses of $1.76m per annum with no further information provided as to the breakdown of these costs. In contrast, the Taskforce’s consultants have advised that the venue overhead expenses for 35,000 rectangular stadium would be in the order of $4.73m. As such, the Taskforce is of the view that the venue overhead assumption applied in the MES business is significantly underestimated. Conclusion The Taskforce believes that the revenue assumptions within the MES business plan are too optimistic due to significantly higher attendances and number event days than assumed by the Taskforce. Further, the venue overhead expenses presented within the business plan are almost $3m per annum lower than the assumption applied by the Taskforce for a 35,000 seat rectangular stadium. As such, the Taskforce believes that hirers would need to pay significantly higher rents than currently assumed within the MES business plan. Therefore, the Taskforce has adopted the financial forecasts prepared by the consultants with respect to a dedicated 35,000 seat stadium.

PERTH STADIUM C-36

2.9

SENSITIVITY ANALYSIS

As noted earlier, the financial returns to the venue owner and hirers are dependent, to a large extent, on the average attendance (corporate and public / general admission) at major events. Accordingly any significant change in forecast average attendances will have a significant impact on forecast financial returns. The following section assesses the impact on financial returns to the owner of a 20% variation (both positive and negative) of forecast average attendances. Table 43 highlights the currently projected net stadium revenue for the stadium owner including potential overhead savings from the joint management of 2 venues and the projected net revenues under a worst-case (20% lower attendances) and best-case (20% greater attendances) scenario. It should be noted that revenue from naming rights, pourage rights and signage as well as venue overhead expenses have been assumed to remain unchanged due to their fixed nature or long-term agreements with sponsors.

As will be presented in Section 3 following, the Taskforce believes that all hirers will be in a better financial position by playing at the Major Stadium. A sensitivity analysis assessing the impact on financial returns to hirers of a variation in average attendances has been perceived as unnecessary as all hirers are projected to be “better off” under the currently projected “base case”. A sensitivity analysis comparing the impact of fluctuating attendances on hirers would therefore always result in hirers being “better-off” by playing at the Major Stadium. For example, 20% lower than projected attendances at the Major Stadium would leave hirers in a better financial position than if hirers were to experience 20% lower attendances at their current venues.

Table 43: Sensitivity Analysis – Projected Venue Net Operating Result (including Potential Overhead Savings)

Table 44: Sensitivity Analysis – Projected Venue Net Operating Result (excluding Potential Overhead Savings)

As shown in Table 43 if average attendances are 20% lower than previously projected, then the multi-purpose 60,000 seat major stadium option, hosting all major oval and rectangular events (AFL, Super 14, International Rugby, Cricket and Soccer) is the only stadium option which has the capacity to generate almost sufficient revenues to cover the stadium overheads and also make the forecast required contribution (1.5% of capital costs) to ongoing lifecycle maintenance costs. In fact, including potential venue overhead savings the multipurpose 60,000 seat major stadium would achieve its breakeven point if attendances were 19.4% lower than currently projected. As highlighted in Table 44 if the potential overhead savings from the joint management of 2 venues are excluded from the projected net stadium operating result then none of the venues would generate a positive return under the worst-case scenario. Excluding potential overhead savings the multipurpose 60,000 seat major stadium would reach its breakeven point if attendances were 14.3% lower than currently projected.

SECTION C C-37

2.10 IN CONCLUSION The results of the preliminary financial forecasts and capital cost estimates indicate that the development of a 60,000 seat multipurpose stadium (including operable seating), is the only stadium configuration which has the potential to fund its day to day operating costs and venue overheads, as well as the majority of its associated lifecycle maintenance costs and meet all the sports requirements. The spreading of the event schedule over multiple venues (oval and rectangular), will not only require the Government to fund significant additional capital costs associated with building two major venues, but may also require the Government to provide ongoing contributions towards lifecycle maintenance costs. Accordingly, it is recommended that, pending resolution of ongoing issues relating to governance of the new venue, the Government should proceed with the development of a multi-purpose (incorporating operable seating) 60,000 seat stadium to host all AFL and Super 14 fixtures, as well as international cricket, soccer and rugby events and one off concerts. Members Equity Stadium should be retained, largely as is, hosting A League football matches and provincial rugby games. Should attendances at these events outgrow the current capacity of MES, then they could be accommodated at the Major Stadium, utilising the operable seating solution. Alternatively the Government may consider at sometime in the future (10 – 15 years) the development of a 35,000 seat rectangular stadium at a site to be determined, pending the level of attendances for Super 14 and A League events as well as crowd support for potential reintroduction of a local NRL franchise.

ensure that sports would also contribute to annual maintenance and lifecycle maintenance costs. During the Taskforce’s consultations with the sports in the second stage of the study the sports advocated a preference for no venue memberships and a ‘requirement’ to be provided a clean stadium as they enjoy now at Subiaco Oval. However sports agreed in return for this position a willingness to pay a larger percentage share of admissions in rent to cover the venue maintenance and contribution to lifecycle maintenance costs (on the basis of a percentage where the potential owner i.e. Government, would therefore share risk). The financial model developed by the Taskforce for the multipurpose stadium indicates overall stadium revenues of $93.7m with expenses of $14.2m for match day costs and stadium overheads. Overall the stadium owner could generate revenues of $17.37m from rents and a share of other revenue sources which would cover the stadium’s overhead expenses and contribute to lifecycle maintenance costs. The Taskforce has formed the view that if the sports require a ‘clean stadium’ without a venue membership program as the sports have indicated, then the sports must accept that they will pay higher rents than those currently in place. Even with the higher charge on general admissions the Taskforce model clearly demonstrates that all sports will be better off from overall higher returns and a greater capacity for ‘blue sky’ revenues.

The Taskforce and its consultant team have reviewed the financial operating model after extensive consultation with sports. At present, sports that use Subiaco Oval pay relatively cheap rent to the WAFC in the range of 10-12% of face-value admissions and do not make any noteworthy contribution to maintenance or life cycle costs – the funds for which are generally sought from Government as ad hoc capital funding for ‘improvements’ with no supporting justification (such as strategic facility plans) provided by the owners i.e. sports. In the Interim Report the Taskforce proposed that rents for sports tenants of the new stadium could be consistent with current levels plus, if a ‘venue membership’ program was adopted. This would

PERTH STADIUM C-38

3.0 IMPACT ON SPORTS

3.1

AFL

C-40

3.2

Rugby

C-41

3.3

Cricket

C-42

3.4

Other Hirers

C-43

3.5

In Conclusion

C-43

SECTION C C-39

The Taskforce aims to ensure that all of the sporting codes who will be tenants at the new stadium (stadia) will be “better off” in comparison to playing at their existing venues, i.e. Subiaco Oval, WACA and MES. The following sections detail that, based on the proposed venue governance and management model and the proposed commercial terms detailed previously, all key tenants will be better off at a new multi-purpose 60,000 seat stadium.

not require increases in ticket prices as it is largely grant funded by Government.

3.1

Finally, it is believed that in an average year football in WA as a whole will potentially be approximately $3.0m “better-off” annually at the new venue. Further confidential information on the projected financial benefit for the WAFC from playing at the multi-purpose 60,000 seat major stadium is presented in Section D7.1.

AFL

During the consultation process the WAFC has repeatedly emphasised that its aim is to ensure that football will be “better off” in a new venue. In this context, football has been defined as the operations of the WCE, FFC, WAFC, and the development of football in general including junior football and umpiring. The Taskforce agrees with the WAFC that football in WA as a whole should be “better off” in a new venue and believes that a number of benefits highlighted in Table 45 should leave the WAFC and football in a better position at the new venue. Firstly, the WAFC will be provided with a “clean” venue which has a 39.3% greater capacity than the existing venue which will allow increased attendances and corporate sales at both WCE and FFC matches and, in turn, will provide both clubs with the opportunity to generate greater revenues. Secondly, the WAFC will be provided with a new venue with state of the art facilities with an estimated economic useful life of 30-40 years. In contrast, the WAFC would need to spend over $600m for the redevelopment of Subiaco Oval. It is assumed that the WAFC would need to fund these costs which would have a detrimental impact on football in WA as a whole. The WAFC has informed the consultants that it does not perceive that Subiaco Oval has a limited useful life as any infrastructure could be funded through football or (though not preferred) through an “expensive, elite stadium” model under which patrons would be charged higher prices to finance the infrastructure investment. In contrast, the multi-purpose 60,000 seat Major Stadium proposed by the Taskforce would

Further, the WAFC will continue to have priority access rights to the venue as is currently the case at Subiaco Oval. For example, the WCE and FFC as anchor tenants of the 60,000 seat major stadium would have the first right to book event days at the venue during the football season.

The Taskforce recognises that while the WAFC has a long term lease over Subiaco Oval this lease was originally provided at no cost to the WAFC to assist them in addressing the financial difficulties faced by football in WA, and to help in securing a national AFL franchise. Further, while the lease has an unexpired term of 84 years the remaining economic useful life of some of the stands at Subiaco Oval is in the order of 5-10 years. Accordingly, in order for the WAFC to enjoy ongoing significant returns from the operations of Subiaco Oval for the remaining term of the lease it must invest in the order of $600m in the redevelopment of the asset. Therefore, the Taskforce does not believe that there is any inherent net value of the remaining term of the Subiaco Oval lease and that the WAFC and football in WA will be substantially better-off under the Taskforce’s new stadium proposal. In conclusion, the Taskforce is of the view that the net present value (NPV) of the future income stream that football will derive from the new stadium will be significantly better than the NPV of the future income stream the WAFC will derive from the existing venue particularly if it assumed that football will fund all future capital expenditure associated with maintaining or replacing Subiaco Oval. Therefore football is in fact better-off under the new Stadium option which we believe does not warrant any further annual compensation to be provided to the WAFC.

Table 45: Key Benefits for Football associated with the Major Stadium proposed by the Taskforce

Key Benefits for Football in WA associated with the Major Stadium proposed by the Taskforce. Status Quo

Major Stadium

Total Capacity

43,082

60,000

Total capacity of the venue will increase by 39.3% at the 60,000 seat major stadium.

Public Admission Seats

39,647

54,600

The total number of public admission seats will increase by 37.7% at the 60,000 seat major stadium.

Corporate / Function Seats

3,435

5,400

The capacity of corporate facilities will increase by 57.2% at the 60,000 seat major stadium.

Clean Stadium

a

a

Commentary

The venue will remain a clean stadium for all hirers.

Average Attendance WCE*

40,744

55,000+

The average attendance for WCE matches is projected to increase by 35.0% at the 60,000 seat major stadium.

Average Attendance FFC*

36,569

50,000

The average attendance for FFC matches is projected to increase by 36.7% at the 60,000 seat major stadium.

a

a

The AFL teams will continue to have priority access rights to the venue (e.g first access to book events).

Priority Access Rights during Season Remaining Economic Useful Life (EUL)

Cost of extension of EUL to Football

5-10 years

+$600m

Obligation to maintain the stadium asset

a

State of the Art facilities for teams and spectators

r

Additional Potential Annual Return to Football - Average Year

-

30-40 years

The EUL of the new stadium will be approximately 3 times greater than the EUL of some of the stands at Subiaco Oval.

-

Football will be provided priority access to a new venue at limited cost compared to significant costs associated with an extension of the EUL of Subiaco Oval which is assumed will need to be funded by the WAFC. Funding of this investment by the WAFC may require significant increases in ticket prices.

r

The WAFC is currently responsible for maintaining the existing stadium at Subiaco Oval. In contrast, the WAFC would be relieved of this obligation at the 60,000 seat major stadium with the Government (as the owner) having responsibility for maintaining the asset.

a +$3.0m

The new venue will provide the AFL teams, their spectators and, in turn, football as a whole, state of the art facilities. Football in WA are forecast to derive potential additional revenues of $3.0m from the new venue in an average year.

*WCE and FFC average attendances are based on mid-points of attendance forecasts presented in the WAFC’s “Subiaco Oval Redevelopment” document dated 21 October 2005. Function room seats for the status quo are based on dining capacities presented in the WAFC Masterplan. Source: Perth Stadium Consulting Team

PERTH STADIUM C-40

3.2

RUGBY

Table 46 highlights the key benefits, for Rugby WA, the Western Force and rugby in Western Australia as a whole, associated with the stadia options considered by the Taskforce. If the Western Force were to become a tenant of the multipurpose 60,000 seat major stadium then the team would be provided with a “clean” stadium with significantly higher public / general admission seating as well as corporate seating capacity than currently available at Subiaco Oval. In such a venue, the Western Force would not have any capacity constraints for key blockbuster events. Further, the venue would provide the Western Force and its spectators with state of the art facilities and the use of retractable seating would ensure uncompromised viewing of rectangular sports at the multi-purpose 60,000 seat major stadium if retractable seating is provided. Further, it is believed that Rugby WA will potentially be approximately $1.7m “better-off” at a multi-purpose 60,000 seat major stadium. Further confidential information on the projected financial benefit for Rugby WA from playing at the multi-purpose 60,000 seat major stadium is presented in Section D7.2. In conclusion, the Western Force would be provided with a “clean” stadium, state of the art facilities and uncompromised viewing of rectangular sports.

Table 46: Key Benefits for Rugby Associated with the Stadia Options Considered by the Taskforce

Key Benefits for Rugby WA associated with the Major Stadium proposed by the Taskforce. Status Quo

Major Stadium

Total Capacity

43,082

60,000

Total capacity of the venue will increase by 39.3% at the 60,000 seat major stadium.

Public Admission Seats

39,647

54,600

The total number of public admission seats will increase by 37.7% at the 60,000 seat major stadium.

Corporate / Function Seats

3,435

5,400

The capacity of corporate facilities will increase by 57.2% at the 60,000 seat major stadium.

Clean Stadium Average Attendance Western Force

Uncompromising Viewing of Rectangular Sports to lower tier

a

The venue will remain a clean stadium for all hirers.

28,000

The average attendance at the 60,000 seat major stadium is projected to be similar to the actual attendance in 2006.

a 28,231

a

r

Remaining Economic Useful Life (EUL)

5 -10 years

Cost of Extension of EUL to Rugby

Potential opportunity cost associated with transitional arrangements

State of the art facilities for teams and spectators

r

Additional Potential Annual Return to Rugby - Average Year

-

Commentary

The Major Stadium incorporates 22,000 reconfigurable seats that can be moved closer to the rugby side line and dead ball line. This represents 78% of the projected average Western Force rugby crowd.

The EUL of the new stadium will be approximately 3 times greater than the 30-40 years EUL of some of the stands at Subiaco Oval. There is limited cost for rugby associated with the development of a major 60,000 seat stadium. The extension of the EUL of some of the stands at the existing Subiaco Oval could potentially result in foregone revenue for the Western Force during the redevelopment phase.

-

a

The new venue will provide the Western Force, its spectators and, in turn, rugby as a whole, state of the art facilities.

+$1.7m

Rugby WA is forecast to derive potential additional revenues of $1.7m in an average year from playing at the 60,000 seat major stadium.

Source: Perth Stadium Consulting Team

SECTION C C-41

3.3

CRICKET

Table 47 presents the key benefits for cricket in WA associated with playing its international events at the 60,000 seat major stadium or a combined 35,000 seat Cricket / Rugby venue. If the WACA would play its international events at the 60,000 seat major stadium it is likely to benefit significantly from the increased public / general admission and corporate seating capacity. A comparison of average attendances at the WACA and the Gabba indicates that attendances at international cricket events in Perth would have significant upside potential at a new state of the art facility. As highlighted in Table 48 and Table 49 the Gabba has attracted 35.8% in 2004-05 and 50.8% in 2005-06 more patrons per international cricket event day than the WACA. The WACA ground is likely to require ongoing investment to extend the economic useful life of some of the stands. If the WACA would play its international fixtures at the 60,000 seat major stadium then it would have access to state of the art facilities with a significantly extended useful life.

Table 47: Key Benefits for Cricket Associated with the Stadia Options Considered by the Taskforce

Key Benefits for Cricket associated with the Major Stadium proposed by the Taskforce. WACA

Major Stadium

Total Capacity

24,000

60,000

Total capacity of the venue will increase by 150% at the 60,000 seat major stadium.

Public Admission Seats

22,566

54,600

The total number of public admission seats will increase by 141.9% at the 60,000 seat major stadium

Corporate / Function Seats

1,434

5,400

The capacity of corporate facilities will increase by 276.6% at the 60,000 seat major stadium.

Clean Stadium Average Attendance International Cricket (per event day)

a 12,200 (2005-06)

a

Commentary

The venue will remain a clean stadium for all hirers.

19,600

The average attendance is projected to increase by over 60% at the 60,000 seat major stadium in an average year. The EUL of the new major stadium will be 3-4 times greater than the remaining EUL of some of the stands at the WACA.

Remaining Economic Useful Life (EUL)

10 years

30-40 years

Cost of Extension of EUL to Cricket

$50-100m

-

State of the art facilities for teams and spectators

r

There is limited cost to cricket / the WACA associated with the development of the 60,000 seat major stadium.

a

The new venue will provide the WACA, its spectators and, in turn, cricket as a whole, state of the art facilities.

Note: No figures are available for cricket as Cricket Australia control fixtures and revenues associated with International Test Cricket and ODI’s not the WACA. Source: Perth Stadium Consulting Team

Table 48: WACA International Cricket Average Attendances 2004-05 and 2005-06

The consultants were unable to obtain operational information to estimate the actual returns that international cricket fixtures generate at the WACA (please refer to Section D7.3 for further confidential information). However, the Taskforce is of the view that the increased capacities and state of the art facilities at a new venue are likely to result in a financially better position.

Table 49: Gabba International Cricket Average Attendances 2004-05 and 2005-06

PERTH STADIUM C-42

3.4

OTHER HIRERS

ARU The ARU will significantly benefit from hosting its annual Rugby Test match at the 60,000 seat major stadium particularly due to the significant capacity increase of corporate facilities and general admission / public seating compared to Subiaco Oval. The 60,000 seat major stadium will remain a “clean” stadium as required by the ARU and will provide state of the art facilities and uncompromised viewing of rectangular events.

3.5

IN CONCLUSION

Based on this comparative assessment the Taskforce and its consultants believe that all key tenants of the new stadium have the potential to be significantly better off in both financial and qualitative terms (facilities, services etc ) . Essentially all sports are being offered the opportunity to stage their sporting events in a state of the art venue, with significantly enhanced facilities, greatly expanded capacities (all provided as a “clean “ stadium), with priority access arrangements.

The fact that the 60,000 seat major stadium would become the 3rd largest venue in Australia to host rugby events could result in the ARU awarding more “blockbuster” matches to Perth including Bledisloe Cup matches. As such, the 60,000 seat major stadium would allow Perth to compete directly with Sydney, Brisbane and Melbourne for such events.

FFA Similarly, the increased capacity of the 60,000 seat major stadium could result in the FFA scheduling a greater number of Asia Cup matches in Perth and consider awarding international matches against “top” ranked opponents to Perth.

Perth Glory Finally, the Perth Glory is believed to benefit from playing at a 25,000 or 35,000 seat venue. In the short-term, the key benefits for the Perth Glory are less likely to be capacity-related but the club is likely to be “better-off” from having access to a “clean” stadium with state of the art / upgraded facilities.

Other Events The 60,000 seat major stadium will generally allow Perth to better compete for high-profile national and international sports / entertainment events. The type of events, the requirements associated with hosting / competing for these events and the potential economic benefit of such events is discussed in detail in Section C7 of this report.3.5

SECTION C C-43

PERTH STADIUM C-44

4.0 FUNDING AND DELIVERY OPTIONS

4.1

Summary of Funding Requirements

C-46

4.2

Potential Sources of Funding

C-46

4.3

Summary and Conclusions

C-50

4.4

Possible Delivery Options

C-50

4.5

Contractual Options

C-52

4.6

Recommended Delivery Structure and Options

C-53

SECTION C C-45

4.1

SUMMARY OF FUNDING REQUIREMENTS

WT Partnership have provided detailed forecasts of the estimated capital costs for each stadium option at the various locations being considered. Table 50 provides a summary of these costs. Please note that the estimated capital costs include forecast escalation through to completion, which is assumed to be as highlighted in Table 50, based on an assumed start date of September 2008. The consultants have provided the Taskforce with a detailed overview of the funding requirements for the various venue options. The information is considered commercial in confidence and the Taskforce believes that the release of this information will potentially compromise the Government’s future position in respect with dealing with this project. As such, this information has been included in Section D8 of the confidential cabinet report.

4.2

POTENTIAL SOURCES OF FUNDING

Figure 3: Continuum of Financing Options G o v t F in a n c e d

P u b lic P riv a te

P riv a te S e c to r

In fra s tru c tu re

P a rtn e rs h ip

F in a n c e d In fra s tru c tu re

There are several options for funding public infrastructure available. These are broadly described as: •

Government financed through capital works program;

•

Private sector financed and operated; and

•

Public private partnerships (joint provision).

Table 50: Estimated Capital Costs for Stadium Options

Site Specific Development Costs for the Major Stadium 60,000 seats multi-use stadium

WAFC Masterplan

East Perth

Kitchener Park

Burswood

Subiaco Oval

Capacity

60,000

60,000

60,000

Stadium Cost including Escalation

$596m

$632m

$685m

On-site car parking and Plaza including Escalation

$83m

$31m

$256m

Transport Infrastructure including Escalation

$29m

$34m

$83m

Cost based on current day construction Start (1st qtr 2007)

$708m

$697m

$1,024m

Additional escalation for delayed start to September 2008

$71m

$69m

$101m

Government Financed Infrastructure

Other Capital and Acquisition Costs including Escalation

$32m

$73m

$12m

The traditional approach to financing infrastructure is for the public sector to finance the construction of the asset. It will fund such investments through operating surpluses or borrowings (or some combination of the two). The WA Government could certainly adopt this approach to deliver the major and rectangular stadia.

Pre-Opening Expenses including Escalation

$10m

$10m

$10m

Sep 2011

Sep 2012

Mar 2013

$821m

$849m

$1,147m

Each of these financing options are presented on a continuum in Figure 3. Within this broad range, there are a number of different delivery methods and procurement options available, such as traditional design and construct contracts, alliances, BOOs (Build, Own, and Operate) and BOOTs (Build, Own Operate and Transfer). The suitability of a particular procurement option depends on a range of project-specific considerations and the available options are further discussed in the following sub section.

As noted previously, senior representatives of Treasury & Finance have advised the Taskforce that where the Government provides significant and the majority of funds for a major project, Government is required to retain governance over that asset and the asset is also to be recorded on the balance sheet of the State. Currently the major stadia in WA sit on the balance sheets of the respective codes (Subiaco Oval on WAFC’s and the WACA on the WACA’s balance sheet). Government funding to enhance these facilities or to support their operation have been in the nature of grants to the sports

Assumed Construction Completion (End of Day)7 Total End of Day Project Cost

1

55,000

$447m 2

3

4

inc.

$23m

$470m $47m $114m

5

$10m 6

Sep 2012 $641m

1. The WAFC Masterplan only provides 55,000 seats (including 6,000 seats in the retained east stand) not the Taskforce recommendation of 60,000 seats. The construction cost to increase the capacity to 60,000 seats could be in excess of $35m excluding land resumptions, transport infrastructure, escalation and rebuilding the WCE facilities. 2. The Masterplan indicates on site carparking under Kitchener Park which is also to be used as the bus station during events. 3. The proposed Transport Station is located under Kitchener Park and is located with the car park as indicated above. No infrastructure improvements are provided to West Leederville Station. 4. The costs were based on a start of construction at the end of the 2007 AFL season. 5. This includes $55m identified as the cost to acquire the properties to the south of Roberts Road to allow for the realignment of the road and the adoption of good planning principles as identified in Chapter 7.4 WAFC Subiaco Oval Masterplan. 6. Completion date is based on a construction start at the end of the 2007 AFL season. 7. This assumes a start of planning and design work in September 2007. All costs are exclusive of GST Source : Perth Stadium Consulting Team, WT Partnership and WAFC

PERTH STADIUM C-46

and have directly impacted on the Governments operating surplus. The magnitude of the investment in this case would make grant funding support impractical and inappropriate.

the Taskforce has adopted a Clean Stadium approach, whereby all seats are made available for sale by the hirers, in return for the venue owner deriving a higher annual rental charge. It should also be noted if it was decided to sell venue memberships (and apply this revenue to service borrowings) then it is likely that hirers would require a reduction in rental charges to compensate them for the loss of the potential revenue derived from the sale of the venue memberships, whereby there would be a shortfall in meeting the cost of venue overheads, which may be met by ongoing Government support through an annual grant;

The WA Government, could essentially finance the asset and infrastructure construction partially from the revenue received from the sale of the land of the existing venues and the remainder through borrowings through the Department of Treasury and Finance. The level of funding required to be provided by the Government could potentially be reduced through: •

Requiring the sports to make contributions to the financing of the stadium (stadia). The AFL code (including the WAFC) has the greatest capacity to contribute to the financing of a new stadium however discussions have led the Taskforce to believe that such funding would not be large and definitely less than 20% of the cost of any development. If the WACA were to be sold as a result of this process then cricket may be in a position to contribute to the development costs from the proceeds of the sale of its asset(s).

•

The introduction of a redevelopment levy to be charged on every ticket sold at Perth’s sport venues for a specified time. Such a levy has recently been used to partially finance the redevelopments of the MCG.

•

The MCG introduced a redevelopment levy of $1.20 / ticket in 2002/03 to assist with the financing of the Northern Stand. This levy was introduced for a fixed term of 5 years with 2007 being the final season in which it will be charged.

The masterplans for Subiaco Oval, Kitchener Park, East Perth and Burswood have all identified potential development sites which could either be sold off for development purposes or potentially retained and developed by the Government (solely or in a joint venture). In the overall scheme of things the revenue from the sale of these development precincts is not considered material and will be dependent upon gaining appropriate planning approval for the proposed development. Accordingly, for the purpose of this funding assessment we have excluded a specific allowance for the potential proceeds from the sale of surplus lands;

The introduction of a similar levy by the Western Australian Government, say $2.00 over 5 years, could raise a total (gross of collection and administration costs) of approximately $16m (2007/08) based on the forecast average annual attendance at the multi-purpose 60,000 seat stadium (Option 1); •

The increase of the Government’s share of the gaming revenue generated from existing gaming licenses;

•

Through the sale of venue memberships which could generate $4.5m for the venue owner assuming the sale of 3,000 memberships at an average price of $1,500. However as outlined earlier (refer Section C2.1 Venue Memberships & Clean Stadium)

Proceeds derived from the sale of surplus lands, which will vary depending which site(s) is selected for development. In addition current ownership and development zonings (town planning) are also likely to impact the potential value of any surplus land. For example, the WACA currently hold freehold title to the site occupied by the Western Australian Cricket Ground, whereby it is unlikely the WA Government would derive any value from the potential sale and / or redevelopment of this site. In addition, while the WA Government is the ultimate owner of Subiaco Oval, the Government has vested the land in the City of Subiaco and has a lease with the WAFC through to 2090. In addition, the current zoning for Subiaco Oval is for open space and recreational purposes, and in our discussions the City of Subiaco have indicated a strong preference for this zoning to be retained irrespective of whether Subiaco Oval is selected as the preferred site for the major stadium development.

•

The Federal Government from time to time contributes to the development / redevelopment of venues. For example, in January 2007 the Federal Government announced a $25m contribution towards the building of a new grandstand at the Sydney

SECTION C C-47

Cricket Ground. Similarly, in January 2007 the Federal Government announced funding of up to $25m for the upgrade of Adelaide Oval’s western stand conditional on matching funds from the State Government; and •

A surcharge on parking within specified zones in the Perth Metropolitan area.

Private Sector Financed Infrastructure This form of procurement/financing involves private sector provision of the asset and its ongoing operation. This type of procurement will require consideration of the key question whether there is an appetite for such significant private sector involvement in the delivery and operation of the asset. Generally, the commercial return and assumed risk from such an investment will be the overarching criteria used by the private sector in making such a decision. The projected annual return of the new stadium will not be sufficient to attract private sector interest in financing the infrastructure delivery. As noted previously, whilst the venues might be able to achieve a cash flow break-even position, they will not generate a return on equity for a potential private investor. Accordingly, it is likely that the Government would be required to provide additional funding or guarantee in order to secure private sector investment.

Public - Private Sector Partnerships An alternative delivery mechanism, referred to as Public Private Partnerships (PPPs) is to involve the private sector in various aspects of project provision, potentially including designing, building, maintaining, financing, owning and/or operating the asset. Essentially the private sector assumes portion or all of the risks associated with the delivery, maintenance or operation of the asset in return for fee. However, it is unlikely that the proposed stadium project will generate surplus cash flows to fund any substantial debt (refer Section C4.1 earlier) let alone equity, it is unlikely that a Public Private Partnership (PPP) which involves the private sector financing the development and / or operation of the venue will be viable without an additional financial cost to Government

to compensate the private sector for their risk adjusted cost of capital. In return the Government benefits from transferring all or portion of the delivery, maintenance and operating risk to the private sector. The potential use of some form of PPP to deliver the stadium project is discussed separately in Section C4.4 following.

Table 51: Funding Sources of Recent Stadia (Re-) Developments in Australia

Examples of Funding of Major Stadia in Australia In recent times, Governments across Australia have experienced great interest by the private sector to assist in the delivery of major infrastructure projects which is strongly driven by the increasing number and size of private equity funds. As with infrastructure projects internationally, these have been at times successfully delivered for roads, hospitals and schools, but there are far more complications for public assembly facilities, such as convention centres, arenas and stadia, which have high risk, variable and unpredictable revenue streams and where the operation and maintenance function is closely integrated, blurring the availability requirements of a typical PPP. This differs from a hospital or school where the facility maintenance has a regular and predictable requirement and easily measurable availability. Nevertheless, the private sector expects sufficient returns on their investment which in the case of stadia in Australia has generally been insufficient to warrant an investment by the private sector. The majority of major stadia across Australia are owned and funded by their respective State Governments. Exceptions have been two of the Sydney Olympic venues, Telstra Stadium and Acer Arena and Telstra Dome in Melbourne, as indicated in Table 51. Over the past decade the Queensland Government has redeveloped its 2 major stadia in Brisbane. Whilst Suncorp Stadium has been a “straight” redevelopment of the former Lang Park Stadium the Gabba has been upgraded through a progressive rebuild which is further outlined by Relative Example 1. Both redevelopment were funded by the State Government through loans and grants.

PERTH STADIUM C-48

Relative Example 1: The Gabba:

Relative Example 2: Telstra Stadium:

The venue has been redeveloped over several stages with actual construction commencing in 1995 as part of Stage 3 which included the Northern Stand and lights.1 Data provided by the MSFA in Queensland suggests that Government grants and loan draw downs since 1998-99 totalled approximately $153.67m:

Telstra Stadium has been developed under a BOOT scheme with the risk associated with construction and the operation of the venue being carried by the private sector. The venue was originally planned to be operated by Stadium Australia Limited for a period of 30 years before being transferred back to the NSW Government (Source: Freehills). The financing of the stadium has been very complex and included debt financing, equity investment and the public float of membership packages which accounted for the majority of project financing of $519.1m.

Government Grants

Loans provided by Queensland Treasury

• 1998-99: Stage 4 - $26.191m

• 1996: $25m at 0.5% interest - repayments funded from venue operations

• 1999-00: Stage 5 - $27.481m

Initial funding sources – Telstra Stadium: •

ANZ Bank Loan

•

Approximately $130m

•

Multiplex Loan

•

Approximately $6m

•

Obayashi Loan

•

Approximately $4.25m

The Community Investment Fund established by the Queensland Government is funded from poker machine revenues from an additional levy for poker machines in hotels and provides some of the funding for the MSFA’s major infrastructure projects including Suncorp Stadium ($235m), The Gabba ($40m) and the Gold Coast Stadium ($160m).

•

Olympic Coordination Authority

•

Approximately $12m

•

34,400 Gold Memberships @ $10,000

•

$344m

Source: Perth Stadium Consulting Team

•

600 Platinum Memberships @ $34,000

•

$20.4m

•

Unknown

•

$2.45m

• 2003-04: Video Screens - $3.0m

• 1999: $32m at market rate - repayment funded from venue operations • 2006: $40m – repayments funded by Community Investment Fund receipts

1. Stages 1 and 2 of the redevelopment related to temporary transitional arrangements for the Brisbane Lions and the removal of a greyhound racing track, however no financial information relating to Stage 3 was provided by the MSFA.

Telstra Stadium and Telstra Dome were 2 venues which were developed with a greater level of involvement by the private sector and importantly with the private sector adopting patronage risk. However limited investment by the private sector in the development of larger venues in Australia has been recorded since the completion of these 2 venues in 1999 and 2000, respectively. The funding of these venues is highlighted in Relative Examples 2 and 3. In summary, both of the major stadium projects which have involved substantial private sector funding have performed, in a financial sense, less than originally anticipated. In the case of Telstra Stadium, the public float proved to be a failure and financiers have now taken control of the asset due to its inability to generate sufficient trading surplus to repay borrowings. In the case of Telstra Dome, the funding of the Stadium was directly linked to the sale of television rights and the commitment of the AFL to schedule a significant proportion of home games at this venue. The value of the asset was also enhanced by the rights to some 2,500 car parks.

However, the public subscribed only 31% of the 34,400 Gold Memberships on offer whereby the underwriters provided the shortfall. Further, the shares of Stadium Australia Group lost 80% of their original value within 1 week of listing at the ASX. The venue generated sufficient income to pay interest on the outstanding debt, however was not sufficient to reduce the principal loan amount. In November 2006, Stadium Australia Group eventually received a takeover bid by a subsidiary company of the ANZ Bank valuing the venue at $190m (Source: The West, 16 November 2006). Source: Perth Stadium Consulting Team

Relative Example 3: Telstra Dome: The venue was also developed as a BOOT scheme. The $400m project has been fully funded by the private sector however limited information is publicly available as to the exact contribution of the different parties involved in the consortium, as displayed in Figure 4 Figure 4: Telstra Dome Funding Arrangement

Channel Seven provided up to $100m of the funding by purchasing all venue membership seats (4,500 seats) for a period of 30 years as well as 2,500 undercover car-parking spaces. In return Channel Seven received the naming rights, ticketing rights, signage to the stadium, seats as well as indoor and outdoor advertising to all events at the venue for a period of 25 years. The developer retained the right to operate the venue for a period of 25-30 years and has recently sold the management rights to the venue to James Fielding Management Limited for a reported $330m. The AFL has purchased and settled in advance ($30m paid in 2000), the ownership and management rights to the venue after the expiration of the current owners tenure (25-30 years initial term). Source: AFR, Docklands – the no-risk stadium, 2 September 1997

SECTION C C-49

4.3

SUMMARY AND CONCLUSIONS

The major stadium is unlikely to generate sufficient operating surpluses (after lifecycle asset maintenance costs) to fund any significant levels of debt let alone provide sufficient returns to attract private equity. Accordingly, the vast majority of the funding for the stadium will need to be provided by the WA Government, either by way of direct grant funding or by way of guarantee and cash support for any debt/equity raised to fund the development. Additional potential sources of funding include: •

•

•

•

Proceeds from the sale of surplus lands, the quantum of which will depend on site selection, final masterplans and gaining appropriate planning consent; Contributions from the Federal Government which has previously contributed funding towards stadium projects, the most recent of which being a contribution towards the redevelopment of the South Australia Cricket Ground reported to be in the order of $25m; Contributions from major sporting tenants such as the AFL and ARU. In their submission for the redevelopment of Subiaco, the WAFC has indicated that the AFL would consider making a capital contribution (by way of a loan not a grant) towards the funding of the stadium, but these funds would need to be repaid by surpluses generated by the venue; and Proceeds from the introduction of a development levy charged on all tickets for events staged at the venue. Based on “an average year” forecast attendance of 1.6m at the major 60,000 seat stadium, and a levy of $2 / ticket (2007 $) annual revenues (gross of collection and administration charges) of approximately $3.2m could potentially be raised in this manner ($16m over 5 years).

4.4

POSSIBLE DELIVERY OPTIONS

Figure 5: Types of Infrastructure Project Structures High

Infrastructure project delivery structures can range from total government delivery to total private sector delivery. The following diagram illustrates different infrastructure project structures and the associated level of government involvement and risk transfer.

G overnment department provis ion G overnment owned c orporation or s pec ial purpos e vehic le Level of Government Involvement

As discussed previously the Stadium(ia) project is unlikely to support private sector debt/equity funding whereby option E & F are unrealistic for this project unless supported by some form of Government guarantee/service fee which could include a profit element reflecting the risk associated with the delivery, maintenance and operations of the asset. These delivery models are often used in instances where the Government has inadequate reserves to fund the project and/ or is looking at some form of balance sheet funding. Given the financial position of the Western Australian Government, the community nature of the stadium asset and local sensitivities amongst key sporting code stakeholders regarding the new ownership and governance these delivery/funding options are not considered realistic options for the stadium. Accordingly, Options A – D are the only options available to Government for the Delivery of this project. These structures are usually used where government ownership of the infrastructure is important or where the infrastructure does not generate sufficient cash flow to service

Government Transfer of Risk

S ervic e c ontrac ting/outs ourc ing Management contracting (eg DB M, DB OM)

It should be noted that the trade off between Government involvement and risk focuses primarily on risks to Government as an owner of infrastructure. Other risks to Government, such as the loss of flexibility in planning, are clearly reduced by Government ownership of infrastructure. The possible structures differ mainly in regard to the allocation of responsibility for project elements (Design, Construction, Maintenance, Operation and Financing) and the related risks between the public and private sectors. Common structures used for infrastructure projects and the allocation of roles between the public and private sector are shown Table 52.

Low

C onc es s ion (eg DB F O M) P rivate E ntrepreneurs hip

Low

High

Table 52: Common Structures used for Infrastructure Projects

Structure

Ownership/ Financing (O/F)

Design (D)

Building/ Construction (B/C)

Operation (O)

Maintenance (M)

A

D & C Contract Govt

Private

Private

Govt

Govt

B

DB&M / DC&M Govt Contract

Private

Private

Govt

Private

C

DB&O Contract Govt

Private

Private

Private

Govt

D

DBO&M Contract

Govt

Private

Private

Private

Private

E

DBF&M

Private (Concession)

Private

Private

Govt

Private

F

DBFO&M1

Private (Concession)

Private

Private

Private

Private

Source: Perth Stadium Consulting Team 1 A Build Operate Transfer (BOT) scheme is a form of DBO and Build Own Operate (BOO), and Build Own Operate Transfer (BOOT) schemes are forms of DBFO&M structures.

PERTH STADIUM C-50

Figure 6: Government Ownership, Contracted Venue Management and D&C Contract

the required funding (debt and/or equity) but where the government can gain efficiency and expertise through private sector design, construction, maintenance and operation. In determining the appropriate project structure and the amount of private sector involvement in an infrastructure project, the following key factors need to be considered: •

•

Technical capability of government or a government owned entity to perform each project element. If a government does not have the technical expertise to deliver or operate a project, or any element of a project, it may be more efficient and cost effective to seek private sector involvement than to develop the required expertise in-house; Level of risk that can be transferred to the private sector. The theory of optimal risk allocation suggests that project costs are minimised when project risks are allocated to the party in the best position to manage them. The reduction in cost occurs because the party in the best position to manage a particular risk should be able to do so at the lowest price;

•

Flexibility of the structure to deal with changes. Long-term contractual arrangements between the public and private sectors pose complications for later change;

•

Whole of life design (i.e. minimise whole of life costs). Ensuring that whole of life costs are minimised requires that ongoing maintenance requirements are considered in the design and construction stages;

•

Funding costs (cost of government versus private sector funding); and

•

Importance of the project being off balance sheet for the government. If a government has balance sheet constraints, it may not wish to borrow for a specific infrastructure project. In such situations, the government can utilise the private sector to finance and deliver the project, however this will be dependent upon the asset being developed to have the capacity to fund the private sector investment (both debt and equity). As noted earlier, this is unlikely to be the case with the stadium(ia) project.

As detailed previously in Section C1, Governance and Venue Management, the consultants recommend that the WA Government establish a government owned entity (Trust, Statutory Authority, GOC) to oversight the governance and management of the stadium(ia). Further, it is recommended that the ownership entity appoint a suitably experienced, independent professional venue manager to deal with the day-to-day operations of the venue. Given the highly sensitive nature of matters relating to venue governance and management, we do not consider it appropriate to bundle the appointment of a venue manager into a D & C consortium. The decision on the appointment of the venue manager needs to rest with the government appointed ownership entity. With respect to the delivery options which incorporate a maintenance function, we make the following comments: •

Incorporation of lifecycle maintenance within costs and delivery with a D C & M contract is most frequently used in the provision of office buildings and transport infrastructure (roads, rails etc) where maintenance is more predictable and cyclical in nature;

•

Depending on the terms of the agreement a D C & M contract may provide an incentive to the contractor to incur high levels of maintenance; and

•

A major stadium is a specialised public building and the maintenance activities (particularly turf maintenance) are an integral part of the venue operations. Accordingly, the consultant’s recommend that maintenance activities be coordinated by the venue manager and should not form part of the delivery model.

In summary, the delivery options which the consultants consider to be most appropriate for the major stadium project is a Novated D & C contract, the structure of which is outlined in Figure 6.

SECTION C C-51

4.5

CONTRACTUAL OPTIONS

There are a range of contractual arrangements that complement delivery options. As part of this study the following contractual options have been reviewed: •

Novated Design & Construct Contract;

•

Traditional Lump Sum Contract;

•

Provisional Lump Sum Contract;

•

Integrated Contract;

•

Negotiated Contract;

•

Project Management / Design – Construct (Turnkey);

•

Construction Management Contract; and

•

The Principal subsequently transfers his Consultancy Agreements with the design team members across to the Contractor who subsequently takes responsibility for the management and performance of the design team ensuring completion of design to his construction requirement and in conformity with the performance brief and contracted obligations. Key Considerations •

Novation allows the design documentation risks to be transferred to the Contractor normally under a competitive lump sum tender process to minimize the risk premium in the price for design and construction documentation.

•

The terms of the consultant’s agreements after novation are predetermined by the Principal.

•

The design team performance risks in delivering the construction documentation is transferred to the Contractor to enable him to conform to the construction programme obligations.

Design & Construct Contract (with guaranteed maximum price and fixed time).

•

It is recommended that the WA Government utilise a Novated Design & Construct Contract as the preferred means of delivery details of which are outlined in the following paragraphs. An overview and description of other contractual options that have been considered is provided in Appendix B.

The timing of transfer of the contract between the design team and Principal to the Contractor will vary subject to the individual project fundamentals relating to time, quality and control risk profile priorities.

•

Time constraints and the imperative for an early construction start to enable earlier completion will dictate the limitations on the availability of design time before tender.

Novated Design & Construct Contract (NDC)

•

The more complete the design development the more influence the Principal has over the built form, function and performance ideally. Scope, quality and design resolution of key elements of the design should be resolved and well documented for NDC to have the best chance of a successful outcome.

Background The novated design and construct procurement system is now a common contract delivery strategy on many of the major works contracts entered into by Government and public instrumentalities, as well as private developers in the past 10 years including Stadia. The MCG Redevelopment was completed under this delivery system as is the proposed Melbourne Rectangular Stadium currently out to tender. The design team is originally selected by the Principal and the project’s functional and design brief are developed in the traditional form at the outset and through the design development phase to a greater or lesser extent.

Advantages •

Continuity of design including obtaining statutory approvals;

•

Aids a fast tracking delivery system;

•

Transfer risks of design to the Contractor including limiting opportunity for time extension claims, consultant performance, etc;

•

Client still selects their preferred design team;

PERTH STADIUM C-52

•

Contractor may introduce design efficiencies particularly build ability and material selection through value management of the unresolved design which may translate into improved tender price competition; and

•

Members of the novated design team can provide expert reports to the Principal confirming conformance during the construction process by agreement with the Contractor.

Disadvantages •

The Client contracts out of direct access and control of the design team after the contract is executed;

•

Client loses control of design team and tenders the work before design is fully defined;

•

This risk can be mitigated by ensuring functional brief is detailed and comprehensive in setting down performance requirements;

•

The Contractor and design team may be disadvantaged by having to enter into pre-determined terms; and

•

The compatibility of the Contractor and nominated design team may be less than desired.

4.6

RECOMMENDED DELIVERY STRUCTURE AND OPTIONS

It is recommended that the WA Government establish a Government owned entity (i.e. statutory authority, Government owned corporation) to oversight the development of the preferred stadium(ia) options. The role of this entity could be extended after the completion of the new stadium to fulfil the role of the Government’s (owner) representative to oversight the ongoing governance and management of the venue (refer Section C1). The Government should appoint the Board of this entity on the basis of relevant skills and experience required to effectively oversight the delivery and ongoing governance of a major stadium(ia) project. Further it is recommended that the WA Government utilise a Novated D & C Contract as the preferred means of delivery, which will allow the Government to have a role in the appointment of the design team and in the development of the projects functional design brief before going to tender.

Outcome A successful novated design and construct project achieves the right balance between design control and transfer of design risk to the Contractor with sufficient safeguards to maximize the match between Principal’s expectations and Contractor’s obligations. In recent times Telstra Dome, the Millennium Stadium, Wembley Stadium and the recent MCG redevelopment have been delivered using this option. An alliance contract arrangement with a preferred contractor secured under agreed selection criteria would be a possible variation to a traditional novated design and construct contract.

SECTION C C-53

PERTH STADIUM C-54

5.0 RISK MATRIX

SECTION C C-55

During the development of the financial feasibilities and masterplan concepts for the various sites for the Stage 2 study for the major stadia facilities in Perth it has been necessary to make some key assumptions based on the level of information, time and funding available. The key areas of risk associated with the project have been identified as follows: •

Governance and management;

•

Users / sport code agreements;

•

Community and local neighbourhood support;

•

Transport and traffic management;

•

Funding;

•

Agreeing acceptable terms for the land sale and purchase agreements where required;

•

Project procurement;

•

Obtaining acceptable development approval and conditions on selected site;

•

Design, quality and cost; and

•

Programme.

The following table lists the key project risks identified during the masterplan and concept feasibility stage. The risks vary from site to site and will be dependent on the ability to agree governance and final site selection and availability. It should be noted that these risks relate to the delivery phase of the project and will need to be continuously monitored and managed throughout the development of the project. Appropriate action plans need to be developed to minimise their effects on the delivery of the project. Further investigation and consultation will be required to mitigate or reduce the impact of these risks on the project.

PERTH STADIUM C-56

ID

Risk

Impact

Actions & Recommendations

Governance and Management 1

Lack of agreement on governance structure with sporting codes.

High

WA Government to revoke management order and terminate the WAFC’s lease over Subiaco Oval.

2

Lack of agreement with WAFC on venue management structure for proposed stadia.

High

Refer above.

3

Lack of client body able to make effective decisions.

Moderate

WA Government to establish an appropriate ownership entity to act as client body.

4

Lack of agreement with venue hirers.

High

Heads of Agreement to be negotiated with all codes.

5

Allia Holdings Pty Ltd do not agree to surrender Members Equity Stadium operational rights.

Low

To be resolved by Town of Vincent prior to Government commitment to any funding for MES.

6

WAFC do not agree to surrender lease and management rights over Subiaco Oval.

High

No Government commitment to develop a new oval stadium.

7

WACA do not agree to vacate.

Moderate

No Government funding for any ongoing capital improvements at the WACA.

Design Issues 8

Brief requirements not met.

Moderate

Workshops held with users and sports bodies have alleviated risk. Obtain sign off from each user to brief requirements before design work proceeds.

9

WACA do not agree to ICC minimum oval size.

Low

Major Stadium and cricket / rugby option to accommodate WACA sized oval based on a drop in wicket block.

10

WAFL oval size and orientation not met.

Low

Major Stadium design to adopt Subiaco Oval size and orientation.

11

ARU and Western Force do not agree to field size and orientation.

Low

Rugby field dimensions to meet ARU requirements. Rugby WA has indicated acceptance of east west orientation for major multi-use stadium. If and when a dedicated rectangular stadium is developed the field is to have a north south orientation.

12

Maintaining agreed minimum capacity, standard of service and revenue streams during construction (Subicao and Kitchener Park only).

Moderate

Develop detailed staging plan and construction programme during early stages of design to ensure capacity and service expectations are met.

13

Identification of requirements of all users including media, police, emergency services, operations, VIP’s, sponsors, waste management etc.

Moderate

Retain appropriate design and operational expertise to continue brief development during design stages of the project. Ensure that client body is authorised to make decisions and allow for stadium operational and management input throughout the design and brief process.

Neighbours and Community Consultation 14

Banks Community object to stadia at East Perth.

Moderate

Establish an effective community consultation process.

15

Mueller Park Community object to stadia at Subiaco and Kitchener Park.

Moderate

Establish an effective community consultation process.

16

Community concerns over funding requirements and priorities.

Moderate

Establish and communicate clear vision for the new stadium and political leadership.

17

WAFC and Government lack of agreement on ownership played out in media and gains negative community reaction and support.

High

WA Government to resolve governance arrangements committing to the new stadium projects. No Government funding for piecemeal repairs and improvements to existing stadia.

SECTION C C-57

ID

Risk

Impact

Actions & Recommendations

Transport and Traffic 18

Public expectation of PT strategy is negative and impacts use.

Moderate

Integrated ticketing and detailed TMP developed, establish communication / education strategy, infrastructure to be completed at the time of opening of the venue.

19

Infrastructure costs excessive and cannot be supported.

Moderate

Site selection takes account of total project costs and Government commitment to funded and co-ordinated delivery.

20

Lack of co-operation of Government agencies and public transport service providers.

Low

Whole-of-Government approach and empowerment of owner’s representative body.

21

Clash of event times and rush hour places severe strain on public transport system and road network.

Moderate

Detailed TMP established and agreed.

22

Inability to define infrastructure costs.

Low

Independent expert advisers retained.

23

Transport Centre (Shuttle Bus Station) is not incorporated into design.

Low

Refer to feasibility concept and site selection takes account of total project costs and Government commitment to total funding and co-ordinated delivery.

24

Pedestrian Infrastructure upgrades not incorporated into design.

Low

Refer to feasibility concept and site selection takes account of total project costs and Government commitment to total funding and co-ordinated delivery.

25

Rail upgrades (track and stations) not incorporated into design.

Low

Refer to feasibility concept and site selection takes account of total project costs and Government commitment to total funding and co-ordinated delivery.

Scope of the Project 26

Scope creep.

High

Appointment and empowerment of owner’s representative and PMT body to oversight the delivery of the agreed Vision. Retain appropriate professional adviser and select an appropriate delivery model.

27

Third party interference increases size and scope of project.

High

Strong political leadership and empowerment of owner’s representative.

28

Funding budget not defined.

High

Government should define the budget it is willing to expend on the project and ensure that a competent ownership entity and consultant team can deliver the project within the budget.

29

Cannot afford what users have identified.

Moderate

Ensure that the design brief reflects funding constraints and is signed off by users prior to commencement of final stages of design and documentation.

30

Design and brief does not meet funding budget.

High

Ensure that a detailed costed project brief is given to design team at outset of design process, and that expert operational advice is incorporated in the planning and design. Ensure that procurement methodology mitigates design risk and avoids unnecessary design embellishments or architect’s design statements. Avoid design competitions as method of procurement as this will significantly increase the cost risk and delay the project.

31

Cash flow differs from delivery programme.

Moderate

Ensure that project cash flow is defined at start of project and the owner body has sufficient access to key funding to start the design process.

32

Funding for external infrastructure works i.e. transport etc is not provided.

Moderate

Plan for staged and co-ordinated development of works outside the main stadium and infrastructure in Masterplan area.

33

Funding of infrastructure requirements delayed or not given.

Moderate

Ensure that total project costs are understood and met as part of the funding arrangement. Government commitment to the total project.

34

Delays in decision or funding of project.

High

Government leadership and commitment to a timeframe for delivery.

Funding

PERTH STADIUM C-58

ID

Risk

Impact

Actions & Recommendations

35

Government not committed to funding package.

High

Project does not proceed.

36

Actual revenue less than business plan forecast.

Moderate

User heads of agreement to be negotiated and financial forecasts revised accordingly.

37

State Government changes / alters governance and funding.

Moderate

Re-assess business case for the project particularly support from all sporting codes.

38

Funding lags project cash flow requirements.

Moderate

Comprehensive project cash flow agreed and funded by Government.

39

WACA relocation costs.

Low

WACA to fund relocation from proceeds of sale of existing site.

40

WAFC compensation costs.

High

WA Government support Taskforce’s recommendation as to “no worse off” i.e. no compensation payable.

41

Allia Holdings Pty Ltd compensation costs.

Low

WA Government capital funding of MES upgrade dependent upon Town of Vincent resolution of governance issues.

42

Refurbished Subiaco costs less than new stadium.

High

Facility does not meet brief criteria and is not future proofed to match benchmark stadia. Ensure that deficiencies of Subiaco proposal are understood and that project costs are total project costs including escalation, contingency and infrastructure. The adoption of the Subiaco proposal will also trigger the need for development of a dedicated 35,000 seat rugby stadium funded by Government.

43

Inflation differs from allowances included in budget.

Moderate

Allow for total project costs to be based on DHW escalation indices for Perth. Ensure project costs are in escalated costs for variety of development timeframes.

44

Exchange rates vary on imported materials.

Low

Cost impact at this stage of the project is low.

45

Compliance issues with new building regulations.

Moderate

Impact of global warming on building regulations could be severe and impact on construction and design development. Ensure that design accommodates best ESD and access principles to mitigate future effects of amendments to BCA.

46

Life cycle costs impact on Capex.

Moderate

Review during design development the LCC costs against Opex, Capex and ESD objectives. Financial forecasts incorporate lifecycle cost funding.

47

Design competition held for consultant appointment.

High

Design competitions are notorious for delivery of projects above initial Capex projections. Develop a detailed brief and compare design against cost to manage project budget and expectations.

48

Contingency management plan loosely managed.

Moderate

Appoint an experienced Stadium Project Manager to the project at an early stage to manage process and issues.

49

Expectations of standard of finishes out of line with regards to budget.

Low

Agree and give examples of the stadia benchmarks at outset and base cost plan on these standards.

50

Insufficient detail in documentation to give accurate cost at this stage.

Low

Obtain peer review of WT Partnership cost plan by other stadia experienced QS firm (Davis Langdon, Ryders or Rawlinsons).

Costs

SECTION C C-59

ID

Risk

Impact

Actions & Recommendations

Programme 51

No definition of timing allows project to be undefined.

Moderate

Delays will have exponential effect on cost. Ensure that cost plan allows for escalation under various scenarios and start date for project.

52

Introduction of time critical timeframes (event based).

Moderate

Avoid time critical event objections.

53

Allow for handover time.

Moderate

Ensure that construction program allows for handover and commissioning using test events and soft openings to test building, systems and operational requirements prior to first official event.

54

WA region continues building boom.

High

Limitation of resources and state of construction economy in WA could affect program and costs. Allow for elongated programme to take into consideration state of the construction market and resources in WA.

55

Other large Government projects running in parallel soak up available resources.

Moderate

Ensure that Government agencies coordinate release of infrastructure projects to avoid over-stretching market.

56

Election cycle places unrealistic timeframe on project.

Moderate

Co-ordinate project delivery with political objectives.

57

Restrictions on construction due to neighbourhood and planning constraints.

Low

Construction programme cognisant of site neighbourhood constraints.

Procurement 58

Consultant’s procurement process leads to inexperienced consultants being appointed.

High

Ensure the procurement process for consultants places heavy weighting on experience in building type and ability to deliver project on time and budget. Develop a detailed brief and exhibited design that is costed prior to calling consultant tenders.

59

Lack of early engagement with contractors.

High

Recommend procurement methodology that establishes a two stage novated D & C contract.

60

Government seeks private sector capital funding and delivery.

High

Adopt consultant’s recommendation as to funding and delivery models.

61

Lack of competitive contractors.

High

Seek early expressions of interest from major national contractors to gauge contract interest. Adopt novated D & C delivery recommendation.

Consents 62

Significant environmental site issues identified (e.g. site contamination at Burswood or East Perth)

Moderate

Undertake a comprehensive EIS as part of the planning process

63

Compliance with planning requirements.

Moderate

Define DA approval process of preferred site as part of procurement strategy.

64

Restructure existing operational consents i.e. noise, light, spill, number of events.

High

Critically analyse during assessment phase and negotiate appropriate amendments to consents to enable business plan to be delivered.

65

Problems occur due to multiple consents processing across different Local Government and State Government agencies.

Low

Use an appropriate redevelopment authority..

PERTH STADIUM C-60

6.0 STAKEHOLDER AND COMMUNITY CONSULTATIONS

6.1

Consulted Stakeholders

C-62

6.2

Community Consultations

C-62

6.3

Stadium Website

C-63

6.4

Survey

C-63

SECTION C C-61

6.1

CONSULTED STAKEHOLDERS

The Taskforce and the consultants have engaged a wide range of stakeholder groups in both stages of the study. The consultations included major sports codes to identify / consider their design requirements for a new stadium and their view on the potential future governance and management of a major stadium. As part of the consultation process the WAFC, Rugby WA and the WA Rugby League made presentations to the Taskforce during stage 1 of the study. Further, presentations were made by the City of Subiaco, the Town of Vincent, the City of Cockburn, as well as EPRA.

Table 53: List of Consulted Stakeholders

Local Governments and Associations

State Government Agencies

A list of the consulted stakeholders is provided in Table 53.

Local Sports Association / Clubs / Teams

• Football West

• City of Stirling

• Fremantle Football Club

• City of Subiaco

• Perth Glory

• Town of Cambridge

• Royal Agricultural Society

• Town of Claremont

• Rugby WA

• Town of Victoria Park

• West Coast Eagles

• Town of Vincent

• Western Australian Cricket Association • Western Australian Football Commission

• Department of Premier and Cabinet

• Western Australian Rugby League • Western Australian Trotting Association

• Department of Planning and Infrastructure

• West Australian Turf Club

• Department of Treasury and Finance • Main Roads Western Australia

National Sports Codes

National Sport Venues / Association

• Aussie Stadium

• East Perth Redevelopment Authority

• Brisbane Cricket Ground (The Gabba)

• State Solicitor’s Office

• Major Sports Facilities Authority

• Valuer General’s Office

• Melbourne Cricket Ground

• The Government Architect

• Member’s Equity Stadium

• Fire and Emergency Services

• Subiaco Oval (WAFC) • Sydney Cricket Ground

• Australian Football League

• Telstra Dome

• Australian Rugby Union

• Telstra Stadium

• Cricket Australia • National Rugby League

COMMUNITY CONSULTATIONS

• AAMI Stadium

• Public Transport Authority

• WACA

• Football Federation Australia

6.2

• Allia Holdings Pty Ltd

• City of Perth

• Department of Housing and Works

Generally all sports codes, community groups and the majority of local Governments have been consulted on a face-to-face basis, while national sports bodies (e.g. venues in other jurisdictions) have been engaged in the project by either telephone communication or written correspondence. Further, with the commencement of the second stage of the study, DSR engaged Professional Public Relations (PPR) to assist DSR and the Taskforce to manage public relations throughout the study.

• City of Cockburn

Community Groups

• Banks Precinct Community Group • Mueller Park Action Group

As previously outlined, the Taskforce and consultants had ongoing communication with community groups and local governments in Subiaco and East Perth during both stages of this study. The key goal of the community consultation process was to inform local residents about the work of the Taskforce and allow the members of the community to provide input about the proposed solutions to allow the Taskforce and the consultants to integrate the views of the community into the final options to be presented to the State Government.

PERTH STADIUM C-62

A further key message of the consultation process was to highlight that the Taskforce is not a proponent of a particular stadium option or site and is not the decision maker in that regard. The aim was to communicate to the public that the Taskforce’s role is to provide the best advice to the State Government about the advantages and disadvantages of the different stadium options / sites. The Taskforce and the consultants perceived that local community feedback was an important part of this process. The Banks Precinct Community Group and the Mueller Park Action Group were identified as two community groups whose interests could be affected by the proposed options. The following outlines the process applied by the consultants to engage these groups during Stage 2 of the Taskforce’s site investigation process:

Banks Precinct Community Group An initial consultation meeting was held in October 2006 with the aim of opening lines of ongoing communication. At this meeting the Group requested that the Taskforce make a future presentation to its monthly meeting. In December, Taskforce members presented to a meeting attended by about 60 residents at which a presentation was given by a representative of HOK Architects and detailed discussions held as to specific questions and issues raised during the meeting. A survey form was distributed at the meeting to enable residents to give further direct feedback to the Taskforce. Responses were considered as part of the Taskforce’s detailed considerations on issues related to this site. In March 2007 a further meeting was held with Banks Precinct Group representatives at which up-to-date information on site planning and traffic management options for this site was presented for discussion.

Mueller Park Action Group An initial consultation meeting was held in October 2006 in order to open lines of ongoing communication. At this meeting the Group requested the MST provide further information in a future presentation once site option concepts at Subiaco reached an advanced stage.

In January 2007 a further meeting was held between MST personnel and Action Group members at which a presentation on aspects of Subiaco sites under consideration was made and detailed discussion held. At this meeting Action Group members were directly advised that the Taskforce had decided its brief for a future site in Subiaco would not involve disturbance to nearby Mueller Park, a specific request of the Action Group. The Taskforce subsequently issued a media statement advising of this decision.

6.3

STADIUM WEBSITE

During stage 2 of the study, the Taskforce also introduced a website (www.majorstadiataskforce.com.au) outlining the progress made to date and providing links to the Interim Report, consultant reports and stakeholder presentations. The website aims at ensuring a high level of transparency in relation to the progress and recommendations made during the study. The website outlines why WA needs a new major stadium and provides an overview / links to other major stadia in Australia and across the world. Most importantly, the website provides the public with the opportunity to comment on the major stadium proposal.

6.4

SURVEY

To further enhance the level of community engagement DSR’s media advisors developed a survey that was advertised in the Sunday Times on February 25 2007 and the West Australian on February 24 2007. The advertisements promoted a free-call 1800 number that people could phone to receive a hard copy of the survey in the mail. A replypaid envelope was sent with the questionnaire. The survey was also made available in electronic format on the Major Stadia Taskforce website. There were almost 500 respondents to the comprehensive survey conducted by the Major Stadia Taskforce during March. The survey sought feedback on the amenities and design features that the WA public would like to see in any future Perth stadium.

The survey responses demonstrated categorically that Perth people are unhappy with their existing stadia facilities. They feel shortchanged compared with other Australian States and they want a new facility to properly reflect Western Australia’s status within the nation and internationally – and they want it sooner rather than later. By far the most overwhelming responses cited dissatisfaction with the cost and poor variety of food and beverages at Perth’s existing stadia, the length of queues for refreshments, inadequate and badly maintained public conveniences and uncomfortable, outdated seating. Many people complained that public transport was inadequate and overcrowded and that entry and egress to Perth’s existing stadia was difficult. A large number of respondents referred to a need for Perth to have an “iconic” stadium development, with the MCG and Telstra Dome frequently mentioned as stadia in Australia with desirable features. A regularly expressed criticism in the feedback was directed at the technology at Perth’s existing facilities, with a large number of respondents expressing a desire for more video/television screens, improved public address systems and the ability to be able to see the on-field action while waiting for food or beverages. Respondents also expressed a desire for a stadium located within a hospitality precinct, with bars and restaurants and featuring more meeting space outside the ground and more undercover seating. Most respondents in the free text section of the survey raised the issue of seating numbers, with every one calling for a new multipurpose stadium to provide greater capacity than that which is available in Perth’s existing facilities. The survey was a valuable exercise that gave Perth people a means of communicating their views. It reinforced that the Perth community is sophisticated and parochial and demonstrated an expectation that the city feature public amenities that properly reflect its status. A copy of the survey questions and the quantitative and qualitative survey results are provided in Appendix B.

SECTION C C-63

PERTH STADIUM C-64

7.0 MAJOR EVENTS AND THEIR IMPACTS

7.1

Potential Major Events

C-66

7.2

Requirements of Major Events

C-67

7.3

Economic Impacts of Major Events

C-69

7.4

In Conclusion

C-72

Perth is strategically located within the Indo-Pacific region and has the opportunity to promote itself as a major hub of all leisure and sports activities for this area.

SECTION C C-65

7.1

POTENTIAL MAJOR EVENTS

A number of events are held in Perth on an annual basis, including annual international rugby and cricket test matches, and these events are included in the financial models for the stadium. Further, there is the opportunity to host additional major events, and the development of an international standard stadium will enable Perth to more effectively compete for events internationally and within Australia. In addition to the potential revenue stream for the stadium, major events are also a high priority for State Governments in Australia for the economic impact that can be generated.

these events, if it participates as part of an Australian-wide bid for the event. For these major world cup events, it is likely that the finals would be staged in Sydney or Melbourne, but Perth should actively bid for its ‘fair share’ of pool and quarter and semi final events. It should be noted that Australia has secured the cohosting rights for the 2015 ICC Cricket World Cup and assuming the Stadium is completed, will position WA to improve its share of events of major pool events as well as potentially securing quarter or semi finals. •

Regional sporting events – WA can bid for these events in its own right and may include Asia Cup football events, football friendlies, age or national titles (Soccer Under 17’s World Championships, Women’s Soccer, Women’s Cricket etc.) Securing these events will require the successful bid by the EventsCorp. This is not the typical the role of the actual venue manager, who will assist where possible with the bidding process.

•

Major events such as the Commonwealth Games – should WA take the decision to bid for a Commonwealth Games with the next bid option being for 2018, the stadium could provide the centrepiece for the bid, depending on the final location and configuration of the stadium. The requirements for these events go well beyond that of the stadium, and at such time it will require the overlay of the Games over a range of Perth facilities to provide a compelling bid for the proposed event.

•

Other sporting and cultural events that the WA Government may wish to bid for with the stadium as the centrepiece venue could include the following:

Major events targeted would be for sports which can be accommodated in the proposed facilities including: • •

Oval sports, particularly cricket, as the opportunity for international AFL events is limited; and Rectangular sports, such as soccer/football, rugby union, and rugby league.

Depending on the configuration of the stadium and the opportunities for reconfiguration, it may also be possible to accommodate athletics, enabling the venue to be the centrepiece of a bid for other events, such as the Commonwealth Games or IAAF World Athletics Championships, although this may only be feasible on a site with a larger footprint, such as the Burswood site. On this basis the major events that could be envisaged for the 60,000 seat major stadium, over and above the base case events, would be: •

•

Bledisloe Cup – over the last three or four years there has been much more flexibility in the location of this high profile Rugby Union event between Australia and New Zealand, with its move from its home base of Sydney to Brisbane in 2006 and Melbourne in 2007 and the increase in the number of events. The development of the stadium will better position Perth to successfully bid for this event. World Cup events for Cricket, Football, Rugby Union or Rugby League – these events are all major bid events and would be generally subject to Australia wide bids. An international stadium would ensure that Perth does not miss out on its fair share of

-

Masters Games;

-

Student Games/ Universaide;

-

Entertainment events such as the Edinburgh Military Tattoo;

-

Rugby 7’s (currently held in Adelaide);

-

International Rules Football; and

-

NFL Pre Season Games (The NFL will be playing exhibition games in Beijing in 2008).

Bidding for events is increasingly competitive. International standard

PERTH STADIUM C-66

facilities are now the norm expected for any international event and with the emergence of Asian destinations, including China and the Middle East in the event bidding mix, not only is it becoming more costly to secure events but also more unpredictable. The historical expectation that there is an official (or even unofficial) rotation is breaking down. Event bids will need to be carefully targeted and well funded to be successful in the current climate and will require working closely with the other states in any bid where Perth may get events as part of a major event. Establishing Perth as a world class event destination, with international facilities, will be fundamental in securing these events on an on-going basis. In addition, it should be recognised that even the international tests held now for cricket and rugby union cannot be guaranteed into the future. The quality of the events and indeed the continued presentation of an annual event may be subject to competitive bids from emerging markets such as Dubai, Singapore or Japan, and the national associations may not be able to prevent this occurring. It will be imperative that the EventsCorp works closely with the stadium owner and venue manager to ensure that Perth remains a competitive option for these events. These events are important for WA. It is well recognised that major events deliver economic impact. Events attract visitors to the city, who in turn spend money by staying in hotels, shopping, dining, and visiting other surrounding attractions. In addition, the city is showcased in the event advertising overseas, on event promotions on television prior to the event and for the televising of the actual event. Major events can assist the corporate market in Western Australia, particularly the resources sector in creating and enhancing brand awareness in overseas markets such as India and China. Further, holding an event also provides the opportunity to develop associated business opportunities, by hosting specific business forums over the event period and by using the event to leverage conference bookings. This strategy was particularly successful for Sydney during the Sydney 2000 Olympic Games. An important justification for events can be the legacy factors – the development of the necessary infrastructure to host the event can provide community facilities for the longer term.

7.2

REQUIREMENTS OF MAJOR EVENTS

Major Events invariably impose an additional level of physical and operational requirements on a facility well above the level of provision that is required for normal domestic or international sporting competitions or entertainment. The term usually employed for describing this additional layer of fitout is major event overlay, and its ability to be incorporated into a facility is usually judged by the particular event organising committee during the bidding stage for the major event. It is therefore important to recognise the particular requirements for the potential major events and make provision for the event overlay to be easily installed (and later removed if required) into a facility. Major event overlay external to a facility may include: •

Expanded boundaries for the ticketing / security perimeter;

•

Media / broadcast centre or media sub-centre;

•

Stand by power generators;

•

Additional security requirements including bag searches, magnetometers;

•

Vehicle checking stations;

•

Hospitality areas;

•

Live sights / fan zones;

•

Accreditation facilities;

•

Crowd management provisions;

•

VIP and sponsors drop off and parking areas;

•

Staging and assembly areas for ceremonies; and

•

Warm-up areas for sporting participants (for example, an athletics warm-up track).

SECTION C C-67

Major event overlay within a facility may include: •

Temporary building works to provide internal spaces and seating areas for the organising committee and associated organisations, event management, VIP’s and sponsors, corporate patrons, media, officials, venue and volunteer staff;

•

Athletes check-in, changing, holding areas, medical and recovery areas, seating areas;

•

Officials and technical personnel check-in, changing, meal areas;

•

Media tribune areas within the spectator seating;

•

Media sub-centre, conference and interview rooms, mixed zone;

•

Temporary broadcast, power and data cabling reticulation to overlay areas;

•

Camera platforms in seating areas and possibly camera positions in roof;

•

Stand-by power generators;

•

Installation of event specific competition requirements, for example, athletics track and field;

•

Timing and photo finish equipment;

•

Additional scoreboards or video screens;

•

Event theming and event signage;

•

Sponsors signage;

•

Flags;

•

Preferred major sponsors equipment changeover i.e., beer, soft drink, credit card facilities, including merchandise;

•

Opening and closing ceremonies staging, production equipment, performer’s backstage facilities; and

•

Trophy / medal presentation staging.

Special events such as the Rugby World Cup, Cricket World Cup, Football World Cup, Athletics World Cup or Commonwealth Games invariably have major ceremonies and associated entertainment is an

integral part of the event, and require an overlay of sound, lighting, projection or flying capability well in excess of what would normally be provided for the base building. Due to the creative aspects of such shows or ceremonies and the desire to do something that has never been done before it is impossible to anticipate each show designers’ requirements, therefore it is important to look historically at other major events and provide an adequate base building infrastructure for the Perth Major Stadium that will allow the acceptance of the ceremonies overlay with minimum effort and disruption to the normal operation of the venue. Structural rigging points should be provided in the roof structure for mounting of imported supplementary lighting and sound systems, and the underside of the roof shall have a comprehensive catwalk system that enables access to lighting, rigging points and for general maintenance. Electric winches should be provided at several locations on the gantries for the hoisting of heavy equipment (such as amplifiers or cameras) that cannot be taken up manually. Gantries or catwalks need to be of sufficient structural integrity to support additional applied loads from amplifier racks, distribution boxes, projectors, cameras and the like. In addition there may also be a requirement for the temporary rigging of flags or banners, where access and rating of attachment points needs to be considered. In the design of the roof structure, mounting locations for permanent fixtures such as the sports floodlights, house PA speakers and other equipment needs to be considered in conjunction with the possible locations for imported equipment so that for example, the sports floodlights are not obstructed by flags or banners, or the speakers are not obstructed by imported lighting trusses. Major world-class stadium concerts generally have very large stages and a myriad of production equipment comprising sound and lighting, hoisting equipment, video screens, etc. As these major acts are usually on a tight touring schedule the bump-in and bump-out times are kept to a minimum, and require a large labour force and a high level of cooperation by venue management within a short period of time.

PERTH STADIUM C-68

The main stage and delay towers (“the steel”) requires a staging area (the “bone yard”) usually external to the facility where the containers are unloaded, sorted and the components trucked into the arena assisted by forklifts. Once the staging is completed the production equipment is unloaded into an internal loading area close to the arena, and forklifted out to the stage for installation. Electrical power may be either provided by the venue or supplied by generators, which are usually arranged by the promoter. The performers, promoter, production personnel and crew require backstage facilities such as dressing rooms, offices and catering areas. These are usually accommodated in the sports change rooms and media areas provided they are initially designed with this purpose in mind so that they are suitable for multi-purpose use. It should be noted that event overlay requirements for a venue that is designated as the main stadium for a major sporting competition will be significantly different to those where the stadium is only used as one of the venues as part of the overall competition played over a period of time.

7.3

ECONOMIC IMPACTS OF MAJOR EVENTS

As previously outlined, State Governments generally are keen to attract major events to their state due to the economic benefits that such events have on the host city. The support of events has become a major plank of the tourism program of all states in Australia. They are perceived as providing the following forms of benefit: •

Short term tourism impact – the impact of tourist expenditures;

•

Longer term benefits for tourism through state and location promotion by raising awareness and consideration levels;

•

Benefits for business in terms of incremental growth in business activity as a result of visits to Australia and the state by business executives;

•

A broader range of activities for local residents – discouraging outbound tourism, and enhancing value through increased options and regional pride; and

•

Benefits through external funding of improved recreational infrastructure.

In a local context, EventsCorp, the events division of Tourism WA, is the key agency responsible for attracting major international events to Perth. EventsCorp acknowledges that major events are subject to significant competition between Australian and international cities and often result in event owners seeking funding from Government event agencies. EventsCorp analyses funding requests by event organisers against certain criteria (Source: EventsCorp): 1

Estimated economic impact of an event;

2

Media impact and extent of television broadcasting coverage, i.e. the degree to which the event can / will promote WA as a tourist destination interstate and abroad;

3

Event frequency;

4

Private sector investment, i.e. the share of event budget provided by the private sector;

SECTION C C-69

5

Perth’s tourism activity for proposed event date, i.e. events that are held in quiet tourism periods (e.g. July) receive favourable consideration;

6

The development approach – these are events that do not fully meet EventsCorp’s criteria but provide significant growth opportunities and as such are considered worthy of supporting;

7

Other criteria which can include the effect of the event on the corporate sector or the level to which the event enhances the State’s profile and status;

8

The funding available to EventsCorp at any given time, i.e. no funding is provided to events that match the remaining criteria should available funds be exhausted for a certain year;

9

Degree of risk – EventsCorp’s risk analysis includes revenue generation, capacity to cover losses, management expertise, risk for injury, cancellation of the event and terrorism; and

10 Prestige, which EventsCorp measures based on the status of competitors, sponsors, the media, the involvement of international sporting bodies and the anticipated number of patrons.

Commonwealth Games The Commonwealth Games, originally known as the British Empire Games, was designed on the model of the Olympic Games and are held every four years with the most recent event held in Melbourne in 2006. KPMG was engaged by the Victorian Office of Commonwealth Games Coordination to undertake an economic impact study of the Melbourne 2006 Commonwealth Games. The report estimated that the 2006 Games resulted in an increase of the Victorian Gross State Product by $1.6bn over a 20-year period with around half of the impact projected to occur in the year of the Games. Figure 7: Melbourne Commonwealth Games 2006 New Tourism Spend by Type

M e lb o u r n e C o m m o n w e a lth G a m e s 2 0 0 6 N e w T o u r is m S p e n d b y T y p e O th e r E n te r ta in m e n t

2%

P a c k a ge s 2%

4%

G a m e s Tic k e ts 4%

S h o p p in g

A c c o m m o d a tio n

13 %

1 3%

F u el 3%

For a sporting event to be considered as a “Major Event” in Western Australia is must be either (Source EventsCorp): 1

Funded by EventsCorp;

2

Attract a minimum of 10,000 spectators and align with Tourism WA’s corporate objectives; or

3

Be considered as a significant arts / cultural event.

The following provides an overview of the economic benefit of those sports events that have been identified in Section C7.1 as potential sports events that could be hosted in a major stadium in Perth.

O th e r T ra n s p o r t

M e a ls , F o o d a n d D r in k

8%

1 6%

A irfa re s 3 5%

The Games have attracted approximately 166,513 visitors of which 34.2% were international visitors (excluding officials, media and athletes). The estimated aggregate spend by visitors in Victoria due to the 2006 Games has been estimated at $202.5m. Figure 7 provides an overview of the tourism spend by type of expenditure. Further, the Games have attracted business expenditure of $197.7m and resulted in an increase in employment of approximately 13,600 FTEs. Whilst Perth could generally bid to host the Commonwealth Games in the future it is likely to require additional investment in sports facilities in and around Perth to cater for the breadth of events.

PERTH STADIUM C-70

Rugby World Cup The Department of Industry, Tourism and Resources highlights the RWC as the third-largest event in the World after the Olympic Games and the Soccer World Cup. The event is held every four years with the most recent event being held in Australia in 2003 which attracted a television audience of over three billion viewers (Source: IRB). To host the RWC the IRB requires the host nation / union to provide “clean” stadia. Of the revenue generated from the RWC the ARU only retains the revenues from ticket sales with the remaining revenue streams flowing to the IRB including sponsorship, hospitality, merchandise and broadcasting rights (Source: Horwath Asia Pacific Limited).

matches) will be held at Suncorp Stadium over the next eight years. The Brisbane City Council has reported that the economic benefit of a Bledisloe Cup match to Brisbane is estimated $16.529m. Further, the Queensland Premier, Peter Beattie, has announced that the three Bledisloe Cup matches are expected to contribute $50m (in 2006 $) to the Queensland economy with another $50m expected to be contributed by the remaining seven Test matches (Source: Queensland Department of the Premier and Cabinet). In the official press release the Queensland Premier further added: “If we hadn’t turned Suncorp Stadium into the state-of-the-art venue it is today, we would not be attracting such high-class Rugby blockbusters”.

The event creates significant economic benefits for the cities hosting matches during the RWC. For example, Subiaco Oval hosted five matches during the RWC in 2003. An economic impact study of the RWC 2003 released by the Department of Tourism, Industry and Resources in June 2004 outlines that combined these matches attracted 18,386 visitors to Western Australia with an average length of stay of 5.7 nights. 3,458 were estimated to be interstate visitors compared to 14,928 international visitors which combined generated an economic impact of $41.8m (excluding airfares).

Soccer World Cup

•

Direct and indirect spending before and during the event will support 159,000 annual jobs;

New Zealand has been awarded the rights for the 2011 Rugby World Cup. Auckland has a population of 1.24m which slightly lower than the population of Perth (1.50m) and will host the greatest number of games during the event. The event is projected to result in an additional direct expenditure of $262m for the Auckland region (Source: Horwath Asia Pacific Limited). The report further suggests that the economic impact will be primarily generated through the expenditure of international visitors.

•

The event will result in a gross contribution to GDP of approximately: $3.7bn (in 2010 $); and

•

Will attract 190,000 overseas spectators.

Bledisloe Cup The Bledisloe Cup is an annual contest between the Wallabies and All Blacks rugby teams and is based on a three match series. As such, the competition accounts for one to two event days in Australia per year. The Australian host city is generally determined by the ARU. Brisbane has recently signed an agreement with the ARU under which 10 Wallaby Rugby Test Matches (including three Bledisloe Cup

The Soccer World Cup is the second largest sports event in the World and is held every four years. Detailed economic impact estimates have been developed in support of South Africa hosting the next event in 2010. The research (Source: Grant Thornton) suggests that:

Past events suggest that the Soccer World Cup has a positive impact on the economy of the host country. Limited research however appears available on the economic benefit of the event on individual cities. While some data is available on the economic impact on cities during the 1994 Soccer World Cup in the US most of these cities are significantly larger than Perth and do not provide a suitable benchmark. Other soccer events such as the Asian Cup or World Cup Qualifier matches present additional soccer events that could be held in Perth. No research could be identified that quantifies the economic benefits of such events, however anecdotal evidence suggests that the economic impact will correlate strongly with the quality of the match opponent.

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Goodwill Games The Goodwill Games are based on a similar concept to the Commonwealth Games, however have only received limited popularity and have been discontinued after the last event held in Brisbane in 2001. Media reports suggest that the Queensland Government anticipated the Brisbane Goodwill Games in 2001 to generate 2,000 jobs and inject approximately $170m into the State economy (Source: Goodwill Games Inc).

Athletics World Championships The Athletics World Championships are held every two years and are considered as the world’s most prestigious athletics event. The event is held over nine days in a dedicated stadium, however to date has not been held in Australia. Brisbane is currently in the running for the hosting rights for the 2011 world championships with an outcome expected shortly. The event attracts an estimated television audience of four billion viewers worldwide.

7.4

IN CONCLUSION

The bidding for major events is typically not the role of the actual venue manager and would require a successful bid by EventsCorp, the events division of Tourism WA. The development of a 60,000 seat major stadium would provide Perth with the third largest venue in Australia. Perth / WA would have the opportunity to more effectively compete with the Eastern States and internationally for major events. Major events would provide benefits for the stadium owner in the form of additional revenues and would be likely to generate economic benefits for the State.

KPMG has recently been engaged to undertake a cost-benefit analysis of hosting the 2011 World Championships for Queensland Events. However, in a recent press release the Queensland Premier cited that the Spanish city of Seville recorded direct economic benefits of $380m from hosting the event in 1999 (Source: Queensland Department of the Premier and Cabinet). Due to Brisbane’s bid for the event still being under consideration KPMG cannot release the estimated economic benefit for Queensland resulting from hosting the event.

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8.0 PROJECT IMPLEMENTATION

8.1

Project Delivery

C-74

8.2

Transitional Issues

C-74

8.3

Implementation Process

C-75

SECTION C C-73

8.1

PROJECT DELIVERY

Figure 8 outlines a recommended approach to the delivery of the Major Stadium Project. Key aspects of the suggested approach are as follows: •

•

•

If the Government decides to proceed with the project then it is critical to determine the issue of governance of the new venue with all sports. Proposed governance arrangements should be determined and resolved by Government before proceeding with the development of a new major stadium or any alternative developments at a rectangular stadium. The Government should look to establish a separate wholly owned entity (Government Owned Corporation, Trust, Statutory Authority) to oversee the delivery of the major stadium. This entity could potentially fill the ongoing role of the Government’s representative in terms of overseeing the governance and operations of the venue in accordance with the Taskforce’s governance recommendations. This entity should appoint an experienced Project Manager with specific experience in the delivery of major stadia projects to manage the overall delivery of the project.

8.2

TRANSITIONAL ISSUES

The final decision of Government as to the preferred stadium capacity, its configuration and site will clearly have an impact on the scope and impact of transitional issues involved. Further the selection of a brownfield site (East Perth or Burswood Peninsula sites) will have less interruption on the conduct of major sporting events which could continue to be staged at Subiaco Oval until the new stadium is complete. The following broad steps outline transitional issues associated with the development of a new multi purpose 60,000 seat stadium.

In addition to the above broad steps the following specific issues would need to be addressed with each of the particular sites: East Perth Power Station and Burswood •

Demolish Subiaco Oval and potentially redevelop.

Kitchener Park •

Construct Stage 1 of development of Kitchener Park (40,000 seat stand).

•

During construction of Stage 1 the eastern side of the existing Subiaco Oval stadium will need to be demolished during the AFL off season to allow for the construction and installation of the pitch.

•

Government to establish Project Control Group for the development and select appropriately qualified professional consultants for the delivery of the project;

•

confirm project brief and scope. Identify funding and cost parameters;

•

Open Stage 1 of stadium (40,000 seats) for Super 14 / AFL season.

•

consolidation of site for the development and associated infrastructure;

•

Commence Stage 2 construction (20,000 seats) of new west stand.

•

design and document proposed stadium and associated infrastructure;

•

Develop new training and administration facilities for WCE at an alternative venue.

•

planning application and environmental impact assessment for proposed design;

WAFC Masterplan

•

completion of documentation for Design and Construct tenders and early works;

•

call for Design and Construct tender;

•

selection of preferred delivery model and contractor;

•

commence construction documentation and site activity;

•

practical completion of major stadium;

•

venue operator accepts venue and commences pre-opening set up; and

•

official opening and first major event.

•

Commence staged construction documentation and site activity. Capacity of ground not to fall below 39,000 seats during construction for the AFL season.

•

Handover occurs upon completion of each stage.

PERTH STADIUM C-74

8.3 IMPLEMENTATION PROCESS WACA Ground The future of the WACA ground will be determined by the WACA members. However to enable the major stadium to be developed the Taskforce consider that the following steps should be undertaken during the development of the major stadium with the objective that all international cricket games are hosted at the major stadium upon its completion.

•

encourage WACA to sell Western Australian Cricket Ground for highest and best use;

•

WACA to fund development of domestic cricket venue from proceeds of sale; and

•

WACA to be sold on long term settlement to enable development of domestic cricket venue.

Figure 8 provides an overview of the suggested implementation process for delivering the major stadium. Figure 8: Implementation Process

Government decision announced (60,000 seat multi-purpose venue and minor works to MES) Yes Determine governance issues No

Project not to proceed *

Appoint “Owners” entity to oversight delivery / governance

Members Equity Stadium The design, documentation and construction of the minor works to MES can occur as required within its own time frame independent to that of the major stadium.

Engage expert advisers regarding design, operations and finances

Establish Heads of Agreement (commercial terms with key tenants AFL, Rugby WA, WACA, ARU etc)

Progress concept development design and full functional brief

Update business plan and re-assess project viability

Appoint Stadium Operator

Appoint stadium project manager

Confirm project delivery method

Appoint design team to progress the design development phase

Appoint D & C contractor and novate design team

Implement and manage project delivery

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PERTH STADIUM C-76