Consultant got pool costs 'wrong'

StratCorp Consulting made "miscalculations" in its financial projections for the Peninsula Leisure Centre, according to a recent council staff report.

The consultant recently reissued its projection following a council study of previous projections from September 2002.

The original projections considered a number of variables such as the features of the proposed facility, community and user surveys, the catchment area population profile, pricing, competition, staffing and the performance of "like" facilities known to the firm.

A council report stated that "the report of May 3 last year did not adequately highlight the caution expressed by Stratcorp Consulting with regard to income potential and did not recognise that Stratcorp's expense estimates were lower than what would most likely occur".

It stated that the most significant areas where expense estimates were reviewed were electricity and gas, cleaning costs, staff wages and "ramp up" of services and income.

Stratcorp estimated electricity and gas usage at $65,000 per year but council staff stated that, given the size and scale of the centre, the amount would more likely be $250,000 to $300,000 per year.

Stratcorp calculated cleaning costs of $87,000 per year however the figure was not included in the expenses within three proposed "scenarios" for the centre.

The council staff report stated that wage estimates were not calculated using "appropriate local government award rates and conditions" which would normally include a provision for penalties and overtime, representing an under estimation of expenses of $200,000 per year.

The report also stated that no allowance was made for a "ramp up" of services and income where "programs and service take time to fill and business cost control and efficiency improves over time".

The consultancy firm was asked to review its financial projections on the basis of an average take-up scenario giving consideration to the estimates in question, the actual performance of the centre from opening and the council method of applying on-costs to wages.

As a result of the review, Stratcorp Consulting suggested that higher operating costs were likely in the first few years of operation but that it would be "countered by improved performance over time".

The report from Stratcorp was also reviewed by council's finance section with confirmation that the appropriate on-cost rates had been applied.

Trading figures for the centre to June 30 showed that income would exceed projections by an estimated $268,003 but that expenditure was estimated to be $396,926 higher than projections due to electricity and gas, and staff costs.

Electricity and gas costs were assumed by Stratcorp to include the use of pool blankets which would lower energy expenditure.

Staff costs did not include associated increased patronage and programs, that is, reception staff to serve customers, lifeguards for pool supervision, cleaners to maintain the presentation of the facility and swim instructors for lessons.

Other factors such as building security were also "not adequately provided for".

Between opening on October 29 last year and June 30, the centre has attracted 243,860 visitors.

The council staff report stated that customer feedback surveys had demonstrated that the community "recognises the value and community benefit the centre provides".

Council agenda SF.24, August 1