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ONTARIO SPORT LEADERSHIP CONFERENCE
© 2003 Deloitte & Touche. Deloitte & Touche refers to Deloitte & Touche LLP and related entities. All rights reserved.
Facility Access andHow to Get It!!
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Presentation Format
Presenter Ronald Bidulka – Firm Director
Real Estate Advisory Services
Format of Presentation About Deloitte & Touche Facility Economics Facility Access Affordable Facility Access
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About Deloitte & Touche
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About Deloitte and Touche
Deloitte & Touche Founded more than 150 years ago in Canada 6,600 professionals in 46 locations across the country Firm provides a broad range of services including:
• Audit• Tax• Business Consulting Solutions• Management Consulting• Corporate Finance• Specialty Consulting Services
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About Deloitte and Touche
Real Estate Advisory Services Transaction Advisory Services Corporate Real Estate Services Valuation and Appraisal Real Estate Finance Development and Project Management Services
• Facilitating development projects from Idea to Implementation• Involves development strategy / pre-planning / project
structuring / project implementation• Specific expertise in Recreation, Sports and Entertainment
Facility Advisory Services
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About Deloitte and Touche
Recreation, Sports & Entertainment Facility Advisory Services
Assist in realizing the development / enhanced utilization of recreation, sports and entertainment facilities
Services include:• Project Feasibility Assessments• Public-Private Partnership Services• Development Assistance• Operating Cost Analysis and Improvement
Providing services to municipalities, investor groups and sport organizations since 1996
Portfolio of work includes advising on over 35 major national, regional and community sports and recreation facilities
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About Deloitte and Touche
Projects include
Most new Sports and Entertainment Facilities (Kingston, Oshawa, Toronto, Brampton, Guelph, London, Windsor, Owen Sound, SSM)
Community recreation facilities (Ottawa, North Grenville, Kingston, Oshawa, Toronto, Guelph, London, Goderich, Cochrane, Kelowna)
Major sports facilities (Corel Centre / Ottawa Senators, Ontario Baseball Centre of Excellence, Toronto 2008 Olympics, Vancouver-Whistler 2010 Olympics, proposed National Soccer Stadium)
Sports facility costing (Guelph, London, Ottawa, Kingston)
Services geared to realizing facilities, expanding existing facilities, understanding operating constraints and opportunities
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Facility Economics
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Facility Economics Historically, sports / recreation facilities provided by municipalities
service provision seen as a “public good” for the benefit of all usersaccess seen as a public right - cost of access based purely and simply on a
perceived ability to paycapital funding for facilities previously provided through government grants /
transfers
More recently, provision of facilities negatively impacted by provincial downloading and a perceived need to keep taxes as low as possible lack of capital dollars for facilitiesmonies to provide facilities competing with other municipal capital funding
requirements (roads, sewers, water / wastewater facilities)operating budgets impacted from ballooning costs of other servicesnecessitated that facility user fees begin to creep to achieve cost neutrality
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Facility Economics
Increased pressure on capital budgets caused facility development to be postponed or ignored
Situation made worse as population continues to grow
creates more demand for facilities (which are in static supply)creates increased competition for available facility hourscauses user group “stress” as participation rates / membership levels
want to increase but can not be accommodated by lack of facilities Situation also impacted by success of emerging sports / pursuits
increases even more the competition for available facility hoursincreases even more user group stressincreases even more the necessity for innovative solutions to
creating new facilities
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Facility Economics What is the cost to provide and operate a facility
Ice Surfaces• Cost of building one basic ice pad: $5.0 million (excluding land)
• Cost of building two basic ice pads: $9.0 million (excluding land)
• Cost of operating one basic ice pad: $0.4 - $0.6 million per year
• Cost of operating two basic ice pads: $0.8 - $1.1 million per year
• Net operating costs (after user fees $0 to loss of $200,000+but before financing costs): per year depending on
rates
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What is the cost to provide and operate a facility Ice Surfaces – Specific Example
• Cost to operate twin ice facility: $1,000,000• Facility utilization: 80%• Operating revenue (all sources): $750,000• Hourly cost to users: $135 per hour (adult)
$90 per hour (youth)• Net hourly loss: $30 per hour• Hourly charge needed to cover
operations from all users $130 hour• Including capital repayment, rate
needed to “break even” $250 - $300 per hour
Facility Economics
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Facility Economics
What is the cost to provide and operate a facility
Sports Fields
• Cost of building one soccer field: $350,000 (excluding land)
• Cost of operating one field: $10,000 per year
• Net operating costs (after user fees): $4,000 per year (depending on rates)
• Net, Net obligations (including debt): $50,000+ per year
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Facility Economics
What is the cost to provide and operate a facility
Aquatics Facilities
• Cost of building a leisure pool: $5.0 million (excluding land)(lap pool, kiddie pool, slide, therapy pool)
• Cost of operations: $600,000 per year
• Net operating costs (after user fees): $200,000 per year (depending on rates)
• Net, Net obligations (including debt): $700,000+ per year
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Facility Economics
What is the cost to provide and operate a facility
Competition Facilities
• Cost to construct significantly greater as facility sizing, need for spectator viewing areas, training amenities increase costs dramatically
• Net cost to operate also significantly greater as direct operating costs significantly larger; programming revenue potential also significantly reduced
• Programming difficulties / difficulties in ensuring broadest utility to all potential users limits development interest for these facilities
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Facility Economics
Recent Trends in Facility Provision
Ontario SuperBuild Corporation / Canada-Ontario Infrastructure Program funding for new facilities• serves to reduce significantly net capital obligations
Void in facility development also being somewhat filled through private sector development / ownership / operation• generally viewed to free-up time in municipally-run facilities• requires that users pay significantly more than at comparable
municipally-run facilities• provides false sense of security to municipal facility providers
and politicians
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Facility Economics
Recent Trends in Facility Provision
Public-private partnerships seen as vehicle for ensuring community access to new facilities• developed in conjunction with shared-use agreements
guaranteeing community access at existing municipal rates• municipality able to gain access to a facility with no up-front
capital requirements and reduced operating obligations• private sector operator seen as being more able to generate
ancillary revenues• application has, however, seen limited use outside of hockey
arenas (limited application to aquatics / indoor sports fields given more limited revenue generating capabilities)
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Facility Economics
Summary Recreation / sport facilities historically operated at a deficit
• user access fees set with no regard to operating costs but rather against a perceived ability to pay
Increased view to cost recovery in sports facilities• for ice facilities means a minimum 30% increase in rates• for other facilities, trend is to more multi-use facilities which
cater to a broader demographic at the expense of competitive users
Increased interest in P3 structure to develop facilities• structure is not a panacea and may not result in preferred
access• process is also time consuming and costly
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Facility Access
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Facility Access
Facility access generally a function of Municipal allocation policies
• generally a function of age and size of organization and their respective political / bureaucratic influence
Willingness to take non-prime / off peak time hours Facility availability
For most facilities in many municipalities Demand for facility access outstrips supply Ability and willingness to invest in new facilities is limited Lack of supply necessitates that a concerted effort to maintain
current access takes as great a priority as does seeking additional access
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Facility Access
Approaches taken to maintain / improve access Creation of facility user organizations
• Ice Councils, comprised of boys minor hockey, girls minor hockey, figure skating, speed skating, sledge, ringette, etc.
• Aquatics Councils – swim teams, polo, synchro, schools, special needs (rehab / therapy), etc.
• Sportsfield Councils – baseball, soccer, rugby, ultimate, etc. Rationale is that individual organizations do not necessarily have
the size and hence political clout – given constant supply, increasing access for one group can only be at the expense of another
Working together to achieve a common goal increases size of constituency and therefore able to exert greater political pressure
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Facility Access
Approaches taken to maintain / improve access Being “Part of the Solution” to realize new facilities
• agreeing to pay increased user fees – serves to bring into better balance facility net operating costs
• agreeing to a “Facility Use Surcharge”, an add-on facility use charge dedicated to paying for the cost of a new facility
• agreeing to a “Facility Surcharge” as part of annual registration fees, with this amount again dedicated to paying for the cost of a new facility
Net effect is to bring open dialogue / a sense of partnership to discussions of increased facility access• groups seen to be bringing something to the table (not simply
“my group needs better access”)
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Facility Access
Approaches taken to maintain / improve access
Actively supporting P3 initiatives• participating with municipal sponsors to be “part of the solution”• seeking out prospective partners and securing long-term use
agreements• educating municipal officials on what peers jurisdictions have
accomplished
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Facility Access
“a public-private partnership is a relationship structured between a government entity and the private sector wherein the private sector assumes a defined level of
responsibility for the provision and/or operation of a facility or service which had previously been the sole responsibility of the government”
RISK TRANSFER
PRIVATEPARTNER
partnershiparrangement
BENEFIT TRANSFER
PUBLICSPONSOR
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Facility Access
Design /Build
WraparoundAddition
TemporaryPrivatization BOOT BBO
FullyPublic
FullyPrivate
LDO BTO BOOOperation &Maintenance
PermanentPrivatization
The Public-Private Partnership Continuum
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Facility Access
P3 Approaches taken by other municipalities
Ottawa / London• purchase sizable blocks of time at privately funded and
operated facilities
Guelph• seek to augment facility uses by attracting private sector
investors / users
Kelowna• finance the construction of the facility, but lease it to a third
party operator subject to certain use / usage requirements
North Grenville / Goderich / Waterloo• lease-back and operate a portion of a privately-built facility
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Facility Access
User Group Input
Council Input
revenue assessment
expense analysis
financial assessment
Development scenarioanalysis
Recommended Development Scenario
P3 Strategy
Potential Partner Identification
Legal Agreement
Report to Council
Refinement and Analysis
Business Plan Development
Tender / RFP Process
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Facility Access
Summary Facility access generally set by historic policy
• unless substantive alteration of supply occurs reallocation of supply to individual user groups is difficult
Lobbying for increases in supply is most effective through concerted efforts by a “common voice” of user groups• increases size of lobby and seriousness of issue
Common voice coupled with financial commitment increases likelihood of positive results• assists in minimizing two main financing risks to facility
development – capital and operating P3 structure can effect positive results, but all parties must be
aware of issues and opportunities
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Affordable Facility Access
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Affordable Facility Access
Affordable facility access does not mean priority access to sports / recreation facilities at nominal cost
Affordable facility access does not also mean priority access at full cost recovery
Affordable facility access does mean that government facility providers recognize the benefits of sport within
their community that government facility providers recognize that sport and recreation
facilities are a public good that it needs to provide and invest in that facility users recognize the financial pressures of facility providers
and that they are committed to working to balance facility revenues and costs
that facility users recognize competing users and that they accept to work together to balance and maximize access for all
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Questions
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