Late Item Agenda of Finance & Audit Committee

PALMERSTON NORTH CITY COUNCIL

Memorandum

TO: Finance & Audit Committee

MEETING DATE: 4 December 2019

TITLE: CET Arena Redevelopment Update

Presented By: Bryce Hosking, Manager - Property

APPROVED BY: Tom Williams, Chief Infrastructure Officer

RECOMMENDATION(S) TO Council

1. That Council approve the plan to deliver Programmes 1534 (Embankment), 1082 (Speedway Pits Relocation) and 1083 (Entrance Plaza) concurrently as one project through a single main contractor during the 2019/20 and 2020/21 years.

2. That Council approve the budgets for these Programmes totalling $6.833m for the current 2019/20 financial year and $8.862m for the 2020/21 financial year as follows:

	2019/20	2020/21
Programme 1534	$1,694,000	$2,481,000
Programme 1082	$2,876,000	$4,040,000
Programme 1083	$2,263,000	$2,341,000
TOTAL	$6,833,000	$8,862,000

3. That Council note that as a consequence of the changes above the remaining LTP budgets for the following Programmes have been reduced to the following:

Programme 990	$6,757,000
Programme 1083 (Land Purchase)	$1,008,000

1. ISSUE

1.1 As part of the redevelopment of the CET Arena there are three projects which have physical works commencing in the current 2019/20 financial year – The Speedway Pits Relocation, the new Entrance Plaza, and the Embankment Redevelopment. The construction of these projects will conclude in the 2020/21 financial year.

1.2 To ensure best outcomes; these projects are being designed concurrently by the same designers, and they will also be delivered concurrently as one project with the contract being tendered to deliver the three projects through a single main contractor.

1.3 A competitive tender process has been undertaken for these works. As the contract will exceed the delegated authority of the Chief Executive a report will be brought to Council on 18 December 2019 for approval to accept the preferred tender.

1.4 There were several movements of budgets into the current 2019/20 financial year that were approved via the 2019/20 Annual Plan process to enable the projects to be designed concurrently.

1.5 As the projects will be delivered over two financial years, prior to being able to accept the preferred tender, Council will need to approve the several budgets being brought forward into the 2020/21 financial year so the projects can be completed on time prior to the new Speedway season beginning in November 2020.

1.6 This report addresses the following:

· The benefits in designing and delivering the Speedway Pits, new Entrance Plaza, and Embankment Redevelopment projects concurrently;

· Provide a comparison of the Programme Budgets in the LTP and the Programme budgets being proposed;

· Provide an overview of the budget movements that were approved for these Programmes in the 2019/20 Annual Plan;

· Clearly outline the budget movements required for approval; and

· Clarify the rationale for, and estimated costings of, the bridge.

2. BACKGROUND

Benefits in Designing and Delivering Projects Concurrently

2.1 Below is a summary of the benefits of the decision to design and deliver the projects concurrently:

· Mitigate around $428,000 of inflation costs by delivering over 2 years;

· Mitigate cost of multiple tenders across each project;

· Mitigate multiple design phases for each project;

· Provide a co-ordinated design due being designed all together;

· Provide overall design efficiencies due to delivery and design together i.e. the bridge;

· Reduce overall contractor costs due to 1 construction duration;

· Single resource consent and building consent;

· Mitigate multiple contractor establishment costs for each project;

· Overall reduction of construction programme reducing consultant fees;

· Condensed programme reducing business interruption to CET Arena; and

· Complete redevelopment earlier and maximise revenue returns sooner.

Comparison of Programme Budgets – LTP and Proposed

2.2 Please refer to the attached financial summary table. This table clearly highlights:

· The budgets as they were reflected in the 2018-28 LTP;

· The budgets as they are now reflected in the 2018/19 and 2019/20 years – The 2018/19 years shows the actual expenditure, and the budgets that were approved in the 2019/20 Annual Plan; and

· The budgets being proposed be brought forward into the 2020/21 financial year.

Overview of Movements Approved in the 2019/20 Annual Plan

2.3 Please refer to the attached financial summary table when reading this section.

2.4 Please note, as these are multi-year programmes, if required, budget was also moved into the 2018/19 year to cover actual expenditure over budget. These moves are also reflected in this section.

2.5 Below is a summary of the movements approved in the 2019/20 Annual Plan:

· Programme 1534 – Embankment

o $70,000 was transferred from Programme 1083 (Land Purchase) to Programme 1534 for the over expenditure in the 2018/19 year.

o $179,000 brought forward into 2019/20 and budget transferred from Programme 990 (Southern Grandstand) to Programme 1534.

· Programme 1082 – Speedway Pits

o Reforecast to spend $2,876,000 in 2019/20.

o Balance deferred to 2020/21.

· Programme 1083 – Entrance Plaza

o $113,000 was moved forward from 2019/20 into 2018/19 to cover the over expenditure in that year.

o Then $1,922,000 was brought forward from 2020/21.

2.6 In addition to the above, there was a $89,000 budget increase to the Artificial Pitch project. This was not approved as part of the Annual Plan but via a report titled ‘CET Arena Artificial Pitch Project Update’ that was brought to the Finance and Performance Committee in April 2019.

Budget Movements Required for Approval

2.7 Below is a summary of the budget movements required to be approved for the 2020/21 financial year:

· Programme 1534 – Embankment

Total Budget Proposed in 2020/21 = $2,481,000

o $651,000 to be transferred from Programme 990 to Programme 1534.

o $1,807,000 to be brought forward and transferred from Programme 1083 to Programme 1534.

o $22,000 to be transferred from Programme 1083 (Land Purchase).

· Programme 1082 – Speedway Pits

Total Budget Proposed in 2020/21 = $4,040,000

o $4,040,000 is deferred from 2018/19 and 2019/20.

· Programme 1083 – Entrance Plaza

Total Budget Proposed in 2020/21 = $2,341,000

o $92,000 to be brought forward within Programme 1083 from 2021/22 into 2020/21.

o This is to be added to the balance left in this year of $2,249,000 after money was brought forward as mentioned in Clause 2.5 above.

2.8 The rating impact from the interest cost for the borrowing associated with the additional capital new expenditure is approximately $80,000 for 2020/21.

Rationale for the Entrance Bridge

2.9 There were several complex safety issues associated with access, security and public separation with the speedway cars during events, while still allowing for the pits area to be viewed by the public.

2.10 The creation of a bridge from the entrance plaza to the embankment was selected through design and development as the best solution to overcome these safety issues.

2.11 If the bridge was to be removed there would be a requirement to provide significant fencing, automatic gates and traffic bollards to the speedway pits area. Not only would this be a poor design outcome but result in significant ongoing management from the CET Arena staff before and after events and require additional temporary staff as safety and security marshals during each event, therefore incurring significant OPEX costs to each event moving forward.

2.12 Council Officers, in conjunction with the external project managers, have determined the best delivery solution is for the bridge be delivered as part of the entrance plaza project.

Indicative Cost of the Entrance Bridge

2.13 When a Quantity Surveyor builds up a project estimate, the costs are not built up by sections i.e. roof, walls and ‘the bridge’, but rather they are ‘scheduled’ by building elements such as bricks, concrete, timber. This means that unless specifically requested items like the bridge are not typically costed up.

2.14 However, to provide clarity for Council, the cost of the bridge has now been estimated to be approximately $990,000.

2.15 It is important to note, that although the bridge is circa $990,000, the bridge could not be simply removed to make a $990,000 saving. The alternative solutions in Clause 3.3 above would need to be put in place. As these alternatives have not been priced, Council Officers are uncertain if there would be a saving or not.

3. NEXT STEPS

3.1 Tenders will be assessed, and a report will be brought to Council in December 2019 seeking approval for the preferred tenderer.

3.2 Construction works are due to commence in January 2020 and conclude in October 2020 prior to the next speedway season commencing.

4. Compliance and administration

Does the Committee have delegated authority to decide? If Yes quote relevant clause(s) from Delegations Manual <Enter text>		No
Are the decisions significant?		No
If they are significant do they affect land or a body of water?		No
Can this decision only be made through a 10 Year Plan?		No
Does this decision require consultation through the Special Consultative procedure?		No
Is there funding in the current Annual Plan for these actions?		Yes
Are the recommendations inconsistent with any of Council’s policies or plans?		No
The recommendations contribute to Goal 2: A Creative and Exciting City
The recommendations contribute to the outcomes of the Creative and Liveable Strategy
The recommendations contribute to the achievement of action/actions in the Active Community Plan The action is: Central Energy Trust Arena is the city’s main multi-purpose hub for sport and recreation and serves as the region’s premier sporting and events hub.
Contribution to strategic direction and to social, economic, environmental and cultural well-being	Palmerston North has fit-for-purpose facilities that meet demonstrated community’s sport and recreation needs and retains its ability to host major sporting events.

Attachments

CETA Budgets Financial Summary Table ⇩

Susan Baty (Chairperson)
Karen Naylor (Deputy Chairperson)
Grant Smith (The Mayor)	Leonie Hapeta
Vaughan Dennison	Lorna Johnson
Renee Dingwall	Bruno Petrenas
Lew Findlay QSM	Tangi Utikere
Patrick Handcock ONZM