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7. 10. 96
1. SPORTS LIGHTING AT LANCASTER PARK RR 3649
| Officer responsible | Author |
| Director of Finance | Geoff Barnes |
| Corporate Plan Output: | Grants |
The purpose of this report is to seek approval to provide additional support from the Council to ensure the establishment of lighting at Lancaster Park.
The Victory Park Board (VPB) has advised that due to uncertainty of the timing of the budgeted funding, support additional to that already given will be necessary for the project to proceed. The Council has resolved to provide a guarantee of up to $100,000 per annum for five years to fund the project. Attached is the Council agenda item 25 September 1996.
PROJECT CAPITAL COSTS AND FUNDING
Based on firm tenders the project cost is estimated to be $3.2M with a commencement date of October 1996 and commissioned in February 1997.
The expected funding is:
| Trust Bank Community Trust | $600,000 | Confirmed |
| MM Cables ) Southpower ) Other Sponsors ) Lottery Commission ) Benefit Matches ) |
$1,000,000 | To be Confirmed |
| ------------ $1,600,000 ======= |
||
| Shortfall | $1,600,000 |
SHORT TERM FINANCING OF EXPECTED FUNDRAISING
VPB advise that whilst $1M is expected from further fundraising, the timing is not assured. To cover this $1M, the VPB will arrange a loan facility secured and serviced from its own resources. The VPB has not sought Council involvement in this loan.
LONG TERM FINANCING REQUIRED
The VPB is now asking the Council to support the $1.6M shortfall. It is suggested that this support be given by way of loan of $1.6M with an annual grant, for five years covering part of the interest.
It is expected that the lights will generate additional revenue which will be utilised to service this additional debt of the VPB.
Because of the lack of security and of the inability to finance the whole of additional loans from revenues of VPB, unless the Council supports the project the lighting construction will not proceed.
Should the Council agree to this project and the loan funding, which because of the lack of freehold title will be essentially unsecured, the Council should be assured that the VPB will demonstrate a continuing ability to service and repay the loan. It is therefore recommended that the loan to the VPB be interest only for the first five years and on a table basis thereafter for 15 years. This gives certainty of term to the loan. Further, the VPB should allow the Council to approve any major future capital expenditure. Such approval be after a recommendation of the Director of Finance.
The Council's Director of Finance should be given access on an annual basis to the VPB accounts and budget.
The Council should take such security for the loan as is available by way of an additional mortgage over the freehold land and a charge over the lessee's interest in the stadia.
By way of partial compensation, the VPB are prepared to allow the Council (or its agents) rights to use the stadium free of rent when not otherwise in use. Direct operating expenses will be recovered.
Therefore to facilitate this project it is recommended:
Recommendation: That the Council lend to Victory Park Board $1.6M subject to:
1. The loan is to be an investment of Council reserve funds.
2. The interest rate to be 1% over the Council's three year borrowing rate reviewed annually.
3. The loan is to be interest only for five years and then on a table basis for a further 15 years.
4. The Council commit to an annual grant for five years based on the interest cost of the $1.6M loan:
(a) First year - the full value of the interest cost. - estimate $160,000.
(b) Second year - the interest cost less $30,000.
(c) Third year - the interest cost less $60,000.
(d) Fourth year - the interest cost less $60,000.
(e) Fifth year - the interest cost less $60,000.
5. The Council supports an application by VPB to the Trust Bank Community Trust for an additional grant and if received then this grant is applied in reduction to the $1.6M loan.
6. VPB grant security over both the freehold land and the lessee's interest as recommended by the Council's Solicitor.
7. The Council has the right of prior approval of all future major capital expenditure at Lancaster Park in excess of $250,000 pa.
8. VPB supply annual accounts and budgets as required to the Director of Finance.
9. The VPB allow the Council or its agents use of the stadia free of rent for any event when not otherwise used.