Propuesta Urbana Barrial

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):

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.

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

• Rugby Union

- 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 pre-season games;

- Soccer Internationals – Socceroos: 35,000;

- Soccer Internationals – Perth Glory: 15,000; and - Community Events: 10,000.

• 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).

SECTION C

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 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 multi-purpose 60,000 seat major stadium would achieve its break-even 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 multi-purpose 60,000 seat major stadium would reach its break-even point if attendances were 14.3% lower than currently projected.

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)

2.10 IN CONCLUSION

The results of the preliminary financial forecasts and capital cost estimates indicate that the development of a 60,000 seat multi-purpose 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 re-introduction of a local NRL franchise.

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

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.

SECTION C

3.0

IMPACT ON