cairns entertainment precinct l cairns regional council 10 … · appendix 1 – programme appendix...

Business Case Cairns Entertainment Precinct l Cairns Regional Council

10 November 2011 (Final)

S:\Cairns Cultural Precinct\20699 (Cairns Regional Council) - Cairns Cultural Precinct\21 PAF\04 Stage 3 - Business Case\Business Case - Final (10.11.11).doc

The above advertisement was placed in the Cairns Post in 2010 by Advance Cairns. It expresses the views of local businesses at that time and indicates a high level of support for the CEP which is continuing today. Advance Cairns has advised that an updated public

statement of support by local business is currently being planned. Reproduced with permission of Advance Cairns.

S:\Cairns Cultural Precinct\20699 (Cairns Regional Council) - Cairns Cultural Precinct\21 PAF\04 Stage 3 - Business Case\Business Case - Final (10.11.11).doc

Contents

Controlled Document Register ............................................................................................................................................ 1

List of Tables ...................................................................................................................................................................... 2

List of Figures ..................................................................................................................................................................... 3

Glossary of Terms ............................................................................................................................................................... 4

Executive Summary ............................................................................................................................................................ 5

1.0 Introduction................................................................................................................................................................. 16

2.0 Outcomes Sought ....................................................................................................................................................... 21

3.0 Options to be Evaluated .............................................................................................................................................. 32

4.0 Project Organisation & Governance ............................................................................................................................ 40

5.0 Financial and Economic Analysis ................................................................................................................................ 42

6.0 Detailed Options Evaluation ........................................................................................................................................ 66

7.0 Implementation ........................................................................................................................................................... 82

Appendices ....................................................................................................................................................................... 91

appendix 1 – Programme

appendix 2 – PAF BC Checklist

appendix 3 – Community and Stakeholder Engagement

appendix 4 – Project Management Plan

appendix 5 – Probity Plan

appendix 6 – FA and EA Databook

appendix 7 – Performing Arts Centre Analysis

appendix 8 – Financial and Economic Analyses

appendix 9 – Risk Management

appendix 10 – Market Sounding

appendix 11 – Planning Advice

appendix 12 – Policy Alignment

appendix 13 – ESDIS

appendix 14 –Concept Plans

appendix 15 – Options Cost Estimates

appendix 16 –Change Management Plan

appendix 17 – Quality Management Plan

appendix 18 – Government Funding Commitments

Cairns Regional Council | Cairns Entertainment Precinct | 10 November 2011

1

Controlled Document Register

Copy No.Copy No.Copy No.Copy No. NameNameNameName OrganisationOrganisationOrganisationOrganisation

01 Linda Cardew Cairns Regional Council (CRC)

00 File Savills Project Management (SPM)

Copy No. Copy No. Copy No. Copy No. ________________________________________ Approved:Approved:Approved:Approved: ____________________________________________________________________________________________________________________________________


2

List of Tables

Table 1 –CRC Budget Analysis for Option 6 (Stage 1) (BC compared to PE) ....................................................................... 5

Table 2 – Ranking of options............................................................................................................................................... 8

Table 3 –Incremental NPEV and BCR for Option 6, Stage 1 depending on choice of discount rate (PWC) ....................... 13

Table 4 –NPEV and BCR for Option 6, Stage 1 and Base Case (not incremental) (PWC) ................................................... 13

Table 5 – CEP Vision and Uses ......................................................................................................................................... 18

Table 6 – CEP Cultural Uses ............................................................................................................................................. 18

Table 7 – Existing infrastructure (capacity and occupancy) .............................................................................................. 23

Table 8 – Existing cultural and entertainment infrastructure (main venues) ....................................................................... 24

Table 9 – Alignment of Needs and Outcomes ................................................................................................................... 29

Table 10 - Cultural vitality indicators ................................................................................................................................. 31

Table 11 –Comparison of regional QLD PAC seating capacity (auditorium / theatre space only) ...................................... 34

Table 12 –Comparison of functional elements of the CCT and other regional theatres ..................................................... 35

Table 13 – CCT attendance 2009 – 2010 (Source: CCT) .................................................................................................... 36

Table 13– Cultural Activities Undertaken .......................................................................................................................... 44

Table 14– CEP Visitation ................................................................................................................................................... 44

Table 15– Renewals Capex ............................................................................................................................................... 45

Table 16 – Revenue Sources and Results ......................................................................................................................... 46

Table 17 – Capex expenditure profile................................................................................................................................ 48

Table 18 – Expenditure Sources and Results .................................................................................................................... 50

Table 19 – CRC Budget Analysis for Option 6 (Stage 1) (BC compared to PE) .................................................................. 51

Table 20 – Option 6 Stage 1 Projected Cash Flow ............................................................................................................ 54

Table 21 – Employment supported by final demand of construction services for the CEP (PWC) ..................................... 60

Table 22 – Project Phase Risk framework ......................................................................................................................... 66

Table 23 – Extract from Risk Register (Extreme Risks)...................................................................................................... 69

Table 24 – PAC market sounding results .......................................................................................................................... 71

Table 25 –Whole of Government Policy ............................................................................................................................ 74

Table 26 – Assessment Scale ........................................................................................................................................... 77

Table 27 – Rating criteria .................................................................................................................................................. 77

Table 28 – Public Interest Assessment Results ................................................................................................................. 78

Table 29 – Needs & Outcomes Assessment Results ......................................................................................................... 79

Table 30 – Cultural Vitality Assessment Results ................................................................................................................ 80

Table 31 – Ranking of options ........................................................................................................................................... 80

Table 32 – Option 6, Stage 1 Area Schedule ..................................................................................................................... 82

Table 33 – CEP Stakeholders ............................................................................................................................................ 86

Table 34 – Option 6 Stage 1 Projected Cash Flow ............................................................................................................ 89

Table 35 – Comparison of Option 6, Stage 1 Capex and FSR ........................................................................................... 90


3

List of Figures

Figure 1 – Preferred Option (CA-Cox Rayner) ..................................................................................................................... 8

Figure 2 – Net present value and incremental net present value for both project options (PWC) ...................................... 11

Figure 3 – Revenue Forecast for each option under consideration (PWC) ........................................................................ 12

Figure 4 – Operating expenditure forecast for each option under consideration (PWC) .................................................... 12

Figure 5 – PAF Project Stages .......................................................................................................................................... 16

Figure 6 – Site and its context........................................................................................................................................... 19

Figure 7 – Previous CEP site area with ’Area A’ & Revised site area ................................................................................. 19

Figure 8 – Cairns City Masterplan Context ........................................................................................................................ 20

Figure 9 – CRC Masterplan nodes .................................................................................................................................... 20

Figure 10 – Overriding Project Objectives (PWC) .............................................................................................................. 30

Figure 11 – Options analysis process................................................................................................................................ 32

Figure 12 – Theatre door ................................................................................................................................................... 33

Figure 13 – Theatre seating ............................................................................................................................................... 33

Figure 14 – Back of house................................................................................................................................................. 33

Figure 15 - Foyer............................................................................................................................................................... 33

Figure 16 – Long Section (CA-Cox) ................................................................................................................................... 38

Figure 17 – Lower Plaza Plan (CA-Cox) ............................................................................................................................. 38

Figure 18 – Upper Plaza Plan (CA-Cox) ............................................................................................................................. 39

Figure 19 – Roof Plan (CA-Cox) ........................................................................................................................................ 39

Figure 20 – Overarching Governance Structure ................................................................................................................ 40

Figure 21 – Revenue Forecast for each option under consideration (PWC) ...................................................................... 48

Figure 22 – Operating expenditure forecast for each option under consideration (PWC) .................................................. 49

Figure 23 – Net present value derived from sensitising the base Option 6, Stage 1 (in $,000s) (PWC) .............................. 52

Figure 24 – Net present value and incremental net present value for both project options (PWC) .................................... 53

Figure 25 – Incremental, discounted free cash flow forecast for Option 6, Stage 1 (PWC) ................................................ 54

Figure 26 –Incremental NPEV and BCR for Option 6, Stage 1 depending on choice of discount rate (PWC) .................... 56

Figure 27 –NPEV and BCR for Option 6, Stage 1 and Base Case (not incremental) (PWC)................................................ 56

Figure 28 –Expenditure on construction in Option 6, Stage 1 (PWC)................................................................................. 57

Figure 29 –Direct expenditures in the operational phase (PWC) ....................................................................................... 57

Figure 30 –Number of workers on site during the construction phase of the CEP (PWC) .................................................. 58

Figure 31 –Summary and comparison of costs and benefits for Option 6, Stage 1and Base Case (PWC)......................... 64

Figure 32 – Risk classification ........................................................................................................................................... 67

Figure 33 - Risk ranking and action .................................................................................................................................. 68

Figure 34 – Risk Management Process ............................................................................................................................. 68

Figure 35 – Summary and comparison of key employment and skills development impacts for both options (PWC) ....... 76

Figure 36 – Proposed operational & management model structure ................................................................................... 83


4

Glossary of Terms

AQ Arts Queensland

BC Business Case

CBRC Cabinet Budget Review Committee

CE Creative Economy

CEP Cairns Entertainment Precinct (formerly the Cairns Cultural Precinct)

Cox CA-Cox Rayner Architects

CM Construction Management

CCT Cairns Civic Theatre

CRC Cairns Regional Council

DA Development Application

DDA Disability Discrimination Act 1992

DLGP Department of Local Government and Planning (formerly Department of Infrastructure and Planning)

DIT Department of Infrastructure and Transport

DPW Department of Public Works

FSR Financial Sustainability Review

FNQ Far North Queensland

NBN National Broadband Network

PCG Project Control Group

PAF Project Assurance Framework

PAC Performing Arts Centre

PE Preliminary Evaluation

PMP Project Management Plan

PN Far North Queensland Ports Corporation (Ports North)

PPP Public Private Partnership

PWC PriceWaterhouseCoopers

QMP Quality Management Plan

QT Queensland Treasury

RMP Risk Management Plan

RMR Risk Management Register

SASR Strategic Assessment of Service Requirements

SPM Savills Project Management

TNQ Tropical North Queensland

WTP WT Partnership Quantity Surveyors


5

Executive Summary

Cairns Regional Council (CRC) is proud to present Arts Queensland (AQ), the Queensland Government and the community of Far North Queensland (FNQ) with this Business Case (BC) for a new and exciting Cairns Entertainment Precinct (CEP) in the heart of Cairns.

In October 2011 the Preliminary Evaluation (PE) prepared by CRC was submitted to the State Government for its consideration. This BC represents the next stage of the Project Assurance Framework (PAF) process and seeks to further refine the project opportunity and respond to any State Government comments.

CRC resolved at its meeting of 21 September 2011 to fund its $57.3million share of the Capital expenditure (Capex), subject to the State Government’s acceptance of the BC and the State and Commonwealth Governments agreeing to project funding. Confirmation of Federal Government funding will be forthcoming upon confirmation of State Government’s commitment to funding.

The CRC has made provision in its forward budget estimates (adopted by CRC) for the provision of a multipurpose performance centre. This BC is based on the provision of such a facility which was identified in the earlier Strategic Assessment of Service Requirements (SASR) as the facility most urgently required to meet the most pressing cultural needs of the Cairns community. This BC is also based on the provision of other supporting facilities and includes the restoration of White’s Shed.

The original estimate within the PE for the provision of the CEP was $180m. This BC demonstrates that the CEP can be delivered for $155m. Based on the PE work CRC’s 10 year budget estimate for its ongoing contribution to the operation of the CEP ranges from $9.8m to $10.2m (including depreciation and interest). This BC demonstrates that the CEP can be operated with a contribution (including depreciation and interest) from CRC of up to $8.5m over the same period.

This BC therefore demonstrates that the initial facilities that the CRC has included in its forward budget projections for the CEP, and which are urgently required by the Cairns community, can be provided at a lower capital cost than CRC had included in its forward estimates, and with a lower ongoing contribution than CRC has included in its forward estimates.

The approved capital expenditure budget for the Preferred Option (Option 6, Stage 1) is $154,611,000.

Funding for the total capital expenditure (Capex) of $154,611,000 is proposed as follows:

CCCCommonwealth Governmentommonwealth Governmentommonwealth Governmentommonwealth Government $40,000,000

State Government State Government State Government State Government $57,305,500

CRCCRCCRCCRC $57,305,500

From an operating perspective, Table 1 illustrates that estimated negative cash flows emanating from the CEP are less than CRC’s Financial Sustainability Review (FSR) estimate.

Table 1 –CRC Budget Analysis for Option 6 (Stage 1) (BC compared to PE) For too long the region’s community has been disadvantaged with social infrastructure that is inadequate to showcase the rich cultural diversity and heritage on offer in this part of Australia. This BC justifies an opportunity to address these shortcomings – a position supported by comments from Premier, The Hon. Anna Bligh on 8 June 2010 - "It will put Far North Queensland on the map as a cultural destination and add a whole new dimension to the experience of visitors to the region,".

OPEXOPEXOPEXOPEX FY 15FY 15FY 15FY 15

($’000)($’000)($’000)($’000)

FY 16FY 16FY 16FY 16

($’000)($’000)($’000)($’000)


($’000)($’000)($’000)($’000)


($’000)($’000)($’000)($’000)


($’000)($’000)($’000)($’000)


($’000)($’000)($’000)($’000)

BC BC BC BC ---- OPTION 6, Stage 1 NOI OPTION 6, Stage 1 NOI OPTION 6, Stage 1 NOI OPTION 6, Stage 1 NOI (incl. depreciation and interest)(incl. depreciation and interest)(incl. depreciation and interest)(incl. depreciation and interest)

(6,028) (8,445) (8,532) (8,099) (8,206) (8,330)

FSR (incl. depreciation and FSR (incl. depreciation and FSR (incl. depreciation and FSR (incl. depreciation and interest expense) interest expense) interest expense) interest expense) –––– babababased on PEsed on PEsed on PEsed on PE

(2,569) (3,648) (10,124) (9,810) (9,884) (10,026)

Opex improvement of BC over Opex improvement of BC over Opex improvement of BC over Opex improvement of BC over PEPEPEPE

(3,459)(3,459)(3,459)(3,459) (4,797)(4,797)(4,797)(4,797) 1,5921,5921,5921,592 1,7111,7111,7111,711 1,6781,6781,6781,678 1,6961,6961,6961,696


6

The need is clear, the case for change compelling.

� At a time of high unemployment of persons aged 15 years and over in Cairns (8.2% for the June quarter 2011 based on a smoothed series - Source: DEEWR) and with the business community attempting to recover from natural disaster and the ravages of a global financial crisis, the CEP offers all levels of Government an opportunity to invest in a sustainable future for the city and wider environs.

� It is estimated that as a direct result of Government investment in this project, up to 165 new jobs will be sustained on the site during the construction phase with flow-on of many indirect additional positions related to the construction. Furthermore, many more jobs will be sustained indirectly through the life of the CEP, in arts, cultural, retail and catering industries.

� The community, as performers, exhibitors, entertainers and visitors, has been widely canvassed for input and contribution to this project. The community has voiced its displeasure at the lack of appropriate and adequate social infrastructure currently available in the region. The opportunity for cultural growth, education and celebration has been constrained by lack of opportunity for many years.

� The Cairns Civic Theatre (CCT) is inadequate. Opened in 1974, the building has exceeded its useful life and fails to accommodate many of the locally-produced, entrepreneurial performances or larger visiting groups. The CCT does not meet current minimum building code requirements and discriminates against patrons with disabilities. The risk of claims against CRC will only increase as the CCT ages. The cost of maintaining the CCT continues to grow every year. This is clearly an unsustainable position.

� Cairns is unique, attracting 1,968,000 international and domestic tourists to the Tropical North Queensland (TNQ) region in the year ending December 2010. This number will continue to grow. Of total annual visitation to the region, 47% of international visitors and 11% of domestic visitors may be described as cultural tourists, tourists seeking personal experience and exposure to museums, the arts, music and artistic performance. Cultural tourists typically spend 70% more than non-cultural tourists with a length of stay double that of their counterparts. The opportunity for cultural tourists to view and invest in locally produced product and performance is lost. (Source: Cultural Tourism in the Regions of Australia – Tourism Research Australia, 2005).

� In May 2011 the Queensland Treasury’s Office of Economic and Statistical Research estimated the population of CRC region as 168,251. This represents an increase of 3,897 persons or 2.4% over the year. By 2031, this number is forecast to be between 215,805 and 264,208. Far North Queensland (FNQ) has also grown over the four years to 2010 by 2.7%. The population of FNQ is projected to increase from 281,000 to 373,000 by 2031 (Source: Office of Economic and Statistical Research, Queensland Government population projects to 2031. 2011 edition).The demand for greater and improved social infrastructure will only increase as the population of Cairns and FNQ grows.

OOppttiioonnss EEvvaalluuaattiioonn aanndd tthhee PPrreeffeerrrreedd OOppttiioonn

In collaboration with the local community, CRC and its team of consultants have developed a concept design option for a new CEP that responds to community need as expressed in the SASR, the PE, Section 2 of this BC and the existing social infrastructure failings evident in Cairns today. The Preferred Option was viewed by CRC as achieving a superior outcome in terms of urban design, user amenity, flood and storm surge protection, and the ability to stage construction

During the PE, eight (8) separate options, including construction staging options, were considered and evaluated, including;

� Option 1 - Base Case (Status Quo – Do nothing)

� Option 2 - Complete development (no staging)

� Option 3 - 2 stage development

� Option 4 - 3 stage development

� Option 5 - 2 stage development (rationalised*)1

� Option 6 - 3 stage development (rationalised*)

� Option 6A - 3 stage, 10 year development (alternate and lagged staging, rationalised*)

� Option 6 (Stage 1)

1 Rationalised (*) – value management process which reviewed all back of house and support areas to identify the minimum area and scope inclusions required to still

meet the brief but provide a more cost-effective outcome.


7

It was identified that with current economic restraints on all levels of Government, the only feasible option for immediate realisation of this project, is the first stage of Option 6. It is this option that has been analysed and compared to the Base Case in this BC.

OOOOption 6 Stage 1 is the ption 6 Stage 1 is the ption 6 Stage 1 is the ption 6 Stage 1 is the PPPPreferred referred referred referred OOOOption.ption.ption.ption.

The results of detailed analyses clearly demonstrate that Option 6, Stage 1 will provide a superior outcome in terms of addressing key public interest criteria. This option will satisfy the identified needs and outcomes, and provide an economically viable and vibrant arts and cultural hub for Cairns. The Base Case analysis shows that the existing CCT cannot meet the above criteria and presents an unacceptable risk to the longevity and viability of the Cairns arts and cultural community, related stakeholders and user groups.

A brief description of the two options is provided below;


The Do Nothing option does not involve any development, upgrade or refurbishment to the CCT. It will not meet the needs identified and would have a serious impact on groups that currently use the facility during a refurbishment / construction phase, if contemplated. Further, this option does not address the need for a community meeting place. The current CCT site does not provide for future expansion to fully accommodate the required refurbishment and meeting place requirements nor does it provide for the additional parking requirements.

� Option 6, Stage 1 (refer Figure 1)

� Performing Arts Centre (PAC) comprising the following:

1. A main venue comprising approximately 1,100 seats (depending on the configuration of the orchestra pit), designed to achieve an excellent level of acoustics in a variety of performance modes. The venue is accessed off the upper ground foyer and will provide seating at either stalls or balcony levels. The front of house space including toilets and foyers, etc will be sized to suit the capacity of the venue, which at this stage is approximately 1,700m2. A 23m wide stage with side stage areas will be provided that contains a 13 – 16m x 8m high proscenium, with a grid set at approximately 22m high;

2. Back of house facilities will be provided across two levels, including both general and performer storage, changing facilities, green room, dressing rooms and assembly areas. Facilities within the fly tower include sound shell storage, lighting bridges, grid, winch, dimmer and follow spot rooms;

3. A multi-purpose, rehearsal space to the Wharf street side of the main venue. Accessed off the main upper ground foyer, it will provide an opportunity for the hire of a low-cost venue, which will be equipped with technical equipment to allow low budget performances to occur. This space can be used by many performing arts companies for rehearsal and small performances (up to 150 seats) and will include public access from a discrete foyer, linked to the main foyer. It will also be connected to the main venue backstage facilities. It will be a large high volume space, with a tubular pipe lighting grid and basic stage lighting patch system, AV, projection and sound system infrastructure;

4. A low height studio connected to a kitchen facing over Trinity inlet, which will offer enhanced facilities over the rehearsal space in a low height setting. The "Rehearsal Studio" would be appropriately finished, foyer facing rehearsal room with technical amenity for small rehearsal or performance events like cabaret. It would also be well suited for many other events including corporate functions, yoga classes and general meetings. The studio will be connected to the backstage facilities of the main venue. The room will include AV, projection and sound / patch systems and will include storage for furniture and production equipment. Access to front-of-house (FOH) catering facilities will be provided.

� White’s Shed refurbishment. The White’s shed refurbishment will now focus on the creation of a usable space that will be sufficiently flexible to allow for a variety of uses consistent with the overall cultural / community focus of the CEP. White’s Shed, in conjunction with the external performance space, plaza spaces and public domain, will meet the identified need for a meeting place.

� Public plaza and canopy.

� Parking will be provided for cars both on and offsite, with options being currently explored for providing an amount of above ground parking on site

� Off site and enabling works will be complete to include road realignment, services diversions and quicksilver relocation.

� Convention Centre bridge link.


8

Figure 1 – Preferred Option (CA-Cox Rayner)

These two options were subjected to detailed analysis in accordance with a range of measures dictated by the PAF and Arts Queensland (AQ), including:

� Financial Analysis (FA) – Net Present Value (NPV)

� Economic Analysis (EA) – Net Economic Present Value (NEPV) and Benefit Cost Ratio (BCR)

� CRC Budget Analysis (CRCBA) – Funding Gap Analysis

� Public Interest Assessment (PIA)

� Needs and Outcomes Sought (NOS)

� Cultural Vitality (CV)

Against these measures, options were ranked 1 (highest) through 2 (lowest) to determine an overall ranking. Table 2 below summarises ranking results. These assessments were completed separately and in addition to the analyses undertaken by Pricewaterhouse Coopers (PWC).

OPTIONOPTIONOPTIONOPTION PUBLIC PUBLIC PUBLIC PUBLIC INTINTINTINTERESTERESTERESTEREST

NEEDS & NEEDS & NEEDS & NEEDS & OUTCOMESOUTCOMESOUTCOMESOUTCOMES

CULTURAL CULTURAL CULTURAL CULTURAL VITALITYVITALITYVITALITYVITALITY

RISKRISKRISKRISK NPVNPVNPVNPV NPEVNPEVNPEVNPEV BCRBCRBCRBCR OVERALLOVERALLOVERALLOVERALL

Base Base Base Base CaseCaseCaseCase 2 (11) 2 (15) 2 (2) 2 1 1 1 2222

Option 6 Option 6 Option 6 Option 6 Stage 1Stage 1Stage 1Stage 1 1111 (31) 1111 (40) 1111 (16) 1 2 2 2 1111 Table 2 – Ranking of options As stated in the PAF, if an economic argument is to be made for this sort of cultural facility, the greatest weight should be given to the significant non-market impacts (such as increased social cohesion and quality of life, arts and cultural heritage appreciation, increased education and training facilities and health improvement), together with the key outcomes sought by Government when undertaking the project. Based on these considerations, Option 6, Stage 1 presents as the Preferred Option.


9

The project goals, community and cultural needs, and outcomes sought have been rationalised to determine four overriding objectives. These tangible and measurable objectives form the benchmark for option appraisal throughout the analysis framework. The overriding objectives are:

� To meet community need for art and cultural facilities

� To meet the need for a community meeting place

� To develop greater awareness of the historical and cultural value of the Far North

� To support regional growth

As Queensland Government’s PAF states, “important cultural projects seek to promote Queensland and should not be assessed by using possible economic and employment benefits. Rather, it may be better to rank options by their ability to deliver specific outcomes and assess them against the performance criteria for promotional success rather than their economic impact.”

As such, the four objectives identified above are crucial to the economic and financial appraisals, forming the benchmark for final conclusions regarding the Preferred Option. When ranking the options, the overriding decision rule is that the Preferred Option must be capable of meeting the outcomes sought.

The assessment undertaken demonstrates that Option 6 The assessment undertaken demonstrates that Option 6 The assessment undertaken demonstrates that Option 6 The assessment undertaken demonstrates that Option 6 ---- Stage 1 meets the four key objectives, while the Base Stage 1 meets the four key objectives, while the Base Stage 1 meets the four key objectives, while the Base Stage 1 meets the four key objectives, while the Base Case does not. Case does not. Case does not. Case does not.

The CEP will replace the existing CCT which is an inferior facility, unable to attract or support large-scale stage shows and cultural displays. It is widely acknowledged to no longer meet the needs of Cairns.

The CEP will provide facilities for the performing arts industry, and the region’s families and communities, which have not been previously available. These facilities will not only harness significant social and educational benefits, but provide a unique attraction for the Cairns and FNQ region, fostering the region’s cultural value and local identity.

TThhee BBeenneeffiittss

� The CEP will replace the existing CCT which is an inferior facility, unable to attract or support large-scale stage shows and cultural displays. It is widely acknowledged to no longer meet the needs of the city.

� The CEP will provide facilities for the performing arts industry, and the region’s families and communities, which have not been previously available. These facilities will not only harness significant social and educational benefits, but provide a unique attraction for Cairns and the FNQ region, fostering the region’s cultural value and local identity.

� The Public Plaza and White’s Shed will form a central meeting place for community interaction. Such community meeting places are acknowledged by policy makers as crucial to enhance urban structures and liveability of cities. They can also provide a sense of enjoyment, resulting in improved individual and community well-being.

� It is envisaged that the CEP will support the changing nature of the Cairns CBD by providing a catalyst for business growth, encouraging longer business hours, greater public amenity and safety, and by providing economic benefits to the city from business events and heightened tourism activity. The CEP is therefore regarded by CRC as a priority catalyst project for the development of the Cairns CBD.

� Together with sustaining employment levelsduring the construction phase and fostering regional growth during the operational phase, the CEP will encourage participation in the arts and cultural activities, thereby harnessing the associated non-market social benefits discussed above.

� These benefits include improved languages skills; more developed critical thinking ability and increased confidence to engage with the education system. Having a local population that is increasingly able to think critically and is more confident and culturally aware, will lead to a more productive workforce that can meet the challenges of a growing region.

� Total expenditure for the CEP is projected to be in excess of $150 million over the three years from FY12 to FY15 comprising approximately $125m of construction costs with the balance of costs associated with employee, authority and consultant costs. Expenditure will peak in FY13 ($67.4 million). While there is evidence to suggest that the demand for labour resources in the construction industry is currently exceeding supply, it may be argued that, following the temporary shock to the labour market arising from the Queensland reconstruction effort, some of these resources may then be directed to construction projects like the CEP. This would assist in maintaining economic activity and employment in Cairns and the FNQ region.


10

� Throughout the operational phase, the Preferred Option will provide greater support for the Construction, Arts and Restaurants/Catering industries, as compared to the Base Case. The larger, complementary PAC at the CEP will allow for greater revenues from Arts activities in particular, with more than four times the revenues accruing to the Arts industry under the Preferred Option as compared to the Base Case. Heightened tourism activity under the Preferred Option will also provide support for the region’s retail, restaurant/catering and accommodation industries.

� It is estimated that, during the operational phase, the CEP will directly employ 34 people, while the CCT would only employ around 20. As well as these direct labour effects, it is likely that the flow-on effect of the project will support economy-wide employment, particularly in tourism related industries like retail and restaurants/catering. The CCT does not currently operate as a key tourist attraction, nor does it support a significant level of retail/restaurant/catering activity and employment. As such, the economy-wide employment supported under the Preferred Option is expected to be greater than that under the Base Case.

� In light of the key objectives sought by CRC and Government, particular weight should be given to the social and educational benefits that have been described. In particular, the CEP will have the capacity to increase social cohesion and enhance health and well-being for both those in the Cairns community and those attracted to the area. It will promote stable, cooperative and sustainable communities that encourage intergenerational and intercultural interaction.

� Participation in arts and cultural activities can have a direct impact on the improvement of education and training outcomes, not only for performers and artists, but also for consumers whose participation is merely receptive. It promotes knowledge sharing, increased collaboration, cultural appreciation and skills development. The CEP will likely foster and encourage participation in arts and cultural activities, thereby harnessing these associated benefits.

� The development of the CEP will enhance urban amenity of the CEP site, areas adjacent to the site and more broadly within the Cairns CBD. It will contribute to the sustainable development of Cairns through integration of sustainable design values, protection and enhancement of the natural landscape and appropriate utilisation of the land.

CCoommmmuunniittyy CCoonnssuullttaattiioonn

Community consultation continues to feature as the backbone to the CEP project. Significant community and stakeholder consultation was undertaken by CRC and the consultant project team (2009-2011), with the following groups, including:

� Access advisory committee

� Local architects (input into design brief)

� Community

� Schools and tertiary education bodies

� Ports User groups

� Traditional Owners and Indigenous groups, including Indigenous performers

� Multicultural groups

This BC is substantially a refinement of a detailed PE, during which there was considerable public consultation. The community and stakeholder groups have been consulted at length on the elements that contribute directly to the BC (for example; needs, master plan options, concept design options, functional and spatial requirements, and CBD master-planning).

Council’s funding commitment to the CEP has been extensively considered in CRC’s budget planning processes and has been the subject of commentary in public reports and meetings.

Additional consultation will be undertaken by CRC on endorsement of the BC and will continue throughout design development and construction.


11

DDeettaaiilleedd FFiinnaanncciiaall AAnnaallyyssiiss

Net Present Value (NPV)

The Net Present Value (NPV) results indicated in Figure 2 demonstrate that neither option is self-funding on a purely commercial/financial basis. The Base Case is presented for comparative purposes only for this appraisal, and does not represent a viable solution for CRC. Under the Base Case, the CCT continues to operate at a loss of approximately $1 million (in FY11), with an additional renewal cost of between $0.1 million and $5.7 million in each year of operation.

The incremental NPV for Option 6, Stage 1 is -$33.1 million. The negative NPV results reflect that the discounting of future cash flows is not offsetting the forecast operating losses and renewal costs associated with the CEP.

Figure 2 – Net present value and incremental net present value for both project options (PWC)

Revenues

As presented in Figure 3 below, in FY 2016, the first full year of operation for the CEP, revenues are forecast to be approximately 2.1 times that of the CCT’s projected revenues. By FY 2041, CEP revenues as a proportion of the CCT revenues are projected to grow marginally to 2.2 times. The CEP offers a wider diversity of revenue streams than currently provided by the CCT, including;

� Fee revenue generated from a 200 space carpark

� Event hire revenue for use of White’s Shed space

� Revenue from functions held in the PAC

� Studio hire and equipment hire

� Commissions, fees and charges to be earned from tickets sold for the PAC’s 1,100 seat theatre

� Food and beverage revenue

The PAC is by far the dominant source of revenues.


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Figure 3 – Revenue Forecast for each option under consideration (PWC)

Operating Expenditures

Figure 4 demonstrates that in FY 2016, the first full year of CEP operations, operating costs are forecast to be approximately 2.1 times that of the CCT’s projected costs. By FY 2041, CEP Opex is expected to grow to be 2.5 times that of the CCT. The difference in growth rates during this time – between 3.20% and 3.40% per annum for the CEP, and 2.50% per annum for the CCT – is due to a portion of the CEP’s cost base being linked to PAC utilisation, which is expected to increase in stages of the first 30 years of operation.

Mirroring the revenue profile, the PAC is by far the dominant source of operating expenditure for the CEP, representing 95% of forecast FY 2016 Opex. This is explained by the PAC:

� having the largest employee headcount of all facilities in the CEP

� having a high variable cost base, particularly in areas such as food and beverage costs, function costs and community hire subsidies for theatre hire by community groups

� incurring sizeable entrepreneurial programming, advertising and marketing costs

PAC Opex as a proportion of total expenditure is expected to stay relatively consistent throughout the forecast period to FY 2041. Opex stays constant in real terms. The increase between FY 2017 and FY 2041 is due to escalation.

Figure 4 – Operating expenditure forecast for each option under consideration (PWC)


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DDeettaaiilleedd EEccoonnoommiicc AAnnaallyyssiiss

The key economic costs and benefits to be considered when assessing the development of the Cairns Entertainment Precinct are best classified as costs and benefits relating to the five key “impact categories”:

1. Direct and indirect expenditures;

2. Labour;

3. Education and skills training;

4. Social benefits/quality of life; and

5. Environment.

When assessing the costs and benefits considered in the economic appraisal, significant weight should be given to the social and educational (non-market) costs and benefits that are subject to qualitative analysis in the economic appraisal, particularly in light of Council and Queensland Government’s key outcomes and objectives for the Entertainment Precinct. As Queensland Government’s Project Assurance Framework states, “important cultural projects seek to promote Queensland and should not be assessed by using possible economic and employment benefits. Rather, it may be better to rank options by their ability to deliver specific outcomes and assess them against the performance criteria for promotional success rather than their economic impact.”

Net Present Economic Value & Benefit Cost Ratio

The monetised costs and benefits are summarised using two key CBA metrics – the net present economic value (‘NPEV’) and the benefit-cost ratio (‘BCR’). It is important to note that only the direct expenditures in the construction and operational phases of each Option have been monetised for the purpose of the PAF CBA framework, from which the Net Present Economic Value (NPEV) and Benefit Cost Ratio (BCR) metrics are calculated.

DISCOUNT RATE SCENARIODISCOUNT RATE SCENARIODISCOUNT RATE SCENARIODISCOUNT RATE SCENARIO NPEV ($’000s NPEV ($’000s NPEV ($’000s NPEV ($’000s –––– nominal)nominal)nominal)nominal) BCRBCRBCRBCR

LowLowLowLow -223,363 0.19

MediumMediumMediumMedium -208,278 0.16

HighHighHighHigh -195,434 0.14 Table 3 –Incremental NPEV and BCR for Option 6, Stage 1 depending on choice of discount rate (PWC) OPTIONOPTIONOPTIONOPTION NPEV ($’000s NPEV ($’000s NPEV ($’000s NPEV ($’000s –––– nominal)nominal)nominal)nominal) BCRBCRBCRBCR

Base CaseBase CaseBase CaseBase Case -14,498 0.63

Option 6, Stage 1Option 6, Stage 1Option 6, Stage 1Option 6, Stage 1 -205,676 0.20 Table 4 –NPEV and BCR for Option 6, Stage 1 and Base Case (not incremental) (PWC) While the metrics provided in Tables 3 and 4, when considered in isolation, might suggest that neither option is economically viable, it is important to note that these metrics have only been calculated based on the impacts that have been monetised in the EA – that is, the direct expenditures under the construction and operational phases of each Option. The supplementary analysis presented above illustrates a broad range of costs and benefits that have not been monetised.

Based on careful consideration of the discounted cash flow results; the quantitative and qualitative analysis of the five key impact categories; and the State and Local Governments’ goals and objectives sought for cultural progress in FNQ, Option 6 - Stage 1 presents as the preferred project option.


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BBuuddggeett AAnnaallyyssiiss

A budget analysis was prepared to assist the project’s key stakeholders to better understand CRC’s ongoing financial commitment relating to development and operation (Net Operating Impact – NOI) of the CEP. Key observations from the budget analysis are presented below and the results of the analysis are summarised in Table 1:

Operating expenses and routine maintenance expenditure were subtracted from the CEP’s revenues. Depreciation was calculated on a straight-line basis, beginning in the year of each facility’s commissioning, and continuing for the useful economic life of the CEP (assumed to be 40 years).

Interest expense was estimated by modelling forecast debt schedules, utilising a funding schedule2 in the following order:

� Federal grants ($40.0 million)

� State grants ($57.3 million)

� Council equity ($10.5 million)

� Sale proceeds from Civic Theatre ($8.0 million; available from FY 2015 only) and other Council property ($8.0 million, available from FY 2017 only)

� Council debt funding requirements ($38.8 million)

� At no point over the 10 year forecast period is the net operating impact of the CEP on CRC’s budget positive. The operating result (earnings before interest and depreciation) steadily increases from -$1.2 million to -$3.2 million.

� From FY 2017, once all facilities have become operational, depreciation expense is expected to be $3.9 million per annum.

� Interest expense peaks in FY 2015 at $2.4 million, after which the CCT’s sale proceeds are used to pay down the principal balance of outstanding debt.

� The budget analysis was also conducted using the parameters from the risk analysis test 3 (lower visitation and revenues). This demonstrates a deterioration in the Net Operating Impact (with interest) from $8.5 million to $11.0 million in FY2021.

IImmpplleemmeennttaattiioonn

Procurement and risk management workshops have been convened with representation from key stakeholders and Government agencies. The preferred procurement option has been identified.

A Managing Contractor (MC) contract will be used with the Principal (CRC) having the right to transfer the detailed design responsibility to the Contractor but with no obligation to do so. With this model, CRC will be able to decide as the design progresses if it is confident that the required design standards can be maintained with the Contractor holding design responsibility.

It is proposed to use the Queensland Government’s, Department of Public Works’ Managing Contractor Design and Construction (D&C) Management form of contract as the base document. This contract allows CRC to either proceed on a D&C form of delivery (stage 2 of the Contract) or to go to another form of delivery if it is not confident that the design integrity will be maintained with the transfer of design responsibility.

2 The funding schedule assumed that funding would be drawn down as initial capital costs are incurred during the construction phase of the project. Once Federal Grants

have been fully exhausted, funding of the capital costs will be split between State Grants and Council on a 50%/50% basis. Council debt would only begin to be drawn

down once Council equity and proceeds from property sales have been exhausted. Only the shortfall in a given financial year would be drawn down in that period.


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The implementation of the Preferred Option has been considered in detail, with key outputs and processes documented in this BC, including;

� A Project Plan

� Governance Arrangements

� Change Management Strategy

� Benefits Realisation Strategy

� Stakeholder and Communication Strategy

� Project Resourcing

� Quality Management

� Operating Model

CRC has developed a budget and procured all independent services necessary for completion of the next phases of the project, namely design, approvals and procurement.

CClloossiinngg SSttaatteemmeenntt

As stated by the Premier the Honourable Anna Bligh in 2010, “if you live in regional Queensland, arts and culture has to be...just as important to liveability as schools and hospitals and roads. . . . It doesn’t matter where you live, you should be able to access arts and culture. It’s important to who we are, and it shouldn’t be that you only ever see great shows or aspire to seeing a great orchestra if you travel out to bigger centres or capital cities... importantly, [the CEP also] provides the opportunity to provide a whole new destination for visitors from other parts of Queensland, Australia and the world.”

The CEP project represents a unique opportunity for all levels of Government to invest in a sustainable future for Cairns and FNQ. Through this BC, CRC has compiled a robust case for change, and having considered the needs of the community, has responded with a detailed, credible and viable solution, representing value for money.

Realisation of an opportunity for the people of the region to showcase and share their rich cultural heritage for all to enjoy, is now much closer.

CRC looks forward to support from the Queensland and Commonwealth Governments for this important project.


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1.0 Introduction

1.1. Project Assurance Framework (PAF)

CRC is applying to the State and Commonwealth Governments for contributions to the funding of the proposed PAC, and other facilities in the CEP. For funding applications to be considered by State and Federal Governments, the proponent (CRC) is required to substantiate the need for the facilities and to demonstrate that proposed solutions offer value for money to Government. The BC facilitates an assessment of the priority and affordability of the project options. This BC embodies the outcome of this requirement and has been prepared in accordance with the State Government PAF guidelines. Figure 5 below describes the project stages within the PAF.

The first stage of the PAF is the SASR. The SASR is complete and was endorsed by AQ on the 21st June 2011.

The second stage of the PAF is the PE. The PE is complete and was submitted to State Government for its consideration in October 2011.

The third stage of the PAF is the BC – this document, which has been prepared in recognition of the PAF Grant Funding milestones and the funding timeframe proposed by the Commonwealth Government.

The PAF programme is included at Appendix 1.

Figure 5 – PAF Project Stages


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1.2. Business Case (BC)

The key activities that have been undertaken as part of preparing this BC include:

� Confirming the outcomes identified in the PE.

� Defining the options to achieve these outcomes.

� Provide project status briefings to Local, State and Federal Governments.

� Refining Preferred Option 6, Stage 1 for consideration in the BC to ensure that it more accurately responds to identified needs and outcomes sought.

� Refinement of Capex and Opex assumptions for Preferred Option 6, Stage 1, and comparison of same with CRC’s stated FSR in a Budget Analysis.

� Conducting a detailed evaluation of the costs, risks, and economic benefits associated with Preferred Option 6, Stage 1 (Financial Analysis – FA / Economic Analysis – EA).

� Preparation of an Employment and Skills Development Impact Statement (ESDIS).

� Determining the appropriate procurement strategy.

� Finalising project organisation and governance arrangements for leading and managing the project.

� Review and update of the Risk Management Register (RMR) for Preferred Option 6, Stage 1

� Further refinement and development of the preliminary Implementation Plan for the project.

A “Review Schedule” checklist is included in Appendix 2 confirming compliance with the requirements of the BC Products and Processes. The schedule accords with Section 4 – Checklist within the PAF – BC Guidelines.

1.3. Purpose and Approach

The purpose of this document is to demonstrate that the CEP should be delivered as a priority to satisfy the current and future needs of the Cairns community. Further, the BC demonstrates that the CEP is viable, affordable for all levels of Government, including CRC, and represents value for money to Government.

This BC provides sufficient information to Government decision makers to enable them to make an informed decision as to whether to proceed further with the project, and will specifically allow consideration of the project by State Government. The information generated in this BC aims to be of sufficient detail and accuracy to assist project decision makers to determine the priority and likely affordability of the potential project and the form it should take to deliver best value for money.

The development of this BC has followed an iterative and collaborative approach involving working sessions with Arts Queensland (AQ) , QLD Department of Local Government & Planning (DLGP), Department of Public Works (DPW) and Queensland Treasury (QT), to ensure that relevant stakeholder issues and PAF guideline requirements are addressed.

1.4. Project Goals

There are eleven key project goals established by CRC, which guide the planning, design and delivery of the CEP and which will underpin future operation and management. The eleven goals are listed below:

� To meet community need

� To achieve the highest and best use for the land

� To ensure design excellence and accessibility

� To encourage community critique and comment

� To reflect the character of the Cairns region and FNQ

� To support economic growth

� To ensure responsible financial management


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� To identify and manage risk

� To deliver the project efficiently through solid governance and administration

� To plan for efficient, cost effective operations

� “The world’s most liveable city...part of a vision for a sustainable and liveable city, a thriving CBD, and a special place accessible by all.”

1.5. The Project Opportunity

An opportunity exists for Cairns to finally deliver flexible facilities that meet both the needs of the community, and also the needs of domestic and international visitors. Further, the CEP will enable Cairns to host and showcase performing and visual arts unique to the region which has a rich indigenous and multi-cultural heritage. The CEP will become a significant cultural asset for the far north of Queensland, Australia and the Pacific Rim. The CEP will also provide retail opportunities, be a hub for community activities, a link to the existing convention centre, and additional off-street parking.

The eight key drivers for the CEP are included in Table 5 below.

CEP VISION CEP VISION CEP VISION CEP VISION ---- The vision for the CEPThe vision for the CEPThe vision for the CEPThe vision for the CEP is that it should be: is that it should be: is that it should be: is that it should be:

� A performing arts centre for the whole of Northern Queensland and for the Pacific Rim.

� Sensitive to the unique requirements of Indigenous and multi-cultural artists and audiences.

� Technologically advanced – ability to connect to remote communities via the NBN.

� A living cultural space – accessible to local artists and groups.

� A hub that reflects Cairns’ unique cultural diversity.

� A place for teaching, storytelling, learning and cultural education.

� A place that positions Cairns as a respected centre for the creative arts.

� A driver for attracting additional tourist to Cairns, generating additional tourist nights, and generating additional spend per visitor to Cairns. Table 5 – CEP Vision and Uses

The CEP is to accommodate the following potential cultural uses, described below in Table 6.

CULTURAL CULTURAL CULTURAL CULTURAL USES USES USES USES –––– Examples of cultural use may include:Examples of cultural use may include:Examples of cultural use may include:Examples of cultural use may include:

� Indigenous performance and celebration, including Multicultural community celebration and performance.

� A place for story-telling, education, employment, and research.

� Western performance including performances by Queensland Symphony Orchestra.

� Music, Cabaret, Film Festival events, and new media arts events.

� Theatre performance.

� Dance, including performances by Bangarra Dance Company (which performed at the CCT on 1/11/11 – 2/11/11).

� Chamber music, including performances by Musica Viva.

� Temporary art exhibitions and displays curated by professional organisations. Table 6 – CEP Cultural Uses


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1.6. Site and Ownership Context

The site is owned by Far North Queensland Ports Corporation Limited trading as Ports North (PN). PN is the Assessment Manager for the CEP site (Lot 9, SP113632 and Lot 10, SP214821) which is to be leased (on a peppercorn rent) to CRC for 99 years. The definition of the site and its context is represented in Figure 6 below.

Figure 6 – Site and its context

SSiittee AArreeaa

The CEP site area offered by PN had a total area of 1.5572 hectares (refer Figure 7 below) comprising a major parcel and a minor parcel called ‘Area A’ which was described as an additional site area that would be made available for the CEP if it was deemed necessary for the project. The shape of the Lease Area was insufficient for the required project planning, and the additional ‘Area A’ proved necessary for the CEP to function in its final form. ’Area A’ also straddled the existing port service road, linking Wharf Street to the wharf area, which must continue to function at all times.

PN gave permission for the CEP project team to investigate an alternative road alignment and the additional ‘Area A’ on the basis that overriding functionality of the port was uncompromised. The heritage-listed “White’s Shed” is located on the northern part of the site, further limiting the development of site planning options.

Figure 7 – Previous CEP site area with ’Area A’ & Revised site area


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The solution agreed with PN is a new road running straight out from, and broadly perpendicular to, Wharf Street. The alignment provides a new site area of 1.5649 hectares (Refer Figure 7 above). The CEP site boundary encroaches into areas leased by Quicksilver, for which solutions have been identified for further investigation. The cost and timing of relocating Quicksilver is included in the current project scope and the proposed relocation options were discussed with Quicksilver on 20 May 2011.

PN has provided in-principle agreement to the reconfiguration of the site and boundary realignment, which will also include some very minor adjustments on the eastern and western boundaries of the site (centimetres only) when the final survey is prepared.

The site is surrounded by:

� Wharf Street to the West, which curves to connect into Sheridan Street

� Port service road to the East (which connects the Cruise Liner Terminal to the industry working port)

� Wharves 4 and 5 to the East, owned and operated by PN

� PN land to the North, which is intended for future development

The relationship of the CEP site to the Cairns City Masterplan and key nodes is illustrated in Figure 8 and Figure 9 below.

Figure 8 – Cairns City Masterplan Context

Figure 9 – CRC Masterplan nodes


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2.0 Outcomes Sought

This section provides details of the outcomes sought, including:

� Describing the community and cultural needs

� Detailing stakeholder and community consultation undertaken, and

� Describing the existing cultural infrastructure located in Cairns

2.1 Community Need

The overarching needs, established in a series of earlier community workshops, include:

� Promotion and Enhancement of Cultural Vitality – improvement of Cultural Infrastructure to the city of Cairns and the region of FNQ that identifies and defines the community’s cultural diversity.

� A Community Meeting Place – a place for the Cairns community to meet, to share ideas, converse and to be entertained and educated.

� Performing Arts Infrastructure – that meets the needs of

� A growing population

� Provision for forty – fifty years growth

� Members of the community with a disability

� Touring performing groups that have a need for larger venues with appropriate Back of House (BOH)

� Performances that require modern acoustics

� Space for rehearsals

� Flexible stage arrangements

� Orchestra pit(s) commensurate in size for larger performances

� Industry standard ancillary facilities, and

� Whole-of-school performances and events

� Business Community – there is a need to support the local business community by providing and promoting employment opportunities, including support for the existing convention centre business.

� Tourism – there is a need to enhance the diversity of offering to international and domestic tourists in order to maintain and potentially grow the tourism industry in FNQ.

� Catalyst – there is a need to provide Cairns with a catalyst project to stimulate growth and economic prosperity, consistent with the current CBD Masterplan as well as drive the revitalisation of the local construction industry, which is a key objective of the Federal Government Economic Stimulus plan. Refer to following quote from Minister Albanese 7 July 2010:

"determined to put FNQon the map as a cultural destination and add to the enjoyment visitors to the region already experience. Equally, this project would be a great example of our economic stimulus plan at work, creating economic activity in a region particularly hit hard by last year’s global recession."

There is a clear requirement for a well-defined and delivered outcome which considers these needs. This has been reinforced during extensive community consultation which is summarised at Appendix 3 and the public interest assessment which is included at Section 6.7.


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2.2 Cultural Need

There is worldwide recognition of the important role that culture plays in peoples’ lives as it shapes society and determines how it functions. Cities that are known for their strong sense of identity and heritage, are rich in cultural expression and creativity. It is widely accepted that Government support and investment in culture, produces numerous social and economic benefits.

It is recognised that arts and cultural participation is valuable and integral to everyday life, community dynamics, and community living conditions in that it significantly contributes to, and defines, a community’s quality of life. It recognises that arts and culture are also resources that come out of communities, rather than merely resources that are brought to communities from the outside.

CRC recognises its obligations to engage with the community and understands its needs in respect to the provision of the policies, plans and infrastructure that are required to meet the community’s cultural needs. In response to this, CRC developed the Cultural Plan: Strengthening Our Cultural Vitality 2009-2014.

The Urban Institute of Arts and Culture Indicators Project (ACIP) which is adopted by Arts Queensland as an appropriate authority, defines Cultural Vitality as;

‘Evidence of creating, disseminating, validating, and supporting arts and culture as a dimension of everyday life in communities.’

The ACIP definition allows the creation of a measurement framework which communities can use to track and measure cultural vitality. The four overarching measurement criteria which provide an indication of cultural vitality are as follows:

� Presence – The existence of cultural and creative expressions, which a given community defines and values as community assets

� Participation – The many ways in which people participate in these cultural expressions (as creators, teachers, consumers, supporters, etc)

� Impacts – The participation and contribution of the cultural expressions to the community building outcomes (community pride, stewardship of place, racial tolerance, improved public safety, etc)

� Systems of Support – The resources (financial in-kind, organisational and human) required to bring opportunities for participation in these creative expressions to fruition

CRC understands that communities that participate in creative and cultural activities are generally healthier as participation increases skill development, social interaction, cultural cohesion and social capital. Cultural participation positively contributes to the following:

� Catalysing economic development

� Improving the built environment

� Promoting stewardship of place

� Augmenting public safety

� Preserving cultural heritage

� Bridging cultural/ethnic/racial boundaries

� Transmitting cultural values and history

� Creating group memory and group identity

This BC aims to provide Government with assurance that the outcomes sought are clearly definable and measureable. As such, the above guidance criteria of measurement of cultural vitality will be an important reference in later sections of this document.


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2.3 Existing Cultural Infrastructure in Cairns

The extent of existing cultural and entertainment infrastructure is broadly described in Table 7 below. Additional information relating to the four main venues in Cairns is included in Table 8. These venues are inadequate to meet the needs of the community for the reasons outlined in the PE and summarised in this report.

VENUEVENUEVENUEVENUE LOCATIONLOCATIONLOCATIONLOCATION OWNEROWNEROWNEROWNER CAPACITYCAPACITYCAPACITYCAPACITY

CCTCCTCCTCCT Cairns City Centre CRC 669 Tanks Art Centre Tanks Art Centre Tanks Art Centre Tanks Art Centre –––– Tank 3Tank 3Tank 3Tank 3 Adjacent to the Botanical

Gardens CRC 390

Tanks Art Centre Tanks Art Centre Tanks Art Centre Tanks Art Centre –––– Tank 4Tank 4Tank 4Tank 4 Adjacent to the Botanical Gardens

CRC 497

Tanks Art Centre Tanks Art Centre Tanks Art Centre Tanks Art Centre –––– Tank 5Tank 5Tank 5Tank 5 Adjacent to the Botanical Gardens

CRC 400

Tanks Art Centre Tanks Art Centre Tanks Art Centre Tanks Art Centre AmphitheatreAmphitheatreAmphitheatreAmphitheatre

Adjacent to the Botanical Gardens

CRC 250

Botanical Gardens Visitors Botanical Gardens Visitors Botanical Gardens Visitors Botanical Gardens Visitors Centre AmphitheatreCentre AmphitheatreCentre AmphitheatreCentre Amphitheatre

Botanical Gardens CRC 150

Forgarty Park Forgarty Park Forgarty Park Forgarty Park SoundstageSoundstageSoundstageSoundstage Fogarty Park, the Esplanade CRC 6,000

City Place Sound ShellCity Place Sound ShellCity Place Sound ShellCity Place Sound Shell City Place Plaza CRC 300

Jute TheatreJute TheatreJute TheatreJute Theatre 96 Abbott Street Cairns Queensland Government 248

Rondo TheatreRondo TheatreRondo TheatreRondo Theatre Greenslopes Street Cairns Cairns Little Theatre Inc. 191

Tjapukai Dance TheatrTjapukai Dance TheatrTjapukai Dance TheatrTjapukai Dance Theatre and e and e and e and Cultural ParkCultural ParkCultural ParkCultural Park

Cairns Western Arterial Road, Caravonica

Indigenous Business Australia 300

Brothers League ClubBrothers League ClubBrothers League ClubBrothers League Club 99 – 105 Anderson Street, Manunda

Brothers Rugby League Football Club

600 (theatre) and 1,200 (standing)

Great Hall and Hall Two of Great Hall and Hall Two of Great Hall and Hall Two of Great Hall and Hall Two of the Cathe Cathe Cathe Cairns Convention Centreirns Convention Centreirns Convention Centreirns Convention Centre

Sheridan Street Cairns Queensland Government 2,070 + 4,500 seating Table 7 – Existing infrastructure (capacity and occupancy)


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VENUEVENUEVENUEVENUE IMAGEIMAGEIMAGEIMAGE DESCRIPTIONDESCRIPTIONDESCRIPTIONDESCRIPTION

CCTCCTCCTCCT

669 seat theatre opened in 1974 and managed by CRC, which presents professional touring product, entrepreneur’s productions, and is available for hire by a range of cultural, educational, entertainment and other users. It is an established and popular regional theatre venue, but is limited by outdated functionality, poor technical infrastructure, and inadequate front-of-house and support services and does not cater for future performing arts and cultural needs or meet the minimum level of access standards.

Tanks Art TheatreTanks Art TheatreTanks Art TheatreTanks Art Theatre (Tanks)(Tanks)(Tanks)(Tanks)

Tanks is operated by CRC and presents a range of small contemporary performing and visual arts activities in and around three tanks (world war two heritage listed facilities), and hosts corporate events and other functions. The seating capacity of Tank 3 is 350, Tank 4 – 150, and Tank 5 – 400. An amphitheatre is also available which seats 250+. It has focused on development of its music program in recent years. While it enjoys a distinctive ambience, its technical and environmental-control limitations are significant.

JUTE Theatre at the JUTE Theatre at the JUTE Theatre at the JUTE Theatre at the Centre foCentre foCentre foCentre for r r r Contemporary Arts Contemporary Arts Contemporary Arts Contemporary Arts (CoCA)(CoCA)(CoCA)(CoCA)

Jute is a 240 seat studio theatre, opened in 2004. CoCA is housed in a State Government-owned building (the ‘Main Roads’ building), and is currently undergoing further development, including the addition of a dedicated rehearsal space. It is managed by the Jute Theatre Company.

Cairns Little Theatre Cairns Little Theatre Cairns Little Theatre Cairns Little Theatre (the ‘Rondo Theatre’)(the ‘Rondo Theatre’)(the ‘Rondo Theatre’)(the ‘Rondo Theatre’)

With a seating capacity of 191, the Cairns Little Theatre is a community-driven theatre. It incorporates an amateur theatrical company, whose charter is to choose, produce and stage the works of the finest Australian and international playwrights in a professional manner for the training, benefit and appreciation of its membership at all levels. It is run by Cairns Little Theatre Inc. Table 8 – Existing cultural and entertainment infrastructure (main venues)


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2.4 Drivers of the Need for Change in Cultural Infrastructure

The following drivers of the need for change in Cultural Infrastructure have been identified and have been interrogated as part of the options evaluation.

� Community need for adequate facilities

� Population growth

� Tourism

� Stakeholder needs (demand influencers)

� Culture and arts industry trends

In May 2011 the Queensland Treasury’s Office of Economic and Statistical Research estimated the population of Cairns Regional Council region as 168,251. This represents an increase of 3,897 persons or 2.4% over the year. By 2031, this number is forecast to be between 215,805 and 264,208. FNQ has also grown over the four years to 2010 by 2.7%. The population of FNQ is projected to increase from 281,000 to 373,000 by 2031 (Source: Office of Economic and Statistical Research, Queensland Government population projects to 2031. 2011 edition).The demand for greater and improved social infrastructure will only increase as the population of Cairns and FNQ grows. This is placing cultural infrastructure of FNQ under pressure. Despite cultural tourism being a growing industry sector, Cairns is experiencing lost opportunities as there are clear ‘gaps’ in the provision of cultural infrastructure in the third most visited destination in Australia. Appropriate cultural infrastructure can increase tourist numbers, nights stayed and direct expenditure. There are also trends reflecting growing interest in participating in the arts3.4 5 Cultural infrastructure planning must consider this growing interest and population growth, and ensure that there is sufficient capacity to enable participation in the arts by the progressive Cairns community.

2.5 Stakeholder Consultation and Research

The needs and expectations of all key stakeholders were documented for the SASR. Significant community and stakeholder consultation was undertaken by CRC (information sessions 2010) and the consultant project team, with the following groups, including:

� Access advisory committee (2010)

� Local architects input into design brief (2010)

� Community

� Schools and tertiary education bodies

� Ports User groups

� Traditional Owners and Indigenous groups, including Indigenous performers

� Multicultural groups

Additional consultation will be undertaken on endorsement of the BC and will continue throughout design development and construction as detailed below.

The following stakeholder / user groups will be consulted during future project phases. These include:

� Access and equity committee

� Ongoing Indigenous consultations

3 Total Attendance and participation for organisations funded via Cultural Infrastructure Programme, 2004-2007 grew from 1,360,172 to 1,615,277.

Queensland Arts Industry Sector Development Plan Evaluation report for February 2007 to January 2009

4 Total main stage audience figures for (four) major performing arts organisations, 2005-2007 increased from 266,832 to 317,231. Queensland Arts Industry Sector

Development Plan Evaluation report for February 2007 to January 2009

5 Total attendance at (four) major cultural institutions at Cultural Centre, 2004-05 to 2007-08 increased from 1,915,703 to 4,029,918. Queensland Arts Industry Sector

Development Plan Evaluation report for February 2007 to January 2009


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� Indigenous Advisory Committee

� Public Art Advisory Committee

� Performing Arts reference group

� Venue users reference group

� Venue operators reference group

� Community reference group

� Educational institutions reference group (including Schools, TAFE and James Cook University)

Many of the workshops included Indij Design, CA Cox Rayner Architects, and CRC Project Manager.

Additional details in relation to the ongoing implementation of stakeholder engagement are provided in Section 7.6.

All consultation and communications have been and will continue to be undertaken in accordance with the Communications and Stakeholder Management Plan which is included at Appendix 3.

CCoommmmuunniittyy CCoonnssuullttaattiioonn

Eight separate sessions were held during the preparation of the PE.

� 3 May 2011 Two Inception Workshops

� 24 May 2011 Two Master Plan Workshops

� 14 June 2011 Two Preliminary Concept Design Workshops

� 12 July 2011 Two Concept Design + architectural Options Workshops

Indigenous consultation continued during the preparation of the PE. Targetted consultation with key stakeholders in relation to theatre planning and acoustics design also continued through the PE period.

Community consultation has formed an intrinsic part of Masterplan and Concept Design development, and has been highly productive, informing and influencing overall strategies as well as specific components of the project.

UUsseerr GGrroouupp CCoonnssuullttaattiioonn

The following groups have been consulted.

� Multicultural advisory group (mag)

� Performing arts centre group (pacg)

� School user group (sug)

� Port Douglas community group (pdcg)

A number of additional User Groups will be formed and maintained during future project phases, these include:

� Access and equity committee

� Ongoing Indigenous consultations

� Indigenous Advisory Committee

� Public Art Advisory Committee

� Performing Arts reference group

� Venue users reference group

� Venue operators reference group

� Community reference group

� Educational institutions reference group (including Schools, TAFE and James Cook University)


27

IInnddiiggeennoouuss CCoonnssuullttaattiioonn

In January and February 2011, CRC met with a number of indigenous organisations, Traditional Owners, and Indigenous performers for the purpose of spatial and facilities planning. While members of the Cairns Indigenous community have attended a number of the community consultation workshops, more focused Indigenous consultation commenced toward the end of the Concept Design phase. To assist the process, CRC has engaged the Indigenous architectural design consultancy, Indij Design and one of the Traditional Owners as consultants.

The role of the Indigenous architectural designer has been to:

� participate as part of the project team in consultations with Aboriginal and Torres Strait Islander people of the Local Government Area and beyond, who are representative of the Traditional Custodians/Owners, and other Aboriginal and Torres Strait Islanders of the region

� consult and communicate effectively as part of the team, and in a manner that supports a sensitive, respectful and culturally appropriate dialogue between the Indigenous communities of the region and the architectural design team

� with the permission and consent of the Traditional Owners and others who have been consulted, compile this information in a report that will assist and inform the design of the CEP

� provide other advice as required by the project team and the architectural design team to develop the “place” and the spirit and character of the buildings, ensuring that the design team is both aware and understands the issues that are important to Traditional Owners, and Aboriginal and Torres Strait Islander people in the development of the site

� with the permission and consent of the Traditional Owners and different Indigenous stakeholder groups, prepare a report that details all aspects of the consultations. With appropriate permissions, this report will be made available to all interested parties for public comment

� as required, identify options, and provide hand sketches (if relevant and necessary) to inform the development of the architectural design

� review the architectural design options as they develop and advise the Project Manager and the design team in relation to particular place-making and design suggestions

� provide ongoing advice as required through subsequent design phases

A meeting with these consultants was held on 12 July 2011 to outline the Indigenous community consultation process. This workshop included the four relevant Cairns tribal groups, as well as the broader Cairns Indigenous community and extends out to peoples in the wide FNQ and Torres Strait region. Indigenous consultations were held on 19 July, 9 August, 3 and 6 September, 24 and 26 October 2011.

A summary of outcomes of the first Indigenous Community Consultation Workshop is as follows:

� Physical connections – identification of physical things that make a place feel special, which materials, trees or symbolic objects could be incorporated into the CEP, and identification of sight lines and places of significance.

� Spiritual connections – understanding the public and private knowledge of storylines that connect country to people and whether there was comfort on sharing elements of song lines or story lines for consideration in the CEP.

� Cultural practices – identification of cultural practices that would not fit under the banner of performance that may be accommodated at the CEP, and day to day activities (related to connection to country) that the CEP could facilitate.

� Further Questions – discussion of site history of the CEP that should be shared or represented in the CEP, how the CEP could be inclusive of the Indigenous community and be welcoming, including any impediments.


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A further 5 workshops have been held with a number of indigenous organisatations:

19 July 2011 Workshop 2: Yidinji people

09 August 2011 Workshop 3: Irukandji people

06 Sept 2011 Workshop 4: Kuku Yalanji people

24 October 2011 Workshop 5 Tjapukai people

26 October 2011 Workshop 6 Kookandji (Googanji) and Gimuy Yidinji (Elders).

These workshops included Indij and CA Cox Rayner Architects, CRC Project Manager, and the relevant Cairns Indigenous group.

The purpose of the workshops has been to:

� Obtain input and consult with the local residents on the design of the CEP. Respectfully, the consultation has commenced with the Traditional Owners and Elders.

� Ensure that the cultural heritage of the Indigenous peoples of the region have the opportunity to have aspects of their stories, heritage and culture included in the design and landscaping of the CEP.

� Establish with Indigenous performers their requirements within the CEP. Indigenous performance requires functional spaces that are carefully considered and efficiently designed.

The role of the qualified Indigenous architect, Indij Design, is primarily communication and translation. Indji will be required to interpret the ideas and needs of the diverse Indigenous communities as they arise from the consultations, and to communicate those ideas to the appointed architectural design team and to relevant subconsultants as required.

Indji design will communicate with, the different advisers to the project, including architectural and engineering disciplines, and communicate with Aboriginal and Torres Strait Islander people and groups at all levels to ensure the cultural heritage of the Indigenous peoples are respected and included in the design and landscaping of the CEP.

The outcomes of the recent workshops are currently being compiled by the design team.

2.6 Alignment with Government Policy

The outcomes sought as detailed in this BC, the Preliminary Client Project Brief and resultant Preferred Option are aligned with, and give effect to a wide range of Commonwealth and State Government, policies, guidelines, strategies and plans. This project gives effect to a number of significant Government policies identified as a high priority for Government. For confirmation of alignment refer to Section 6.4.


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2.7 Outcomes Sought

Table 9 below aligns the outcomes sought with the identified needs. These needs are representative of the eleven CRC project goals described in Section 1.4 and reflect the basis of community consultation and design processes to date.

IIIIDENTIFIED NEEDDENTIFIED NEEDDENTIFIED NEEDDENTIFIED NEED OUTCOME SOUGHTOUTCOME SOUGHTOUTCOME SOUGHTOUTCOME SOUGHT

Promotion and Enhancement of Promotion and Enhancement of Promotion and Enhancement of Promotion and Enhancement of Cultural VitalityCultural VitalityCultural VitalityCultural Vitality ––––

Improvement of Cultural Infrastructure to the city of Cairns and the region of FNQ that identifies and defines the community’s cultural diversity.

� Social cohesion.

� Social capital through engagement and participation of the community.

� Educational opportunities through expression and participation.

� Employment and economic benefits.

� Health through active participation and cognitive stimulation.

� Sense of place, identity and pride in the community.

� Promotion of community cultural diversity and tolerance.

A Community Meeting Place A Community Meeting Place A Community Meeting Place A Community Meeting Place

� A focal point for the community – a meeting place which enjoys a high level of community ownership.

� Creation of new cultural and shared community experiences.

� Welcome and profile cultural expression from the Indigenous communities of the region, and from the surrounding communities.

� A place for multicultural celebration, events and performance.

Performing Arts Infrastructure Performing Arts Infrastructure Performing Arts Infrastructure Performing Arts Infrastructure that meets the needs of that meets the needs of that meets the needs of that meets the needs of ––––

� a growing population,

� members of the community with a disability,

� touring performing groups that need larger venues,

� performances that require modern acoustics,

� space for rehearsals and flexible stage arrangements,

� orchestras commensurate in size with larger performances,

� industry standard ancillary facilities, and

� whole of school performances or events.

� Present music, dance and drama that meet the needs of a modern, diverse Queensland community both now and into the future.

� Present performances that are appealing to the tourist market and which increase the length of stay and/or experience of tourists visiting Cairns.

� Broadcast performance to regional communities using broadband.

� Present new and hybrid art-forms, including digital media work.

� Present large commercial entertainment events that require significant box office revenues to be feasible.

� Welcome and profile cultural expression from the Indigenous communities of the region, and from the surrounding communities.

� Create a cultural hub for the whole region – encouraging artistic and cultural exchange and collaboration.

� Creation of new cultural and shared community experiences.

� Provide a focal point for the community – a meeting place which enjoys a high level of community ownership.

� Increase the economic impact of performing arts to the regions GRP.

Museum Museum Museum Museum ----There is a need to present programs, and exhibits and collections, both permanent and temporary, which are representative of the cultural heritage and diversity of FNQ to the local community and visitors in one recognised and identifiable community ‘owned’ location.

� Develop a greater awareness within the local community of the historical significance and value of FNQ.

� Present exhibitions that are representative and inclusive of indigenous and the cultural diversity of FNQ.

� Present the cultural tourist with the evidence of the multifaceted, unique cultural heritage that defines FNQ.

� Present the many historically significant artefacts from FNQ that are in storage in other museums and never placed on display for the enjoyment and benefit of the FNQ community.

� Increase the economic impact of performing arts to the regions GRP.

� Build partnerships with FNQ’s many volunteer museums, and the state and national Museums.

� Attract young people and school groups to identify with and learn from the cultural heritage and significance of the community.

� Increased awareness, both locally and internationally, of the significance of the local world heritage listed reef and rainforest to the community and tourist. Table 9 – Alignment of Needs and Outcomes


30

We note that the museum has been excluded from the scope of the preferred option for the following reasons:

� The Museum did not fit within the proposed funding framework and Capex limitations

� Queensland Museum did not have sufficient time to fully consider the operational constraints and proposed model for the museum – so firm revenues, expenditures and management structure could not be established to P90

� The Museum was not an urgent requirement based on the needs analysis – there is provision for the museum to be completed at some future point subject to agreement in relation to funding, operational and maintenance matters.

Summary of Objectives

The project goals, community and cultural needs, and outcomes sought have been rationalised to determine four overriding objectives. These tangible and measurable objectives form the basis of the detailed Financial and Economic Analyses (FA and EA) undertaken by PWC. Figure 10 below represents these four overriding objectives and confirms the significance of each, thereby aligning these objectives with the previously identified goals, needs and outcomes sought.

Figure 10 – Overriding Project Objectives (PWC)

2.8 Success Criteria

In order to select and assess potential solutions and detailed options it is important to first develop a framework to measure cultural vitality and its associated benefits. AQ has developed a draft framework to assist in measuring the contribution of arts and cultural infrastructure and includes three major outcome areas.

� Arts and cultural development outcomes – evidence of creation, sharing, valuing and supporting both local and imported artists, arts organisations, and arts and cultural work (both professional and amateur).

� Community engagement outcomes – supporting opportunities for brand based participation at a community level and the role of arts and culture in achieving social cohesion and social capital through arts and culture.

� Economic outcomes – contribution of arts and cultural vitality to the local economy.


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For the purposes of this BC the cultural vitality indicators in Table 10 below have been used as the basis of option assessment. Additionally, and in consultaion with Creative Economy (CE), a number of targets have been set against a selection of criteria. CRC will report on these at agreed intervals.

INDICATORINDICATORINDICATORINDICATOR ASSESSMENT CRITERIAASSESSMENT CRITERIAASSESSMENT CRITERIAASSESSMENT CRITERIA BASELINEBASELINEBASELINEBASELINE FORECASTFORECASTFORECASTFORECAST

Arts and CulturArts and CulturArts and CulturArts and Cultural Measuresal Measuresal Measuresal Measures � Increase number of existing cultural venues Increase number of existing cultural venues Increase number of existing cultural venues Increase number of existing cultural venues and facilities. and facilities. and facilities. and facilities.

� Increase number of new works developed locally.

� Increase number of new works presented locally.

� Increase number of touring products Increase number of touring products Increase number of touring products Increase number of touring products presented locally.presented locally.presented locally.presented locally.

� Increase number of ticketed Increase number of ticketed Increase number of ticketed Increase number of ticketed attattattattendancesendancesendancesendances.

� Increase satisfaction of local artists, hirers, arts organisations with the arts and cultural venues.

13131313 *

40404040 **

76,14976,14976,14976,149 **

20202020

4444

1111

$1,910,475$1,910,475$1,910,475$1,910,475 ***

14141414

55555555

110,000110,000110,000110,000

35353535

6666

2222

$2,750,000$2,750,000$2,750,000$2,750,000

15%15%15%15%

Community EngagementCommunity EngagementCommunity EngagementCommunity Engagement � Increase participation of arts and cultural volunteering (number of venue volunteers, frequency and hours).

� Increase number local products presented.Increase number local products presented.Increase number local products presented.Increase number local products presented.

� Increase number of multicultural Increase number of multicultural Increase number of multicultural Increase number of multicultural events/productionsevents/productionsevents/productionsevents/productions

� Increase number of ATSI events/productions Increase number of ATSI events/productions Increase number of ATSI events/productions Increase number of ATSI events/productions

� Increase participation of non-arts groups and organisations in arts and cultural events and activities (e.g. schools, seniors groups, social service / welfare / health organisations, sporting groups, etc.).

� Increase opportunities for community story telling / community history and heritage.

Economic OutcomesEconomic OutcomesEconomic OutcomesEconomic Outcomes � Increase in employment generated by existing cultural venues.

� Increase in local expenditure on arts and Increase in local expenditure on arts and Increase in local expenditure on arts and Increase in local expenditure on arts and cultureculturecultureculture.

� Increased tourist expenditure on arts and culture.

� Increase funds injected into local businesses through contracting with arts and cultural venues.

� Increased percentage tourist visitation to CEP.Increased percentage tourist visitation to CEP.Increased percentage tourist visitation to CEP.Increased percentage tourist visitation to CEP. Table 10 - Cultural vitality indicators

Table 10 Legend

* Refers to cultural venues and facilities presenting performing arts.

** Based on actual figures 2010.

*** Based on 2010 actual tickets sold at average ticket price of $25. Target: 50% capacity for 200 performances at average ticket price of $25


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3.0 Options to be Evaluated

Eight (8) possible options were considered and assessed during the preparation of the PE, including;

� Option 1 - Base Case (Status Quo – Do nothing) � Option 2 - Complete development (no staging)

� Option 3 - 2 stage development � Option 4 - 3 stage development

� Option 5 - 2 stage development (rationalised) � Option 6 - 3 stage development (rationalised)

� Option 6A - 3 stage, 10 year development (alternate and lagged staging, rationalised)

� Option 6 (Stage 1) - referred to by PWC as Option 7 - 1 stage only

(Rationalised *) – result of a value management process which reviewed all back of house and support areas to identify the minimum area and scope inclusions required to still meet the brief but provide a more cost-effective outcome.

It was recognised that with the current economic restraints on all levels of Government, the only feasible option for immediate realisation of this project, is the first stage of Option 6. This option, along with the Base Case, was confirmed for detailed assessment as part of this BC.

Figure 11 below describes options development and the analysis process undertaken through the SASR, PE and ultimately in this BC.

A

Status Quo (Does not meet

needs)

Option 1 Base Case

SASR

Masterplan

Development

Concept

Development

Options assessed

during

Preliminary

Evaluation (PE)

Option 2Full Scope

Option 32 Stages

Option 43 Stages

Option 5(Rationalised)

2 Stages


3 Stages

Option

6A(Alternate staging

& Rationalised)

3 Stages

Option 6

Stage 1

Only

Options assessed

during Business

Case (BC)

Option 1 Base Case


Stage 1

Only

B

Refurbishment (does not meet

needs)

C

New

Development(meets needs)

Masterplan 2

Masterplan 1No further

Assessment following

consultation

Concept 2Layered Roofscape

Concept 1Architectural

Rainforest

Figure 11 – Options analysis process

The two options to be evaluated are the Base Case and Option 6, Stage 1.


33

OOppttiioonn 11 –– BBaassee CCaassee ((SSttaattuuss QQuuoo –– DDoo nnootthhiinngg))

This option anticipates the ongoing management and operation of the existing CCT on the current site (corner of Florence and Sheridan Streets, Cairns) for a period of 30 years and the indefinite ongoing absence of a Regional Museum. The Do Nothing option does not involve any development, upgrade or refurbishment to the CCT.

The refurbishment of the existing CCT will not meet the needs identified and would have a serious impact on groups that currently use the facility during the refurbishment construction phase. Further, this option does not address the need for a community meeting place nor does it provide for the additional parking requirements. Insufficient site area and significant redevelopment expenditure would still not provide modern standards of performing arts infrastructure. As discussed in the PE, this option would involve removing a significant element of the cultural infrastructure of Cairns from community participation for a period of at least 24 months during construction. Many existing performance groups that currently use the CCT would not be able to sustain such a loss.

Figure 12 – Theatre door Figure 13 – Theatre seating Figure 14 – Back of house Figure 15 - Foyer

Details of areas, capacity, condition and infrastructure of the existing theatre are summarised below.

The CCT is a 660-seat performing arts venue purpose-built in 1974 and was the first regional community owned theatre in Queensland. It is operated by CRC and presents professional touring product, entrepreneur’s productions, and is available for hire by a range of cultural, educational, entertainment and other users. It is an established and popular regional theatre venue, but is limited by outdated functionality, poor technical infrastructure, inadequate front-of-house and support services. Plans for replacement of the CCT or addressing its limitations have been evolving since the mid-1990’s.

Functional failings of the CCT can be summarised as follows:

� The stage size is the smallest in regional Queensland and is half the size of what is required to host major performances. Many touring shows and performances cannot perform in such an outdated and small stage.

� The stage can only accommodate an orchestra with 60-70 musicians, however a full symphony orchestra will typically include 100 musicians. Normally the Queensland Symphony Orchestra requires the side-stage curtains (legs) to be removed so that their touring orchestra can fit on the CCT stage.

� In 2010, the Queensland Ballet toured their production of “Swan Lake” through regional Queensland. However Cairns was not included on the Queensland tour because the production would not fit on the stage of the CCT.

� The theatres 669 seat capacity has limited commercial appeal as revenue per show is significantly lower in comparison with larger venues in other comparable regional cities in Queensland. The low capacity of the CCT is a fundamental reason for performances and shows to not come to Cairns. This is evidenced through the stakeholder feedback to date.


34

� By comparison with other regional facilities in Queensland the CCT has a significantly lower number of seats as represented in Table 11 below.

QUEENSLAND REGIONAL AREAQUEENSLAND REGIONAL AREAQUEENSLAND REGIONAL AREAQUEENSLAND REGIONAL AREA

CairnsCairnsCairnsCairns

(Civic (Civic (Civic (Civic

Theatre)Theatre)Theatre)Theatre)

TownsvilleTownsvilleTownsvilleTownsville

(Civic Theatre)(Civic Theatre)(Civic Theatre)(Civic Theatre)

MackayMackayMackayMackay

RockhamptonRockhamptonRockhamptonRockhampton

(Pilbeam (Pilbeam (Pilbeam (Pilbeam

Theatre)Theatre)Theatre)Theatre)

MaryboroughMaryboroughMaryboroughMaryborough

CaloundraCaloundraCaloundraCaloundra

(Events (Events (Events (Events

Centre)Centre)Centre)Centre)

PAC CapaPAC CapaPAC CapaPAC Capacitycitycitycity 669 1014 1090 967 900 900 Table 11 –Comparison of regional QLD PAC seating capacity (auditorium / theatre space only) � Many promoters’ shows that do come to Cairns are required to scale back their productions to fit either the capacity of

the stage or the lower revenue because of the limited seating, therefore depriving the Cairns community of equitable performances with other regional areas of Queensland.

� Dressing and changing room facilities are inadequate. The venue has 2 dressing rooms of similar size, one nominally used for females and the other for males. Each dressing room can accommodate 12 performers, giving a combined total of 24 performers. However, the theatre often needs to accommodate 50-100 performers per show (orchestras, musicals, school productions, etc.) and a few times each year will have a cast of 200 performers.

� The public toilets are inadequate and there is only one DDA compliant toilet facility. The ladies public toilets located off the foyer includes only 8 cubicles. This is inadequate to meet the needs of 300-400 ladies during a 20 minute interval. As a result, many ladies spend most of the interval queuing to use the toilets with the queue often extending into the foyer.

� There are no separate rehearsal facilities that are generally required for larger performances.

� The foyer of the CCT only accommodates 200 people however the auditorium has a maximum capacity of 669 seats. The size of the foyer is therefore inadequate as it only accommodates between 25-30% of the audience before a show and during intermissions. Two consequences of this are:

� Repeated overcrowding for the majority of events.

� The overflow of patrons to external areas, causing level of discomfort in the hot and/or wet tropical summer tropical conditions.

� Access for people with a disability is restricted through poorly considered design and no access direct from the foyer to the auditorium. The only access for people with a disability to the auditorium is by exiting the foyer and travelling around the outside of the building regardless of the weather conditions, to enter via a ramp leading to a side entry door. Furthermore, there is not access to the stage for performers with a disability.

� Administration staff are accommodated in external demountable buildings.

� Storage for sound, lighting and stage equipment is provided by an external shed.

� The orchestra pit only accommodates 16 performers and is a potentially an unsafe working environment. There is only one entrance or exit into the pit and the ceiling height is a maximum of 1.85 metres although the clearance below several beams is only 1.65 metres. As an example of its functional failings a double-bass cannot be played in the normal semi-upright position, it must be reclined to fit in the available height. The space is limited further if a set of timpani or a drum kit are needed, and violinists need to be careful with bow action to ensure the safety of adjacent musicians.

� The height of the proscenium arch and fly tower are too low for major performances and only 21 fly lines are provided.

� The auditorium seating is the original seating from 1974 and CCT management estimated that over 2 million people will have sat in them over the 37 years. The seats have been repaired repeatedly and consequently the angles of the seat backs that have been re-welded are no longer uniform. The most complaints that the theatre receives relate to the “uncomfortable” seats. While the future of the venue is uncertain, CCT management is reluctant to approve expenditure of about $250,000 to replace the seats. The clearance between rows in insufficient to reasonably allow people to move along to their seat when row seats are occupied.


35

� The height of the loading dock door through which all sets must be moved, is only 2.2 metres high. Consequently some sets need to be dismantled so that they can fit through the loadingdock door. Loading docks for theatres are generally 5m to 6m high.

� Stage Cross Over - There is no suitable cross-over space between one side of the stage and the opposite side. However dancers and actors often need to cross from one side of stage to the other for their next entrance. The only space available is the 1 metre wide space behind the cyclorama at the rear of the stage. The cyclorama is a large expanse of fabric that billows in the slight breeze caused by someone walking at even a moderate pace behind. Therefore the audience can see the effect of the cast or crew walking from one side of the stage to the other during the performances.

� Inadequate storage facilities has resulted in emergency exit corridors used as temporary storage space. Management ensure sufficient width is provided to safely exit in an emergency, however the situation is not ideal.

Other functional failings include;

� Inadequate green room facilities and size.

� Inadequate piano storage areas.

� Inadequate wing space.

� Inadequate wardrobe facilities.

� Cramped space for the stage manager.

� Car parking of only 65 car park spaces.

Table 12 below provides a comparison of functional elements of the Civic Theatre with other regional theatres.

Table 12 –Comparison of functional elements of the CCT and other regional theatres Notwithstanding the functional failings the CCT is now 36 years old and requires significant maintenance and capital expenditure. Further, its design does not have the flexibility to enable it to be upgraded to meet the identified needs.

The population of FNQ has out grown its cultural infrastructure which is reflected in the capacity and amenity provided by the ageing CCT. When the CCT was built in 1974 with a capacity of 660 seats the population of the Cairns region was circa 65,000 to 70,000 people. It is now circa 170,000 persons, a growth in population of some 160%. This excludes seasonal workforce adjustment to the City and the significant tourist visitor numbers.

Cairns Townsville Mackay Rockhampton Toowoomba Ipswich Maryborough

Total stage Total stage Total stage Total stage width (including width (including width (including width (including wings)wings)wings)wings)

21.75m (including wings)

24m (including wings)

23.8 (including wings)

16m (including wings)




Stage depth Stage depth Stage depth Stage depth (from house (from house (from house (from house curtain to rear curtain to rear curtain to rear curtain to rear line)line)line)line)

7.31m 15m 9.95m 11m 17.250m 8.8m 10.68m

Stage apron Stage apron Stage apron Stage apron (stage in front (stage in front (stage in front (stage in front of house of house of house of house curtain)curtain)curtain)curtain)

1.25m 1.8m 2.4m 1.2m 1.915m 2.5m 3.1m

Fly linesFly linesFly linesFly lines 21 65 64 40 80 28 66

Dressing Dressing Dressing Dressing roomsroomsroomsrooms

24 people 102 (additional area available)

78 people 76 65 60 (additional area

available)

44

Orchestra pit Orchestra pit Orchestra pit Orchestra pit capacitycapacitycapacitycapacity

16 people 40 people 30 people 25 30 20 35


36

The population growth has lead to a change in demographics with growth in the white collar workforce through the diversification of industry and retention of the skilled young professionals. This growth trend in conjunction with the growth of awareness of the arts through James Cook University arts courses has lead to a rise in demand for the arts in the region that is not met by existing infrastructure.

Table 13 below details the attendance over 2009 and 2010.

Year No of performances

No of patrons Average Attendance

Average attendance rate (% of capacity)

No of Sold out shows

No of shows in excess of average

attendance.

2009200920092009 181 90,125 498 75% 40 84

2010201020102010 183 92,649 506 76% 30 69 Table 13 – CCT attendance 2009 – 2010 (Source: CCT) Detailed attendance numbers are not available for other regional centres, however, advice from AQ is that annual attendances are generally less than 100,000 even with the significantly larger and better facilities in these centres.

The average attendance rate and number of sell out shows evidence the high demand within the community for the performing arts even though many shows can’t be staged or are significantly scaled back, because of the restrictions of the facilities as outlined above.

The current CCT has reached its end of useful life and no longer adequately serves the community’s needs evidenced by inadequate capacity, inadequate technical functionality, and rising maintenance costs. The CCT was designed for a lifespan of thirty years and is now in its 37th year. The community feedback received through CRC consultation of its Cultural Plan along with extensive independent research highlights that the condition of the existing CCT is negatively impacting on the participation in the arts and cultural activities in Cairns by providing inadequate and substandard facilities that alienates the community.

Since completion and lodgment of the PE, there have been no further changes to Option 1 – Base Case.

OOppttiioonn 66,, SSttaaggee 11

Since completion of the PE, the Preferred Option (Option 6, Stage1) has been refined as part of the design development process and to ensure that P90 cost certainty is attainable.

The design has evolved in response to:

� A desire to ensure that the functional spaces operate as efficiently as possible

� Wherever possible spaces meet multiple needs or uses

� Space is optimized with built space reduced wherever possible

� Access, loading and circulation space is as efficient as possible

� Construction staging can be managed to ensure continuing and unaffected PN operations

Specific changes and improvements to the Preferred Option include:

� More efficient back-of-house (BOH) spaces

� Reduced circulation spaces

� Deletion of a substantial component of the rear stage

� Utilisation of the side stage as separate performance space

� Reduced height in the rehearsal space

� Adjustments to theatre seating and balconies to achieve improved acoustics, sight lines and the overall quality of the audience experience

� More efficient loading

The benefits these changes and improvements bring to the project, over the previous design, include:


37

� Greater value for money

� Improved quality and functionality

� Reduced construction staging risk

The scope of the Preferred Option 6, Stage 1 specifically includes the design and delivery of the following key components of the CEP;

� Performing Arts Centre (PAC) comprising the following:

� A main venue comprising approximately 1,100 seats (depending on the configuration of the orchestra pit), designed to achieve an excellent level of acoustics in a variety of performance modes. The venue is accessed off the upper ground foyer and will provide seating at either stalls or balcony levels. The front of house space including toilets and foyers, etc will be sized to suit the capacity of the venue, which at this stage is approximately 1,700m2. A 23m wide stage with side stage areas will be provided that contains a 13 – 16m x 8m high proscenium, with a grid set at approximately 22m high;

� Back of house facilities will be provided across two levels, including both general and performer storage, changing facilities, green room, dressing rooms and assembly areas. Facilities within the fly tower include sound shell storage, lighting bridges, grid, winch, dimmer and follow spot rooms;

� A multi-purpose, rehearsal space to the Wharf street side of the main venue. Accessed off the main upper ground foyer, it will provide an opportunity for the hire of a low-cost venue, which will be equipped with technical equipment to allow low budget performances to occur. This space can be used by many performing arts companies for rehearsal and small performances (up to 150 seats) and will include public access from a discrete foyer, linked to the main foyer. It will also be connected to the main venue backstage facilities. It will be a large high volume space, with a tubular pipe lighting grid and basic stage lighting patch system, AV, projection and sound system infrastructure;

� A low height studio connected to a kitchen facing over Trinity inlet, which will offer enhanced facilities over the rehearsal space in a low height setting. The "Rehearsal Studio" would be appropriately finished, foyer facing rehearsal room with technical amenity for small rehearsal or performance events like cabaret. It would also be well suited for many other events including corporate functions, yoga classes and general meetings. The studio will be connected to the backstage facilities of the main venue. The room will include AV, projection and sound / patch systems and will include storage for furniture and production equipment. Access to front-of-house (FOH) catering facilities will be provided.

� White’s Shed refurbishment. The White’s shed refurbishment will now focus on the creation of a usable space that will be sufficiently flexible to allow for a variety of uses consistent with the overall cultural / community focus of the CEP. White’s Shed, in conjunction with the external performance space, plaza spaces and public domain, will meet the identified need for a meeting place.

White’s Shed will be refurbished to a “base building” level ie no internal walls / services etc. It is anticipated that the DA will be for the building to contain a variety of uses consistent with a community / entertainment facility such as bar / community facilities etc, and that the precise use will be developed as part of a separate expression of interest phase.

� Public plaza and canopy including the provision of a commercial kitchen which will be available for use by contractors and the community subject to scheduling considerations. The costs associated with the commercial kitchen are included in the PAC component of the Option 6, Stage 1 Capex.

� Car parking will be provided for cars both on and offsite, with options being currently explored for providing an amount of above ground parking on site

� Off site and enabling works will be complete to include road realignment, services diversions and quicksilver relocation.

� Convention Centre bridge link.


38

Figure 16 – Long Section (CA-Cox)

Figure 17 – Lower Plaza Plan (CA-Cox)


39

Figure 18 – Upper Plaza Plan (CA-Cox)

Figure 19 – Roof Plan (CA-Cox)


40

4.0 Project Organisation & Governance

GGoovveerrnnaannccee FFrraammeewwoorrkk

A governance framework (Figure 20) has been developed to guide and inform decision making, and to facilitate a transparent and accountable reporting framework. The governance structure established for the CEP is the most publicly accessible framework established for any Council project. Project governance is a critical element of any project and the existing structure provides a decision-making framework that is logical, robust and repeatable for delivery of the CEP by CRC. The framework allows CRC to conduct both business-as-usual activities and management of the CEP project.

Council

Property

Auditor

Cultural Precinct Committee

(Mayor and all Councillors)

Finance

Auditor

Project Control Group CEO and Executive,

Project Manager

Communications Manager

Consultant advisers as

required

Project Manager

Project Officer

Admin Other

staff as

required

Head Building

Contractor

Advisory and Design

Consultants

Technical staff

Project teams

Reference groups

Figure 20 – Overarching Governance Structure

PPAAFF MMaannaaggeemmeenntt CCoommmmiitttteeee

A management committee comprising CRC, AQ, and DPW meet on a regular basis to discuss specific issues relating to the PAF process as well as broader whole of Government matters which directly relate to the CEP.

EEnntteerrttaaiinnmmeenntt PPrreecciinncctt CCoommmmiitttteeee ((CCEEPP CCoommmmiitttteeee))

This committee has been established under the Local Government Act 2009 as a formal Standing Committee of CRC to ensure the governance of the project is transparent, publicly reported, with decision-making documented and readily available for reference by the public. The Committee structure enables public observation of the debate and management of all project issues and to monitor the progress of the project. The Committee deals solely with the delivery of the CEP project. It receives monthly reports from the Project Control Group and as required, receives independent reports from CRC’s finance and probity auditors.

CRC has resolved that in accordance with section 257 of the Local Government Act 2009 that the CEP Committee has delegated authority to resolve matters tabled at its meeting as if it were a full meeting of CRC.


41

PPrroojjeecctt CCoonnttrrooll GGrroouupp ((PPCCGG))

The PCG comprises representatives from CRC, Savills, and Cox. The PCG meets monthly in Cairns. Standing agenda items include;

� Project Manager’s Report

� Project Assurance Framework (PAF)

� Procurement

� Probity

� Risk Management

� Design

� Programme

� Arts Queensland coordination matters

� Financial

Details and functions of the PCG and Project Management framework, roles and responsibilities are included within the Project Management Plan (PMP) at Appendix 4.

It is anticipated that there may be an opportunity for representation of Commonwealth and State representatives on the PCG as the CEP progresses in order to monitor key issues such as cashflow, programme, risk, quality, operational matters, etc. Any change to the current structure of the PCG going forward would be subject to agreement between CRC, State and Federal Government.

Probity Plan

This Probity Plan (PP) sets out the principles and processes adopted by CRC in its advertising, assessment, selection and contracting of tenderers for the CEP. In its commercial dealings, the CRC will observe the highest standards of probity. CRC business must be fair, open and demonstrate the highest levels of integrity consistent with the public interest.

The key probity principles supporting all stages of the CEP are:

� Fairness and impartiality

� Use of a competitive process

� Consistency and transparency of process

� Security and confidentiality

� Identification and resolution of conflicts of interest

Adherence to probity principles also means meeting the requirements of the Local Government Act (Qld) 2009 and the CRC Code of Conduct. All employees will:

� act impartially; and

� act with integrity including avoiding real or apparent conflicts of interest

A number of key steps are identified within the PP and are to be undertaken to ensure the process is conducted with openness and fairness. Records are to be maintained throughout the process to provide sufficient information to enable audit and independent review functions to be carried out. Departure from established procedures may only be for sound and well-documented reasons. Production of documents listed within the PP is anticipated to establish that probity was achieved.

At all times throughout the selection and tender processes, Councillors, Executive and project staff, and expert consultants engaged by CRC to support the assessment process, are to take all steps to ensure that the information provided by proponents and tenderers is not disclosed to third parties, or to the public in general.

CRC has appointed consultants BDO (North Qld) as probity advisers to the CEP project.

The PP is included at Appendix 5.


42

5.0 Financial and Economic Analysis

5.1 Financial Overview

CRC resolved at its meeting of 21 September 2011 to fund its $57,305,500 share of the Capex subject to the State Government’s acceptance of the BC and the State and Commonwealth Governments agreeing to fund in accordance with the below funding strategy.

The CRC has made provision in its forward budget estimates for the provision of a multipurpose performance centre. This BC is based on the provision of such a facility which was identified in the earlier SASR as the facility most urgently required to meet the most pressing cultural needs of the Cairns Community. This BC is also based on the provision of other support facilities and includes the restoration of White’s Shed.

The CRC’s budget estimates for the provision of such a facility is $180 million. This BC demonstrates that it can be provided for $155 million. The CRC’s 10 year budget estimate for its ongoing contribution to the operation of the facility ranges from $9.8 million to $10 million per year This BC demonstrates that the facilities can be successfully operated with a contribution from the CRC including interest and depreciation of up to $8.5 million per year over the same period.

This BC therefore demonstrates that the initial facilities that the CRC has included in its forward budget projections for the CEP, and which are urgently requited by the Cairns Community, can be provided at a lower Capital Cost than CRC has included in its forward estimates, and with a lower ongoing contribution than CRC has included in its forward estimates.

From an operating perspective, estimated negative cash flows emanating from the CEP are less than CRC’s FSR estimate.

The approved capital expenditure budget for the Preferred Option (Option 6, Stage 1) is $154,611,000.

Funding for Capex is proposed as follows:

Commonwealth Government $40,000,000

State Government $57,305,500

CRC $57,305,500

TOTALTOTALTOTALTOTAL $15$15$15$154444,,,,611611611611,000,000,000,000

5.2 Detailed Financial Analysis (FA)

Pricewaterhouse Coopers (PWC) has been engaged by CRC to undertake a detailed FA and EA of the Base Case and Option 6, Stage 1 for the CEP.

The scope of the detailed FA and EA is to review, verify and develop the preliminary analyses undertaken during the PE (also undertaken by PWC) and, specifically;

� Comprehensively identify and assess the financial impact of each project option on the Government

� Identify all of the costs and benefits associated with each option

� Conduct a more comprehensive sensitivity analysis on the options being evaluated.

The purpose of the FA is to determine the commercial viability of project options, specifically whether the options generate an acceptable financial return. It is performed from the project developer’s (CRC) perspective and hence considers only cash flows that impact upon the project developer. Where project revenues are insufficient to cover costs, the financial appraisal can be used to identify a least cost option. Financial appraisal allows for the identification of additional minimum project funding requirements.


43

Financial Analysis ResultsFinancial Analysis ResultsFinancial Analysis ResultsFinancial Analysis Results

The two project options under consideration have undergone a financial appraisal which involved determining the net present value (NPV) of financial revenues and costs attributable to the CEP. The NPV is a measure of all future positive and negative cash flows associated with the project, discounted back to today’s dollars.

The discount rate used represents the time value of money over the life of the project, as well as the risk – or potential variability – associated with those cash flows. The financial appraisal does not factor in monetised benefits to other parties; only the impact to CRC is considered. In order to provide stakeholders with a context for the additional cost associated with the CEP over and above forecasts for the CCT operations, the PWC report also presents NPV and cash flow figures incrementally.

The financial analysis showed that neither project option, including the Base Case under which the CCT continues operating, is self-funding on a purely commercial/financial basis.

Given the cost of the initial capital works is assumed to be entirely covered by grants from Federal, State and Local Governments, the negative NPV is solely a result of the forecast revenue streams being inadequate to cover ongoing operating expenditure and renewals Capex outgoings.

� The least cost development option identified iThe least cost development option identified iThe least cost development option identified iThe least cost development option identified in the n the n the n the BCBCBCBC, , , , Option 6, Stage 1Option 6, Stage 1Option 6, Stage 1Option 6, Stage 1, is, is, is, is estimated to have a NPV impact of estimated to have a NPV impact of estimated to have a NPV impact of estimated to have a NPV impact of ----$56.6 million. Of this, $56.6 million. Of this, $56.6 million. Of this, $56.6 million. Of this, ----$37.9 million, or 67% of the NPV is$37.9 million, or 67% of the NPV is$37.9 million, or 67% of the NPV is$37.9 million, or 67% of the NPV is attributable to renewals capital expenditure.attributable to renewals capital expenditure.attributable to renewals capital expenditure.attributable to renewals capital expenditure.

� The choice of discount rate can have a significant impact on the project appraisal, while escalation rates have a moderate impact. The visitation scenarios have only a minor impact on results, reflecting that these have been set very conservatively and there is only a minor variation across each scenario. The impact of changes in PAC staff award rates is not significant.

� The greatest financial risks posed to the project are related to the provision of funding from the State and Federal Governments. Secondary risks relate to operating outcomes – higher Opex, higher maintenance Capex and lower revenue scenarios. Project delays do not pose a material risk to the project’s financials, except in the event that they compromise the availability of government funding for the project (examined separately).

� Over the forecast period, both the CCT and the CEP are estimated to run at a financial loss to CRC, as measured by Net Operating Income, including depreciation and interest expense.

SSSSSSSSuuuuuuuummmmmmmmmmmmmmmmaaaaaaaarrrrrrrryyyyyyyy ooooooooffffffff KKKKKKKKeeeeeeeeyyyyyyyy AAAAAAAAssssssssssssssssuuuuuuuummmmmmmmpppppppptttttttt iiiiiiiioooooooonnnnnnnnssssssss

Key assumptions utilised to inform the Financial Analysis are summarised below and detailed fully within the PWC Data Book provided at Appendix 6.

CapexCapexCapexCapex

� Construction Costs $125,000,0006

� PAC Pre-Opening Budget7 Refer Creative Economy Report – Appendix 7

Escalation RatesEscalation RatesEscalation RatesEscalation Rates (% p.a.)(% p.a.)(% p.a.)(% p.a.)

� Revenue Escalation Rates 2.5%p.a.

� Renewal Capex Escalation Rates 5.0%p.a.

� Opex Escalation Rates (Excluding Headcount Costs) 2.5%p.a.

� Headcount Escalation Rates 4.4%p.a.

6 Approximate construction cost component included in total development costs of $154,611,000 (which includes $1.0m of the defined pre-opening budget). WTP has

confirmed that cost estimates are to P90 in accordance with PAF guidelines.

7 The role of the development budget is to attract tourists visiting Cairns to attend CEP. CEP enhances the visitor experience and attraction of the Cairns destination.

Through direct development activity and promotions to the tourism market CEP provides an added attraction to increase yield from tourists visiting Cairns.


44

Population Assumptions Population Assumptions Population Assumptions Population Assumptions –––– CRC AreaCRC AreaCRC AreaCRC Area

� Population (#(FY11) 168,000 FY11

� Expected Growth Rate (% p.a.) 1.9%

Tourism Visitation to TTourism Visitation to TTourism Visitation to TTourism Visitation to Tropical North Queenslandropical North Queenslandropical North Queenslandropical North Queensland (%)(%)(%)(%)

� Domestic Day Visitors 1,845,000

� Domestic Overnight Visitors 1,474,000

� International Visitors 778,000

Cultural Tourism Participation RatesCultural Tourism Participation RatesCultural Tourism Participation RatesCultural Tourism Participation Rates (%)(%)(%)(%)8

� Domestic Day Visitors 4.1%

� Domestic Overnight Visitors 15.4%

� International Visitors 61%

Visits to Cultural Facilities Visits to Cultural Facilities Visits to Cultural Facilities Visits to Cultural Facilities –––– Local PopulationLocal PopulationLocal PopulationLocal Population (% p.a.)(% p.a.)(% p.a.)(% p.a.)

� Performing Arts 47.3%

Cultural Activities UndertakenCultural Activities UndertakenCultural Activities UndertakenCultural Activities Undertaken (% p.a.)(% p.a.)(% p.a.)(% p.a.)

Domestic Day Cultural Domestic Day Cultural Domestic Day Cultural Domestic Day Cultural TouristsTouristsTouristsTourists

Domestic Overnight Domestic Overnight Domestic Overnight Domestic Overnight Cultural TouristsCultural TouristsCultural TouristsCultural Tourists

International Cultural International Cultural International Cultural International Cultural TouristsTouristsTouristsTourists

Performing & Visual ArtsPerforming & Visual ArtsPerforming & Visual ArtsPerforming & Visual Arts 18.2% 20% 25%

Visit Historical / Heritage BuildingsVisit Historical / Heritage BuildingsVisit Historical / Heritage BuildingsVisit Historical / Heritage Buildings 28% 35% 62% Table 13– Cultural Activities Undertaken CCTCCTCCTCCT VisitationVisitationVisitationVisitation (%/p.a.)(%/p.a.)(%/p.a.)(%/p.a.)

� Local Visitors 50%

� Domestic Cultural Tourists 2.0%

� International Cultural Tourists 0.5%

CCCCEP VisitationEP VisitationEP VisitationEP Visitation (% p.a.)(% p.a.)(% p.a.)(% p.a.)

Local VisitorsLocal VisitorsLocal VisitorsLocal Visitors Domestic Day Domestic Day Domestic Day Domestic Day Cultural TouristsCultural TouristsCultural TouristsCultural Tourists

Domestic Overnight Domestic Overnight Domestic Overnight Domestic Overnight Cultural TouristsCultural TouristsCultural TouristsCultural Tourists

International Cultural International Cultural International Cultural International Cultural TouristsTouristsTouristsTourists

CarparkingCarparkingCarparkingCarparking9 0.0% 0.0% 0.0% 0.0%

White’s ShedWhite’s ShedWhite’s ShedWhite’s Shed 50% 25% 25% 25%

PACPACPACPAC 70% 30% 30% 15%

Public PlazaPublic PlazaPublic PlazaPublic Plaza10 0.0% 0.0% 0.0% 0.0% Table 14– CEP Visitation

8 Source - Hossain, A., Heaney, L. and Carter, P. (2005), Cultural tourism in regions of Australia, Tourism Research Australia, Canberra.(PWC) 9 The basement carpark revenue calculations are based on utilisation of number of spaces per day, so a visitation number is not applicable

10 The public plaza has no revenues, so a visitation number is not necessary


45

RReenneewwaallss CCaappeexx

As percentage of Total As percentage of Total As percentage of Total As percentage of Total CapexCapexCapexCapex

Estimated Useful LifeEstimated Useful LifeEstimated Useful LifeEstimated Useful Life Proportion considered Proportion considered Proportion considered Proportion considered routine maintenanceroutine maintenanceroutine maintenanceroutine maintenance

CarparkingCarparkingCarparkingCarparking 2.5% 40 Years 40%

White’s ShedWhite’s ShedWhite’s ShedWhite’s Shed 2.5% 40 Years 40%

PACPACPACPAC 2.5% 40 Years 40%

Public PlazaPublic PlazaPublic PlazaPublic Plaza 2.5% 40 Years 40%

CCTCCTCCTCCT 2.5% 40 Years 40% Table 15– Renewals Capex PAC assumptions are included in the Creative Economy Report, included at Appendix 7.

PwC’s FA and EA Report is provided at Appendix 8 with key extracts included below.

LLaanndd VVaalluuee

The opportunity cost of land has not been incorporated in the CBA framework. The opportunity cost of land refers to the value that would be derived from putting the site to its next best alternative use. To calculate the opportunity cost of land, it is necessary to identify the alternatives use of the land, and the possible revenue that could be derived from this. For example, the value of land if sold, the revenue obtained where CRC develops the site and uses it for another purpose, or otherwise leases it to a third-party. All information obtained during the course of the FA and EA indicates that there are limited commercial opportunities for the site. In particular, the site is burdened with significant heritage and planning constraints which impact directly on the land value of the site, and the ability to use it for other commercial purposes. 11

State Government officers have advised CRC that the State Government has compensated PN for lost revenue, which we understand is approximately $40 million, but this has not been assessed as a reasonable “cost” in relation to the provision of land for the proposed facilities. CRC has not had the benefit of reviewing a formal land valuation. Whilst the site is well located, it does have limitations, in particular the restrictions that White's Shed provides. Approximately $10 million 12is required to renovate this structure to provide a reasonable entrance to the facilities and if this is not done, the facilities would be effectively cut off visually from the city centre, with a significant impact on patronage and revenue.

In relation to the constraints imposed on the site by White's Shed, the 2004 study "White's Shed Heritage Matters Status Report", commissioned by the Cairns Port Authority and undertaken by consultants C & B Group, considered the retention and reuse of the building.

At page 13, the report states:

"Given the "constraints" to development within this CEP (eg heritage listing, site contamination, limited height and GFA requirements), an offer from a third party is likely to come at a financial cost. However there are also extensive financial (and other) considerations if CPA undertake the site works. ...Both options clearly have significant financial implications, particularly given the recommendations of the structural report that has been prepared on the Shed."

There are also works required including road realignments, services relocation and the relocation of buildings required to achieve a satisfactory development.

Establishing a realistic value for the site, taking into account all of the above, is therefore considered to be outside the scope of this report and has not been included. Further discussion of this issue is provided in the PWC report included at Appendix 8.

11 Further detail is provided at Appendix Cof the PWC EA/FA. It is also important to note that the site earmarked for the Entertainment Precinct is owned by Far North

Queensland Ports Corporation Limited (Ports North). Ports North is the land owner and the Assessment Manager for the Precinct site which is to be leased on a

“peppercorn rent” to Cairns Regional Council for 99 years.

12 The $10m comprises $5.4m of construction capex and the remaining $4.6m includes; builders preliminaries & margin, planning & construction contingencies,

escalation, consultant fees, and other costs and charges.


46

DDeeffiinniittiioonn ooff CCaappiittaall WWoorrkkss aanndd MMaaiinntteennaannccee dduurriinngg OOppeerraattiioonn

In relation to the building works for the CEP the following are the definitions of Maintenance, which is an operational expense, and Capital Works, which can be paid from the Depreciation Account.

� Capital Works are defined as costs for the replacement of major building elements. This would include replacement of major mechanical services equipment such as chillers, complete replacement of seating, roofing; the replacement of the majority of windows and doors, and the like; and the complete replacement of soft furnishings generally to a new design.

� Maintenance costs are for the repair and refurbishment of buildings including furniture and fittings. It covers the routine maintenance of mechanical equipment, repairs to soft furnishings, replacement of damaged items; painting; and the like. Repairs would not include the replacement of major items such as complete chillers, entire roofs, etc.

For instance the replacement of a complete chiller is a Capital Works item but the replacement of a pump on a chiller is a Maintenance cost.

RReevveennuuee

Table 16 below represents the sources of CEP revenue assumed in the PWC FA. These assumptions are based on data sourced from Creative Economy, WT Partnership, Department of Public Works, and various other industry bodies. The figures have been escalated but have not been discounted.

REVENUE FY15 ($0,000)

FY16 ($0,000)

FY17 ($0,000)

FY18 ($0,000)

FY19 ($0,000)

FY20 ($0,000)

Carpark 116 472 483 495 507 521

White Shed Hire 238 244 250 257 263 270

Venue Hire & Service Fees 80 1,119 1,142 1,167 1,193 1,223

Equipment Hire 21 85 89 93 97 101

Ticketing Commissions 49 778 798 818 838 859

Credit card fees 6 98 103 108 113 119

Telephone Booking Fee 9 147 154 162 170 179

Food & Beverage 39 622 638 654 670 687

Merchandise (net) 2 7 7 8 8 8

Functions 6 23 23 24 25 26

Advertising/Marketing Income 17 68 70 71 73 75

Non ticketed attendance F&B income 24 100 104 108 112 117

Sundry (elec & aircon contribution fees) 5 76 77 79 81 83

Donations, Sponsorship & Philanthropy 14 57 58 59 61 62

CCT 1,802 0 0 0 0 0

TOTAL REVENUE $2,428 $3,896 $3,996 $4,103 $4,211 $4,330 Table 16 – Revenue Sources and Results The following assumptions were provided by Creative Economy and are the basis for the PAC and White’s shed revenue’s.

� Average rental and service fees for 1,100 seat theatre = 35% of hires at $6,000 commercial rate and 65% at $5,100 community rate

� Studio rent is at $50hr @ 4hrs day x 6days a week for 40 weeks

� White Shed functions estimate 2 events per week for 40 weeks at community rate $2,000 (65%) and corporate rate $4,000 (35%)

� Estimated 50% of utilisation equates to approximately 200 performances plus additional 39% which represents tickets sales to other venues and events. Internal ticket commission fee $4 – note: $4 is an internal ticketing charge – consistent with current ticketing commission practise (rate slightly increased)

� Bump-in and bump-out days are counted as hiring days. There is no difference in rate. The hire rate is not related to use (whether performance or rehearsal)


47

� Credit card fees increased to 2% with average ticket price based on current average of $25

� Booking fees at current average $3 and average ticketing transaction of 4 tickets.

� Food & Beverage (F&B) spend increased to $5 per person

� 10 x Functions based on average spend of $2,000 each

� Marketing for 20 commercial shows average spend $3,000 – note: not every commercial show will engage the CEP to undertake advertising and marketing

� F&B income from non-ticketed attendance 5 people x 6 days at average spend of $5

� Electricity $55/hr - based on hire usage of 7 hours daily – note: reflects user-pays approach by CCT (system disincentivises energy wastage)

� 30% margin – note: cost of F&B = 30% margin deducted from revenue to present costs

� Existing costs plus 30% increase

� Electricity supply charges and tariffs based on external consultants estimates

� Gas supply charges and tariffs based on external consultants estimates

� Figures exclude capital expenditures, depreciation, internal charges and competitive neutrality

� Continuation of status quo for ticketing service - all other venues in Cairns which are currently using the ticketing service

� The costs associated with the commercial kitchen are incorporated into the venue management costs and are not considered additional. It is a hire cost only – not a service cost.

� Employee Costs based on 2012 Actual Approved Budget by CRC, 2011 Actual budget for Casuals provided by CCT

� Additional White’s Shed assumptions:

� White’s Shed has been included as part of the ancillary spaces which includes; foyer, side stage, external performance space for various uses, convention centre, etc)

� White’s Shed is a unique venue in the Cairns market with a very distinctive style that existing conventional function rooms cannot offer. It will have an open air feeling whilst still being protected with access to an on-site kitchen.

� A single ‘rental’ income stream for White’s Shed was calculated and was derived assuming the many markets from which it can draw bookings including:

1. Corporate functions

2. Major public functions such as the Cairns Amateurs’ Ball

3. Weddings

4. School functions such as formals

5. Functions associated with the Convention Centre

6. Cabaret style entertainment

7. Any themed function requiring a large open space


48

Figure 21 – Revenue Forecast for each option under consideration (PWC)

In FY 2016, the first full year of operation for the CEP, revenues are forecast to be approximately 2.1x that of the CCT projected revenues. By FY 2041, CEP revenues as a proportion of CCT revenues are projected to grow marginally to 2.2x. The CEP offers a wider diversity of revenue streams than currently provided by the CCT:

� Fee revenue generated from a 200-space basement carpark

� Event hire revenue for use of White’s Shed space

� Revenue from functions held in the PAC and associated ancillary spaces

� Studio hire and equipment hire

� Commissions, fees and charges to be earned from tickets sold for the PAC’s 1,100 seat theatre

� Food and beverage revenue

The PAC is by far the dominant source of revenues.

Full details of revenue sources and results are provided in Table 16.

CCaappiittaall CCoossttss

The total capital cost for the CEP is $154.611 million which comprises $153.611m of development / construction costs and a further $1.0 million of a proposed $3.471 million pre-opening and development budget. The capital cash flow is represented in Table 17 below. A conservative analysis of the cash flow for the project indicates the likely expenditure in FY 12 will be $25.8 million. With additional effort this expenditure may be increased to $30 million but expenditure in excess of $30 million is likely to result in inefficiencies.

We note that consultant costs associated with the CEP have been included in the FA. Costs associated directly with the PAF process (including PAF Project Manager – Savills, FA/EA Consultant – PWC, Performing Arts Centre Consultant – CE, community consultation costs and disbursements, etc) have been excluded.

CAPEXCAPEXCAPEXCAPEX TOTAL TOTAL TOTAL TOTAL

($’000)($’000)($’000)($’000)


($’000)($’000)($’000)($’000)


($’000)($’000)($’000)($’000)


($’000)($’000)($’000)($’000)


($’000)($’000)($’000)($’000)


($’000)($’000)($’000)($’000)

Option 6 (Stage 1) CapexOption 6 (Stage 1) CapexOption 6 (Stage 1) CapexOption 6 (Stage 1) Capex 154,612154,612154,612154,612 25,811 67,362 36,712 24,726 0 Table 17 – Capex expenditure profile


49

OOppeerraattiinngg CCoossttss

Figure 22 – Operating expenditure forecast for each option under consideration (PWC)

In FY 2016, the first full year of CEP operations, operating costs are forecast to be approximately 2.1x that of the CCT’s projected costs. By FY 2041, CEP Opex is expected to grow to be 2.5x that of the CCT. The difference in growth rates during this time – between 3.20% and 3.40% per annum for the CEP, and 2.50% per annum for the CCT – is due to a portion of the CEP’s cost base being linked to PAC utilisation, which is expected to increase in stages of the first 30 years of operation.

Mirroring the revenue profile, the PAC is by far the dominant source of operating expenditure for the CEP, representing 95% of forecast FY 2016 CEP Opex. This is explained by the PAC:

� having the largest employee headcount of all facilities in the CEP

� having a high variable cost base, particularly in areas such as food and beverage costs, function costs and community hire subsidies for theatre hire by community groups

� incurring sizeable entrepreneurial programming, advertising and marketing costs

PAC Opex as a proportion of total expenditure is expected to stay relatively consistent throughout the forecast period to FY 2041.


50

Details of the operating and maintenance costs are represented in Table 18 below.

EXPENDITUREEXPENDITUREEXPENDITUREEXPENDITURE FY15 FY15 FY15 FY15 ($0,000)($0,000)($0,000)($0,000)

FY16 FY16 FY16 FY16 ($0,000)($0,000)($0,000)($0,000)

FY17 FY17 FY17 FY17 ($0,000)($0,000)($0,000)($0,000)

FY18 FY18 FY18 FY18 ($0,000)($0,000)($0,000)($0,000)

FY19 FY19 FY19 FY19 ($0,000)($0,000)($0,000)($0,000)

FY20 FY20 FY20 FY20 ($0,000)($0,000)($0,000)($0,000)

CarparkCarparkCarparkCarpark

InsuranceInsuranceInsuranceInsurance 11 46 47 48 49 51

ElectriElectriElectriElectricitycitycitycity 11 43 44 45 46 47

Management & OperatingManagement & OperatingManagement & OperatingManagement & Operating 7 27 28 29 29 30

White's ShedWhite's ShedWhite's ShedWhite's Shed


ElectricityElectricityElectricityElectricity 2 7 7 8 8 8

CleaningCleaningCleaningCleaning 4 17 18 18 19 19

Building StaffBuilding StaffBuilding StaffBuilding Staff 2 8 8 8 8 8

SecuritySecuritySecuritySecurity 1 3 3 3 3 3

Management Management Management Management 5 19 20 20 21 21

Performing Arts CentrePerforming Arts CentrePerforming Arts CentrePerforming Arts Centre

Employee CostsEmployee CostsEmployee CostsEmployee Costs 523 2,163 2,271 2,371 2,475 2,584

Food & Beverage CostsFood & Beverage CostsFood & Beverage CostsFood & Beverage Costs 44 506 519 533 548 563

Theatre Overhead costsTheatre Overhead costsTheatre Overhead costsTheatre Overhead costs 132 545 558 572 587 601

Entrepreneurial Programming Entrepreneurial Programming Entrepreneurial Programming Entrepreneurial Programming ---- entertainment feesentertainment feesentertainment feesentertainment fees 140 566 580 594 609 624

Marketing & PromotionMarketing & PromotionMarketing & PromotionMarketing & Promotion 167 678 695 712 730 748

Function CostsFunction CostsFunction CostsFunction Costs 4 18 19 19 20 21






PlazaPlazaPlazaPlaza




Building StaffBuilding StaffBuilding StaffBuilding Staff 4 17 17 17 18 18



Existing Existing Existing Existing CCTCCTCCTCCT 2,967 0 0 0 0 0

Routine MaintenanceRoutine MaintenanceRoutine MaintenanceRoutine Maintenance

CCTCCTCCTCCT 194

CEPCEPCEPCEP 112 156 214 289 386 506

TOTAL EXPENDITURETOTAL EXPENDITURETOTAL EXPENDITURETOTAL EXPENDITURE 4,6474,6474,6474,647 6,1156,1156,1156,115 6,3776,3776,3776,377 6,6476,6476,6476,647 6,9526,9526,9526,952 7,2827,2827,2827,282 Table 18 – Expenditure Sources and Results


51

BBuuddggeett AAnnaallyyssiiss

A budget analysis was prepared to assist the project’s key stakeholders better understand CRC’s ongoing financial commitment relating to development and operation (Net Operating Impact – NOI) of the CEP. Key observations from the budget analysis are presented below and the results of the analysis are summarised in Table 19:

� At no point over the 10 year forecast period is the net operating impact of the CEP on CRC’s budget positive. The operating result (earnings before interest and depreciation) steadily increases from -$1.2 million to -$3.2 million.

� From FY 2017, once all facilities have become operational, depreciation expense is expected to be $3.9 million per annum.

� Interest expense peaks in FY 2015 at $1.4 million, after which the CCT’s sale proceeds are used to pay down the principal balance of outstanding debt.

� The Opex improvement of the BC over the PE is largely to; the reduction in scope and identification of operational costs ‘double-ups’ in original data, including lift maintenance, air-conditioning maintenance and maintenance of outdoor areas.

� The budget analysis was also conducted using the parameters from the risk analysis test 3 (lower visitation and revenues). This demonstrates a deterioration in the Net Operating Impact (with interest) from $8.5 million to $11.0 million in FY2021. The Test 3 analysis is included in Appendix 8.

OPEXOPEXOPEXOPEX FY 15FY 15FY 15FY 15

($’000)($’000)($’000)($’000)


($’000)($’000)($’000)($’000)


($’000)($’000)($’000)($’000)


($’000)($’000)($’000)($’000)


($’000)($’000)($’000)($’000)


($’000)($’000)($’000)($’000)

Total RevenueTotal RevenueTotal RevenueTotal Revenue 2,426 3,897 3,996 4,103 4,213 4,331

Total ExpenditureTotal ExpenditureTotal ExpenditureTotal Expenditure (4,645) (6,113) (6,375) (6,649) (6,951) (7,284)

DepreciationDepreciationDepreciationDepreciation (1,375) (3,865) (3,865) (3,865) (3,865) (3,865)

InterestInterestInterestInterest (2,433) (2,363) (2,288) (1,688) (1,603) (1,512)

BC BC BC BC ---- OPTION 6, Stage 1 NOI OPTION 6, Stage 1 NOI OPTION 6, Stage 1 NOI OPTION 6, Stage 1 NOI (incl. depreciation and interest)(incl. depreciation and interest)(incl. depreciation and interest)(incl. depreciation and interest)

(6,028) (8,445) (8,532) (8,099) (8,206) (8,330)

FSR (incl. depreciation and FSR (incl. depreciation and FSR (incl. depreciation and FSR (incl. depreciation and interest expense) interest expense) interest expense) interest expense) –––– basedbasedbasedbased on PEon PEon PEon PE

(2,569) (3,648) (10,124) (9,810) (9,884) (10,026)

Opex improvement of BC over Opex improvement of BC over Opex improvement of BC over Opex improvement of BC over PEPEPEPE

(3,459)(3,459)(3,459)(3,459) (4,797)(4,797)(4,797)(4,797) 1,5921,5921,5921,592 1,7111,7111,7111,711 1,6781,6781,6781,678 1,6961,6961,6961,696 Table 19 – CRC Budget Analysis for Option 6 (Stage 1) (BC compared to PE) � CRC Financial Sustainability Review (FSR)

We note the following in relation to the CRC report on its FSR which was recently submitted to Treasury. The conclusion of the review was that the CRC is financially sound with a neutral operating result provided:

� Achieving 6% pa growth in rate revenues (comprising non-price growth in rates increases at 1.5%pa and price growth in rates is 5.5% pa during the construction of the CEP, declining to 4.0% pa beyond that period);

� CRC continues to constrain cost growth at current long term averages of 5.5% and

� The cost of operating the CEP and the revenues generated by the CEP meet the business case “medium scenario” assumptions.

� The results of the budget analysis become misleading over a longer period of time than depicted in Table 19 as the figures are not discounted.

The complete budget analysis is included at Appendix 8.


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SSeennssiittiivviittyy AAnnaallyyssiiss

The results of the sensitivity analysis are presented below.

� Discount rate Discount rate Discount rate Discount rate – Discount rates were tested under three scenarios: low - 6.00% nominal, at the request of Queensland Treasury (3.42% real), medium – 7.50% nominal (4.88% real) and high – 9.67% nominal (7% real). Under the low discount rate case, the continuous negative cash flows generated under Option 6, Stage 1 had the effect of decreasing the NPV by 29%. The higher discount rate increased the NPV by 31% although in no scenario did the NPV become positive.

� Escalation rates Escalation rates Escalation rates Escalation rates – The impact of the low escalation rate case on the Preferred Option has a positive impact of approximately 20% and the High Case has a negative impact of approximately 17% on NPV. The NPV of the Base Case improved by 12% under the Low Case, and declined by 11% under the High Case. The CCT is less sensitive to escalation rate increases, as it is expected to run at a smaller operating loss than the CEP over the thirty year forecast period.

� Visitation Visitation Visitation Visitation – Low visitation has a negative impact on incremental NPV for Option 6, Stage 1 of approximately 8%. High visitation increased NPV by 11%.

Figure 23 – Net present value derived from sensitising the base Option 6, Stage 1 (in $,000s) (PWC)

RRiisskk AAnnaallyyssiiss

As an extension of the sensitivity analysis, a risk analysis was undertaken to quantify the impact of project-specific risks as identified in the project risk register. The results of the risk analysis are presented below.

� The greatest quantifiable risks identified through the analysis revolve around project funding. The removal of all State and Federal funding decreased project NPV by 60%. Removing all State funding decreased NPV by 47%, whilst halving State & Federal assistance reduced the NPV by 43%. Given the current state of the Cairns economy, any additional capital funding to be provided by Council would need to be debt funded, however at this time the financial burden would be a very significant additional impost on ratepayers, in the context of the FSR Outlook.

� Operating outcomes posed the second-largest risks to the project. This included cases where operating costs and maintenance Capex were assumed to be higher than anticipated, and where revenues were lower than expected. NPV variances ranged from -24% to -37%

� Delays to the project start of 6 months and 12 months had an immaterial impact on the financial outcome for the CEP, increasing NPV by 4% and 5% respectively

Further, we note that by not completing the CEP and maintaining the CCT, there is a very real and catastrophic risk of the arts and cultural sector dying in Cairns as the CCT does not meet the identified needs. The inadequacies of the facility are fundamental and cannot be addressed other than with a complete rebuild at a cost that would be comparable to that for the CEP (excluding the restoration of White’s Shed).


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Further this would cause major disruption to the Cairns community with no facility available from the start of demolition of the CCT to the opening of the new facility. This presents as a greater risk to the Cultural sector – thereby resulting in the risk rating applied. Mitigation measures are in place for all risks associated with the CEP, whereas the mitigation measures in place for the CCT will not facilitate a long term benefit.

NNeett PPrreesseenntt VVaalluuee

The results in Figure 24 demonstrate that neither option is self-funding on a purely commercial/financial basis. The Base Case is presented for comparative purposes only for this appraisal, and does not represent a viable solution for CRC. Under the Base Case, the CCT continues to operate at a loss of approximately $1 million (in FY11), with an additional renewal cost of between $0.1 million and $5.7 million in each year of operation.

The incremental NPV for Option 6, Stage 1 is -$33.1 million. The negative NPV results reflect that the discounting of future cash flows is not offsetting the forecast operating losses and renewal costs associated with the CEP.

Figure 24 – Net present value and incremental net present value for both project options (PWC)

FFuunnddiinngg FFrraammeewwoorrkk

The initial funding for Option 6, Stage 1 is:

� Commonwealth Government $40,000,000

� State Government $57,305,500

� CRC FAA Reserve $11,000,000

� CRC Loan Facilities $30,305,000

� CRC Asset Sales $16,000,000

TOTALTOTALTOTALTOTAL $154,611,000$154,611,000$154,611,000$154,611,000

CRC resolved at its meeting of 21 September 2011 to fund its $57,305,500 share of the Capex from the sources identified above.


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The assumed cash flow for contributions from Government is tabulated below:


($’000)($’000)($’000)($’000)


($’000)($’000)($’000)($’000)


($’000)($’000)($’000)($’000)


($’000)($’000)($’000)($’000)


($’000)($’000)($’000)($’000)

Option 6 (Stage 1) CapexOption 6 (Stage 1) CapexOption 6 (Stage 1) CapexOption 6 (Stage 1) Capex 154,612154,612154,612154,612 25,81125,81125,81125,811 67,36267,36267,36267,362 36,71236,71236,71236,712 24,72624,72624,72624,726

Federal FundingFederal FundingFederal FundingFederal Funding 40,00040,00040,00040,000 25,811 14,189 - -

State FundingState FundingState FundingState Funding 57,30557,30557,30557,305 - 26,586 18,356 12,363

CRC FundingCRC FundingCRC FundingCRC Funding 57,30557,30557,30557,305 - 26,586 18,356 12,363 Table 20 – Option 6 Stage 1 Projected Cash Flow

Figure 25 below shows that the Preferred Option contains a large spike in Free Cash Flow (FCF) resulting in positive incremental discounted cash flows between FY 2013 and FY2016, resulting from:

� A saving in maintenance works in FY2013 and FY2014 that would otherwise be required to keep the CCT operating under the Base Case

� Sale proceeds from the CCT offsetting an otherwise-negative free cash flow position expected from the CEP in FY 2015.

There are minor positive movements in FY 2021, FY 2026, FY 2031 and FY 2036; again, these are due to major capital renewals which would need to be made to the CCT under the Base Case.

Figure 25 – Incremental, discounted free cash flow forecast for Option 6, Stage 1 (PWC)


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5.3 Detailed Economic Analysis (EA)

The purpose of the EA is to assess effects of the project options on the community and regional and State economies. It is performed from a broader perspective than a financial evaluation as it is designed to capture the benefits and costs to the wider region or economy, rather than only those of the project developer (CRC). While the EA does not explicitly consider the commercial viability of the project, it can provide additional justification for the funding of project options which are shown to generate significant economic, social, cultural or environmental benefits for the community.

EEccoonnoommiicc AAnnaallyyssiiss RReessuullttss

The EA considers a broad range of costs and benefits relating to social, cultural, economic and environmental factors associated with project options. As many of the associated costs and benefits are ‘intangible’, and do not have a market price, the EA has been undertaken using a combination of discounted cash flow analysis, quantitative analysis and qualitative assessment. In evaluating options, it is necessary to consider the results of these analysis/assessments in parallel.

In light of the key outcomes and objectives sought by CRC and State Government 13in developing the CEP, significant weight must be given to the key indirect and non-market benefits that may be realised as a result of the CEP development – for example, increased social cohesion and quality of life, arts and cultural heritage appreciation, increased education and training facilities and health improvement. The Preferred Option must be capable of meeting the outcomes sought by local and State Government.

Having regard to the State and Local Governments’ goals and objectives sought for cultural progress in the FNQ region, Option 6 - Stage 1 presents as the preferred project option.

As stated in the PAF, ranking of the options for cultural projects should be based on the options’ ability to meet the key requirements and objectives of the policy makers. The non-quantifiable benefits, particularly the social and educational benefits, provide sufficient justification for Option 6 - Stage 1 in light of the key objectives sought. The CCT is widely acknowledged to no longer meet the needs of a growing city and tourist hub like Cairns.

The EA considers a far broader range of costs and benefits relating to social, cultural, economic and environmental factors associated with project options. As many of the associated costs and benefits are ‘intangible’, and do not have a market price, the EA has been undertaken using a combination of discounted cash flow analysis, quantitative analysis and qualitative assessment.

� As stated in the PAF, if an economic argument is to be made for this sort of cultural facility, the greatest weight should be given to the significant non-market impacts (such as increased social cohesion and quality of life, arts and cultural heritage appreciation, increased education and training facilities and health improvement), together with the key outcomes sought by Government when undertaking the project. Option 6 - Stage 1 presents as the Preferred Option based on these considerations.

� Construction expenditure for the CEP is projected be over $150 million over the five years from FY12 to FY15, with expenditure peaking in FY13 ($67.4 million). While there is evidence to suggest that the demand labour resources in the construction industry is currently exceeding supply, it may be argued that, following the temporary shock to the labour market arising from the Queensland reconstruction effort, some of these resources may then be directed to construction projects like the CEP. This would assist in maintaining economic activity and employment in the Cairns and FNQ region following reconstruction.

� Throughout the operational phase, Option 6 - Stage 1 will provide greater support for the Construction, Arts and Restaurants/Catering industries, as compared to the Base Case. The larger, complementary PAC at the CEP allows for larger revenues from Arts activities in particular, with more than four times the revenues accruing to the Arts industry under Option 6 - Stage 1 as compared to the Base Case

14. Heightened tourism activity under Option 6 - Stage 1 will also

provide support for the region’s retail, restaurant/catering and accommodation industries.

13 We have drawn on State government announcements regarding the precinct; state government policy settings and programs (eg. The Cultural Sector Plan) to

synthesise the government’s objectives and priorities with those of Council.

14 These figures refer to the direct and indirect spend associated with Arts activities and should not be confused with the expenditure on arts activities at the CEP (i.e.

revenue).


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� It is estimated that, during the operational phase, the CEP will directly employ 34 people, while the CCT will employ around 20. As well as these direct labour effects, it is likely that the flow-on effect of the project will support economy-wide employment, particularly in tourism related industries like retail trade and restaurants/catering. The CCT does not currently operate as a key tourist attraction, nor does it support a significant level of retail/restaurant/catering activity and employment. As such, the economy-wide employment supported under the CEP option is expected to be greater than that under the Base Case.

� In light of the key objectives sought by CRC and Government, particular weight should be given to the social and educational benefits that have been described. In particular, the CEP will have the capacity to increase social cohesion and enhance health and well-being for both those in the Cairns community and those attracted to the area. It will promote stable, cooperative and sustainable communities that encourage intergenerational and intercultural interaction.

� Participation in arts and cultural activities can have a direct impact on the improvement of education and training outcomes, not only for performers and artists, but also for consumers whose participation is merely receptive. It promotes knowledge sharing, increased collaboration, cultural appreciation and skills development. The CEP will likely foster and encourage participation in arts and cultural activities, thereby harnessing these associated benefits.

� The development of the CEP will enhance urban amenity of the CEP site, areas adjacent to the site and more broadly within the Cairns CBD. It will contribute to the sustainable development of the Cairns City through integration of sustainable design values, protection and enhancement of the natural landscape and appropriate utilisation of the land.

� The discounted cash flow results must be read in line with the qualitative assessment of key indirect and non-market benefits that cannot be appropriately quantified in a Cost Benefit Analysis (CBA) of a cultural project like the CEP. The CBA metrics (NPEV and BCR) have only been calculated on the basis of the impacts that have been able to be monetised in this assessment – that is, the direct expenditures under the construction and operational phases of each Option.

Conclusions regarding the economic viability of the CEP cannot be made by considering the BCR’s and NPEV’s in isolation.

NNeett PPrreesseenntt EEccoonnoommiicc VVaalluuee && BBeenneeffiitt CCoosstt RRaattiioo

DISCOUDISCOUDISCOUDISCOUNT RATE SCENARIONT RATE SCENARIONT RATE SCENARIONT RATE SCENARIO NPEV ($’000s NPEV ($’000s NPEV ($’000s NPEV ($’000s –––– nominal)nominal)nominal)nominal) BCRBCRBCRBCR

LowLowLowLow -223,363 0.19

MediumMediumMediumMedium -208,278 0.16

HighHighHighHigh -195,434 0.14

Figure 26 –Incremental NPEV and BCR for Option 6, Stage 1 depending on choice of discount rate (PWC)

OPTIONOPTIONOPTIONOPTION NPEV ($’000s NPEV ($’000s NPEV ($’000s NPEV ($’000s –––– nominal)nominal)nominal)nominal) BCRBCRBCRBCR

Base CaseBase CaseBase CaseBase Case -14,498 0.63

Option 6, Stage 1Option 6, Stage 1Option 6, Stage 1Option 6, Stage 1 -205,676 0.20

Figure 27 –NPEV and BCR for Option 6, Stage 1 and Base Case (not incremental) (PWC)

DDiirreecctt aanndd IInnddiirreecctt EExxppeennddiittuurreess

The impact of each project option on expenditures, both in the facility and external to the facility, can be classified into two key categories – direct and indirect expenditures. “Direct expenditures” refers to economic activity that is directly related to the facility, while “indirect expenditures” refers to any flow-on or economy-wide effects.15 Figure 28 presents direct expenditure under the construction phase for Option 6 - Stage 1.

15 The latter are subject to qualitative assessment in the economic appraisal. PwC has received guidance from Queensland Treasury around the most appropriate

methodology for the EAcomponent of the PE. The methodology presented in this report is, in PwC’s understanding, acceptable for Queensland Treasury’s purposes.


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Supply-side constraints and substitution effects are also relevant for the operation of the CEP. That is, expenditure at the CEP may simply have been redirected from other facilities within Cairns. For example, a tourist visiting Cairns for one day may decide to attend a performance at the PAC. If the CEP didn’t exist, the tourist may have visited an exhibit at the Convention Centre instead. As such, the expenditure at the CEP cannot simply be considered to be new expenditure in the Cairns economy, but rather is expenditure that has been redirected from another activity.

Construction expenditure is projected be over $150 million over the five years from FY12 to FY15, with expenditure peaking in FY13 ($67.4 million).

Figure 28 –Expenditure on construction in Option 6, Stage 1 (PWC)

There is evidence to suggest that, while unemployment rates are quite high in Cairns and FNQ (evidencing possible underutilisation of resources), the demand for labour resources in the construction industry is currently exceeding supply, implying that additional construction activity (like that instigated by the CEP) may simply redirect labour resources and economic activity away from other projects.

However, it may be argued that, following the temporary shock to the labour market arising from the Queensland reconstruction effort, some of these resources may then be directed to construction projects like the CEP. This would assist in maintaining economic activity in Cairns and FNQ following reconstruction.

Figure 29 summarises the difference in direct expenditures in the operational phase between Option 6 - Stage 1 and the Base Case.

Figure 29 –Direct expenditures in the operational phase (PWC)


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Throughout the operational phase, Option 6 - Stage 1 will provide greater support for the Construction, Arts and Restaurants/Catering industries, as compared to the Base Case. The larger, complementary performing arts facilities at the CEP allow for larger revenues from Arts activities in particular, with more than four times the revenues accruing to the Arts industry under Option 6 - Stage 1 as compared to the Base Case. Heightened tourism activity under Option 6 - Stage 1 will also provide support for the region’s retail, restaurant/catering and accommodation industries.

LLaabboouurr

The number of persons directly employed on the construction site during the construction phase of the project is illustrated in Figure 30. The maximum number of persons employed during the construction phase of the CEP is in 2013, peaking at around 165 persons. The employment sustained by the CEP’s construction diminishes after 2013 until it reaches completion in FY2016.

0

20

40

60

80

100

120

140

160

180

FY11 FY12 FY13 FY14 FY15 FY16 FY17

Figure 30 –Number of workers on site during the construction phase of the CEP (PWC)

These estimates should be considered as employment that is sustained as a result of the construction of the CEP, as opposed to jobs that are created. For example, some of the persons employed to construct the CEP may be employed on other construction projects in the region if the CEP was not developed.

As discussed above, it is difficult to accurately predict the indirect employment and economic activity impacts that may occur during the construction phase. The key reason for this is the conflicting views as to the capacity of the Cairns region’s economy and the state of the construction industry. While some parties may argue that there is no room for additional economic activity and employment to result from the CEP, it is not that “cut and dry”, particularly in light of the recent negative outlook for the global economy.

On the one hand:

� The reconstruction effort after Cyclone Yasi (and other Queensland natural disasters), together with possible increasing demand for unskilled labour resources in the Mining sector (particularly since Cairns has been earmarked as a key fly-in fly-out base for mining workers), may be drawing upon the otherwise underutilised labour resources in the Cairns and FNQ economies; and

� It may be the case that some of the more specialised resources that are necessary for this project will not be sitting idly by and will simply be drawn from other projects. This redirection of labour resources and economic activity will mean that the flow-on impact may not be as great as if all resources were readily available and going unused.


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On the other hand:

� The unemployment rates for Cairns and the Far North Statistical division suggest that these economies are not operating at capacity and, as such, increased expenditure in the economy (via the CEP construction) may instigate positive economic activity and employment growth;

� Across the country, developers are remaining reluctant to commit to construction work because of fears about the global economy and banks setting stringent lending conditions. The Australian Industry Group Performance of Construction Index (PCI), a joint effort with the Housing Industry Association, shows that the level of construction activity across the housing, commercial and large-end engineering sectors, fell 4 points to 32.1 in August. This is well below the 50 point mark that illustrates a stable industry and is at its lowest level in two years. Activity has now fallen for the 15th month16

� Even if the status of the Australian and Queensland construction industries as a whole are far weaker than that of the Cairns/FNQ region, this may mean that any increase in activity in the FNQ will attract underutilised labour resources from other areas of the State, thereby supporting economy-wide employment;

� Beacon Consulting in the Cairns Contractor Sentiment Survey (October 2011), stated that “contractors are relying heavily on Government spending for future workload and growth....Government investment over the next twelve months will be vital to the to the strength of the Cairns construction economy”.

These points illustrate that there is currently mixed opinion on the state of the FNQ construction industry17 and, as such, it is not possible to categorically state that the development of the CEP will have absolutely no impact of employment and economic activity outcomes. Modest claims regarding these potential impacts, as provided in this analysis, are not unsubstantiated in light of mixed views regarding the market for construction services.

While unemployment rates are relatively high in Cairns and the FNQ (evidencing possible underutilisation of resources), there is reason to believe that demand for labour resources in the construction industry may be exceeding supply.18 The construction of the CEP will undoubtedly support employment during the construction phase and a modest level of additional employment in the economy may be created.

It is estimated that, during the operational phase, the CEP will directly employ 30 people, while the CCT is expected to employ approximately 20 people. As well as these direct labour effects, it is likely that the flow-on effect of the project will support economy-wide employment, particularly in tourism related industries like retail trade and restaurants/catering. The CCT does not currently operate as a key tourist attraction, nor does it support a significant level of retail / restaurant / catering activity and employment. As such, the economy-wide employment supported under the CEP option is expected to be greater than that under the Base Case.

Queensland Treasury estimates that for each $1 million of the construction component of the capital works program, employment of 6.7 full-time equivalents will be supported in 2011-12. This employment ratio has been used to derive the estimate of 93,000 full-time jobs being supported by the 2011-12 capital program. While PwC has concerns regarding the robustness of this methodology to estimate indirect employment resulting from Government final demand for construction services, PWC have utilised the methodology to provide comparative estimates for employment supported by the construction of the CEP. These are provided in the last column of Table 21. PWC stress that these estimates should only be used to compare CEP employment estimates to employment estimates derived by Queensland Treasury for Capital Statements, not as definitive estimates of indirect employment supported by the construction of the CEP.

Table 21 also illustrates how we might expect the employment ratio (6.7 FTEs for each $1 million of Government gross fixed capital formation) to change through time if projections for productivity and price movements are taken into account. These projected employment ratios have been used to derive the full-time employment estimates for the CEP by year for the construction phase.

16 Further evidence of a weakening construction market is the contrasting activity between companies providing materials to the residential (and, to a lesser extent,

commercial) construction market and those servicing the resource industry; Many other statistical indicators related to the construction industry appear to be pointing

downwards. For example, the ABS suggests residential and non-residential building work decreased substantially in the June Quarter.

17 Eg. Beacon Consulting, Cairns Contractor Sentiment Survey (October 2011).

18 For example, Queensland Government has identified construction-related occupations to be in short supply and initiated skills training programs accordingly. It is

important to note, however, that there is currently mixed opinion as to the state of the Far North Queensland Construction industry - Beacon Consulting, Cairns

Contractor Sentiment Survey, October 2011. While this survey indicates a high level of competition in the industry and increasing labour costs (implying a strong

demand for labour resources), it also indicates that some firms may lose staff over the next twelve months.


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FYFYFYFY Projected employmentProjected employmentProjected employmentProjected employment per $1 mill per $1 mill per $1 mill per $1 mill expenditureexpenditureexpenditureexpenditure (adjusted for price and(adjusted for price and(adjusted for price and(adjusted for price and productivity movements)productivity movements)productivity movements)productivity movements) FTE JobsFTE JobsFTE JobsFTE Jobs

Expenditure on construction Expenditure on construction Expenditure on construction Expenditure on construction services in each year of the services in each year of the services in each year of the services in each year of the construction phaseconstruction phaseconstruction phaseconstruction phase $ million$ million$ million$ million

Employment supported Employment supported Employment supported Employment supported bybybyby GovernmentGovernmentGovernmentGovernment final demand offinal demand offinal demand offinal demand of construction services for the CEPconstruction services for the CEPconstruction services for the CEPconstruction services for the CEP FTE JobsFTE JobsFTE JobsFTE Jobs

2010201020102010----11111111 7.0 - ----

2011201120112011----12121212 6.7 25.8 174.2174.2174.2174.2

2012201220122012----13131313 6.5 67.4 436.3436.3436.3436.3

2013201320132013----14141414 6.2 36.7 228.3228.3228.3228.3

2014201420142014----15151515 6.0 24.7 147.6147.6147.6147.6

2015201520152015----16161616 5.7 - ---- Table 21 – Employment supported by final demand of construction services for the CEP (PWC) While the employment estimates for the CEP, as presented in Table 21, provide a comparative estimate to State wide employment supported by Queensland Government’s capital expenditure, key limitations must be kept in mind when assessing and presenting these results:

� Employment ratios for construction in Queensland are estimated from economy-wide data and thus should be considered to be average employment effects for construction projects. Individual construction projects like the CEP may vary from the average;

� The employment ratios provided by Queensland Treasury and those projected by PwC are based on data for the Queensland economy, not for the Cairns or FNQ regions;

� The estimates do not include “consumption induced effects”. For example, the income spent in retail industries by workers employed on the construction of the CEP is not included. Inclusion of such effects is considered inappropriate for this analysis;63 and

� The PwC employment estimates for the CEP should only be compared to the full-time employment estimates derived by Queensland Treasury for the Budget Capital Statements. It is not appropriate to present these estimates as definitive estimates of indirect employment supported by the construction of the CEP.

SSoocciiaall ccoohheessiioonn aanndd qquuaalliittyy ooff lliiffee

The social benefits that may accrue to Cairns and FNQ (and, to a lesser extent, the

State) may be classified into five broad categories:

� Social cohesion: Research indicates that arts and cultural services can contribute significantly to the social cohesion of a community 19 and, as such, arts and cultural policies and programs have been developed throughout Australia with a primary objective of enhancing social cohesion 20. The CEP has been designed to provide state-of-the-art cultural and arts facilities, together with public gathering space for everyday recreational use, allowing local business to take advantage of long business hours available providing greater public amenity and safety. It will foster creative participation; intergenerational interaction and intercultural interaction.

� Local image and identity: Research has shown that the arts help people to express and define what it means to be Australian.21 Additional arts and cultural facilities may therefore strengthen the Australian image and identify and provide a connection to our past and to our nation. The CEP will also foster the further development of community identity.

� Appreciation of the arts and cultural heritage: A heightened appreciation of arts and cultural heritage may be achieved as a result of events or festivals that occur in the public plaza and open space at the CEP. Due to the Far North

19 Matarasso, F., 1997. Use or Ornament? The Social impact of participation in the arts, Comedia, Stroud.

20 Australian Government, Department of Immigration and Citizenship, 2011. The Diversity and Social Cohesion Program, [online] Available at:

http://www.harmony.gov.au/dscp/ [Accessed 8 July 2011].

21 Australian Council of the Arts, 2010. More than bums on seats: Australian participation in the arts, Australian Council for the Arts, Sydney.


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Queensland’s rich indigenous and multi-cultural heritage, there is a great opportunity in Cairns to develop performing and visual arts unique to the region. Increased exposure to this cultural heritage will no doubt lead to an increased appreciation and tolerance of the arts.

� Health and well-being: Health and well-being benefits of arts and cultural activities accrue to both creative participants and receptive participants. There is widespread recognition across literature that, at the basic level, arts and cultural activities provide a unique and deep source of enjoyment, resulting in increased levels of happiness and the ability to cope with everyday pressures of life. 22

� Non-user benefits: For the Cairns Cultural Centre, ‘non-user value’ is also relevant. Non-use value includes value accruing to persons who do not visit the facilities or participate in related cultural activities but place value on the option to visit such facilities.

While the CCT and other venues throughout Cairns currently encourage participation in arts and cultural activities to some extent, the CEP, with its larger complementary facilities, will foster and encourage much greater participation (both creative and receptive participation), thereby harnessing much greater community-wide benefits, as discussed above.23 The current CCT is an inferior facility that, for example, cannot attract, nor can it support, large scale, professional stage shows and cultural displays. Further, it does not encourage the level of creative participation by the community that will likely exist under Option 6 - Stage 1.

Facilities such as the Public Plaza will also foster greater social cohesion and health and well-being benefits that may not accrue to the community under the Base Case.

EEdduuccaattiioonn aanndd sskkiillllss ttrraaiinniinngg

While the construction of the CEP may contribute to skills shortages currently being experienced by the Queensland construction industry, the education and skills training benefits that will be fostered by the CEP once operational, will assist in the long term education and skilling of Queensland’s labour force, both for industries directly linked to the CEP and for the wider community.

The benefits of participation at arts and cultural facilities accrue to a number of groups within the community, from the professional performers themselves (“creative participants”) to consumers whose participation is merely receptive (“receptive participants”). These benefits accrue through a variety of forms, including knowledge sharing; increased collaboration; cultural appreciation; and generic work place skill development (e.g. communication and team work skills).

Receptive and creative participation in the arts can foster improved languages skills, more developed critical thinking ability and increased confidence to engage with the education system. Having a local population that is increasingly able to think critically and is more confident and culturally aware, will lead to a more productive workforce that can meet the challenges of a growing region.

While the CCT and other venues throughout Cairns currently encourage participation in arts and cultural activities (both creative and receptive participation), the CEP will likely foster and encourage further participation thereby harnessing additional community-wide benefits.

EEnnvviirroonnmmeennttaall eeffffeeccttss

The environmental benefits and costs associated with the CEP include:

� Site enhaSite enhaSite enhaSite enhancement: ncement: ncement: ncement: The development of the CEP will result in a number of enhancements to this site. These include the removal of contamination as a result of former uses associated with the port, ground works (e.g. site clearance), construction of stormwater management infrastructure, and landscaping and other final site improvements.

22 Australian Expert Group in Industry Studies (AEGIS), 2004. Social Impacts of Participation in the Arts and Cultural Activities- Stage 2 Report, Sydney.

23 For example, the current facilities are unable to cater for large events and attract national and international participation. Stakeholders have specifically stated that the

low capacity of the CCT in particular is a fundamental reason for performances and shows to not coming to Cairns.


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� Urban development: Urban development: Urban development: Urban development: The CEP (along with the Convention Centre) will create a third node in the urban framework of the CBD, which will provide for better connections between land uses, public spaces and transport facilities. The CEP will provide for higher levels of connectivity between inner city and outer city by anchoring the city centre with the shopping centre, Shields Street, the lagoon, and the Port lands boardwalk. This triangle also defines a circuit of high-amenity public spaces along the waterfront and CBD

� Sustainable design: Sustainable design: Sustainable design: Sustainable design: The CEP facilities will be designed to achieve high standards to energy efficiency and water conservation, life cycle analysis for a selection of materials, waste minimisation, low greenhouse gas emissions and an operational plan to maintain the standards for the life of the building. Under the Base Case, the CEP site would not be subject to the enhancements detailed above, and there remains the potential for environmental issues associated with site contamination.

BBrriinnggiinngg tthhee ccoossttss aanndd bbeenneeffiittss ttooggeetthheerr –– tthhee CCBBAA ffrraammeewwoorrkk

Where possible, the economic costs and benefits identified above have been built into the CBA framework (as outlined in the PAF),24 to provide a summary of the monetised costs and benefits. The monetised costs and benefits are summarised using two key CBA metrics – the net present economic value (‘NPEV’) and the benefit-cost ratio (‘BCR’).25As only the direct expenditures in the construction and operational phases of each Option have been monetised for the purpose of the PAF CBA framework, it is important to consider these monetised components in line with the crucial quantitative and qualitative costs and benefits as discussed above.

If a project’s costs and benefits can be fully quantified and captured in the discounted cash flow analysis, a project option may be considered to be economically viable if the BCR is greater than one and the NPEV is positive. However, as discussed in the PAF, for cultural projects like the CEP, summary CBA metrics (like NPEV’s and BCR’s) are not sufficient to provide an indication of the holistic economic viability of a project.

The NPEV and BCR for Option 6 - Stage 1 are -$208.2 million and 0.16 respectively. The NPEV and BCR are calculated from incremental cash flows, as required by the PAF.26

While these metrics alone are unable to provide economic justification for the project, it is important to note that these metrics have only been calculated based on the impacts that have been monetised in this assessment – that is, the direct expenditures under the construction and operational phases of each Option. The supplementary analysis presented above illustrates a broad range of costs and benefits that have not been monetised.

Figure 31 summarises and compares the monetised, quantified and qualified costs and benefits under each of the five impact categories for Option 6 - Stage 1 and the Base Case. The Preferred Option based on this comparison is Option 6 - Stage 1.

Having regard to the monetised, quantified and qualified costs and benefits, together with keyHaving regard to the monetised, quantified and qualified costs and benefits, together with keyHaving regard to the monetised, quantified and qualified costs and benefits, together with keyHaving regard to the monetised, quantified and qualified costs and benefits, together with key objectives and objectives and objectives and objectives and outcomes outcomes outcomes outcomes sought by the State Government and sought by the State Government and sought by the State Government and sought by the State Government and CRCCRCCRCCRC, Option 6 , Option 6 , Option 6 , Option 6 ---- Stage 1Stage 1Stage 1Stage 1 presents as the presents as the presents as the presents as the Preferred OptionPreferred OptionPreferred OptionPreferred Option....

24 Project Assurance Framework: Cost Benefit Analysis, page 28.

25 These metrics are explained in Section 3.2 of the PWC report.

26 “Incremental” means that the cash flows under Option 1 (the Basecase) are subtracted from the cash flows for each Option to determine the benefit over and above

the status quo. Hence, incremental NPEV and BCRs are zero for the Base Case


63


64

Figure 31 –Summary and comparison of costs and benefits for Option 6, Stage 1and Base Case (PWC)

Direct and indirect


65

MMeeeettiinngg tthhee kkeeyy oouuttccoommeess aanndd oobbjjeeccttiivveess ssoouugghhtt

As Queensland Government’s Project Assurance Framework states, “important cultural projects seek to promote Queensland and should not be assessed by using possible economic and employment benefits. Rather, it may be better to rank options by their ability to deliver specific outcomes and assess them against the performance criteria for promotional success rather than their economic impact.”

Drawing upon the CRC goals and key State Government initiatives and policy objectives, the following four overriding outcomes were identified and form the benchmark for option appraisal throughout the analysis framework:

� To meet community need for art and cultural facilities

� To meet the need for a community meeting place

� To develop greater awareness of the historical and cultural value of the Far North

� To support regional growth

As such, the four key objectives identified above are crucial to the economic and financial appraisals, forming the benchmark for final conclusions regarding the Preferred Option.

When ranking the options, the overriding decision rule is that the Preferred Option must be capable of meeting the outcomes sought.

The assessment above demonstrates that Option 6 The assessment above demonstrates that Option 6 The assessment above demonstrates that Option 6 The assessment above demonstrates that Option 6 ---- Stage 1 meets the four key objectives,Stage 1 meets the four key objectives,Stage 1 meets the four key objectives,Stage 1 meets the four key objectives, while the Base Case while the Base Case while the Base Case while the Base Case does not. does not. does not. does not.

The CEP will replace the existing CCT which is an inferior facility, unable to attract or support large-scale stage shows and cultural displays. It is widely acknowledged to no longer meet the needs of the city.

The CEP will provide facilities for the performing arts industry, and the region’s families and communities, which have not been previously available. These facilities will not only harness significant social and educational benefits, but provide a unique attraction for Cairns and the FNQ region, fostering the region’s cultural value and local identity.

The Public Plaza and White’s Shed will form a central meeting place for community interaction. Such community meeting places are acknowledged by policy makers as crucial to enhance urban structures and liveability of cities. They can also provide a sense of enjoyment, resulting in improved individual and community well-being.

It is envisaged that the CEP will support the changing nature of the Cairns CBD by providing a catalyst for business growth, encouraging longer business hours, greater public amenity and safety, and by providing economic benefits to the city from business events and heightened tourism activity. The CEP is therefore regarded by CRC as a priority catalyst project for the development of the Cairns CBD.

Together with sustaining employment levelsduring the construction phase and fostering regional growth during the operational phase, the CEP will encourage participation in the arts and cultural activities, thereby harnessing the associated non-market social benefits discussed above.

These benefits include improved languages skills; more developed critical thinking ability and increased confidence to engage with the education system. Having a local population that is increasingly able to think critically and is more confident and culturally aware, will lead to a more productive workforce that can meet the challenges of a growing region.

As stated by the Premier the Honourable Anna Bligh in 2010, “if you live in regional Queensland, arts and culture has to be...just as important to liveability as schools and hospitals and roads. . . . It doesn’t matter where you live, you should be able to access arts and culture. It’s important to who we are, and it shouldn’t be that you only ever see great shows or aspire to seeing a great orchestra if you travel out to bigger centres or capital cities... importantly, [the CEP also] provides the opportunity to provide a whole new destination for visitors from other parts of Queensland, Australia and the world.”


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6.0 Detailed Options Evaluation

This section of the BC discusses the results and recommendations arising from the evaluation of each of the two (2) options recommended in the PE and described in Section 3 and listed below;


� Option 6, Stage 1 only

In addition to the consideration of project scope, cost and complexity, analysis and evaluation of each option has been undertaken in respect of the following:

� Needs, Outcomes Sought and Cultural Vitality

Sec 6.8, 6.9

� Consideration of Whole-of Government Issues

Sec 6.4

� Market Sounding Sec 6.2 � Consideration of Regulatory Issues Sec 6.6

� CRC Budget Analysis Sec 5.2 � Preliminary Public Interest Assessment Sec 6.7

Findings emanating from this analysis have then been summarised in Section 6.10 which forms the basis for determining the Preferred Option, which is described in Section 6.11.

6.1 Detailed Risk Analysis

A Risk Management Plan (RMP) has been prepared and extends to the identification, analysis, evaluation and proposed treatment of risks related to the CEP. Overall project phases and tasks are defined within Table 22 below. The management of risks associated with the phases and tasks described are being undertaken in accordance with the RMP which is included at Appendix 9.

PHASEPHASEPHASEPHASE TASKTASKTASKTASK

Phase One: Phase One: Phase One: Phase One: Masterplan and Concept & Schematic Design / BC (Jan 2011 – July 2011)

� Identification of demand / stakeholder needs � Finalise project objectives and scope � Clarification of project funding options � Acceptance of designs by the community � Consultant appointments

Phase Two: Phase Two: Phase Two: Phase Two: DA & Design Development/ Funding including staging options (July 2011 – October 2011)

� DA submission and negotiation of approval � Design development finalisation and cost review

Phase Three: Phase Three: Phase Three: Phase Three: Tender Process (November 2011 – January 2012)

� Secure funding � Tender documentation, cost reviews and pre-tender

estimate � Establish tender shortlist, prepare contract particulars,

tender, assess tenders, negotiate, prepare tender report and approvals

Phase Four: Phase Four: Phase Four: Phase Four: Construction (February 2012 – February 2015)

� Award contract � Site establishment � Construction works, including early works � Fit-out � Commissioning and defects rectification

Phase Five: Phase Five: Phase Five: Phase Five: Operational (March 2015 onwards)

� Marketing of the facility to the community and various potential user groups

� Maintenance cost to be managed � Operational cost to be managed Table 22 – Project Phase Risk framework


67

The process of risk management is described in detail below.

RRiisskk CCrriitteerriiaa

Project risks have been allocated under the following Risk Criteria headings:

� People � Programme

� Business process & systems � Scope

� Financial � Quality

RRiisskk AAllllooccaattiioonn

The Risk Management Register (RMR) provides for the allocation of each risk to a designated team member. To date, the risks are being collectively monitored and managed by the team, led by CRC and Savills. Key risks associated with funding, approvals and delivery risk are managed by CRC and Savills and all design risks are currently the responsibility of the design team as part of the detailed documentation phase.

RRiisskk CCoonnsseeqquueennccee

The consequence of risk events occurring has been classified as follows, with guidance as to the meaning of each classification also included:

� Rare – may occur, but only in exceptional circumstances

� Unlikely – could occur but doubtful

� Moderate – may occur at some point in the future

� Likely – will probably occur

� Almost Certain – is expected to occur in most circumstances

The consequence of risk events occurring has been classified and is included at Appendix 9.

RRiisskk RRaannkkiinngg

LikelihoodLikelihoodLikelihoodLikelihood

ImpactImpactImpactImpact

Insignificant Minor Moderate Major Catastrophic

1 2 3 4 5

A (almost certain) M H H EEEE EEEE

B (likely) M M H H EEEE

C (moderate) L M M H EEEE

D (unlikely) L L M H H

E (rare) L L M H H

Figure 32 – Risk classification


68

The required actions emanating from risk rankings may be generally described as follows:

RANKING ACTION

Low Mange by routine procedure

Medium Specify management responsibility

High Required action of the Project Control Group

Extreme Risk Treatment Plan required

Figure 33 - Risk ranking and action

RRiisskk TTrreeaattmmeenntt

Specific actions for individual risks, together with proposed treatment, responsibility, cost and time impact are detailed within the RMR which is included at Appendix 9. The aim, through adoption of the required actions, is that high and extreme risks may be downgraded to Medium and Low risks.

Figure 34 below depicts the risk management process adopted by Savills for the CEP.

Figure 34 – Risk Management Process


69

RRiisskk IIddeennttiiffiiccaattiioonn

The key extreme risks are included in Table 23 below. The complete RMR is included at Appendix 9.

IDIDIDID RISKRISKRISKRISK MITIGATION STRATEGY / MANAGEMENTMITIGATION STRATEGY / MANAGEMENTMITIGATION STRATEGY / MANAGEMENTMITIGATION STRATEGY / MANAGEMENT

17171717 Complete State funding not provided. Early and ongoing dialogue with current State Government to secure the required funding. Subject to PAF and State Government funding approval. Staging plan developed to mitigate risk of future funding.

18181818 Federal funding committed not spent by June 2012, and subsequently lapses.

Programme to be developed that achieves required expenditure. Clarify requirements of the funding agreement to all the team. Meet with Federal Government.

37373737 Approval from Ports North is delayed or conditions are unacceptable to support the development.

Commence early discussions with Ports North planning consultant, and update during DA design development. Draft conditions to be sought. Discussions commenced with Ports and their approval consultant RPS.

99995555 Approval by State of PAF causes delays to project.

Regular reviews with AQ, Treasury and State Government.

126126126126 Hazardous materials in ground. Obtain agreement with lessor to remediate or manage contamination. Studies have been and are continuing to be done.

142142142142 Change in funding policy of State or Federal Government.

Regular contact with funding bodies to discuss. Maintain dialogue with State / Federal member.

147.1147.1147.1147.1 State Government going into caretaker mode affects ability to make decisions on PAF submission.

Work to current programme, and attempt to develop alternate plans in case the State goes to caretaker mode.

147.2147.2147.2147.2 CRC goes into caretaker mode and affects ability to sign contracts / make decisions.

Work to current programme, and attempt to develop alternate plans for when CRC goes to caretaker mode. Table 23 – Extract from Risk Register (Extreme Risks)

RRiisskk AAsssseessssmmeenntt ((qquuaalliiffiiccaattiioonn aanndd qquuaannttiiffiiccaattiioonn))

A risk analysis has been undertaken to quantify the impact of project-specific risks as identified in the project RMR. The results of the risk analysis are presented below and incorporated in the FA and EA detailed at Section 5.0.

� The greatest quantifiable risks identified through the analysis revolve around project funding. The removal of all State and Federal funding decreased project NPV by 60%. Removing all State funding decreased NPV by 47%, whilst halving State and Federal assistance reduced the NPV by 43%. Given the current state of the Cairns economy, any additional capital funding to be provided by Council would need to be debt funded, however at this time the financial burden would be a very significant additional impost on ratepayers, in the context of the FSR Outlook.

� Operating outcomes posed the second-largest risks to the project. This included cases where operating costs and maintenance Capex were assumed to be higher than anticipated, and where revenues were lower than expected. NPV variances ranged from -24% to -37%.

� Delays to the project start of 6 months and 12 months had an immaterial impact on the financial outcome for the CEP, increasing NPV by 4% and 5% respectively.

Further, we note that by not completing the CEP and maintaining the CCT, there is a very real and catastrophic risk of the arts and cultural sector dying in Cairns as the CCT does not meet the identified needs. The inadequacies of the facility are fundamental and cannot be addressed other than with a complete rebuild at a cost that would be comparable to that for the CEP (excluding the restoration of White’s Shed).

Further this would cause major disruption to the Cairns community with no facility available from the start of demolition of the CCT to the opening of the new facility. This presents as a greater risk to the Cultural sector – thereby resulting in the risk rating applied. Mitigation measures are in place for all risks associated with the CEP, whereas the mitigation measures in place for the CCT will not facilitate a long term benefit.


70

6.2 Market Sounding

Specific market soundings were undertaken with respect to organisations considered capable of building the CEP and managing the PAC.

BBuuiillddiinngg CCoonnttrraaccttoorr

A detailed sounding of possible building contractors for the CEP was undertaken by way of telephone calls to the following ten organisations;

� Bovis Lend Lease � Leighton Contractors � Thiess � Brookfield Multiplex

� Laing O’Rourke � Baulderstone � Abigroup � Watpac

� Hutchison � John Holland

This is not necessarily an exhaustive list of potential building contractors, but it does provide an adequate sample to establish that a competitive market exists for the preferred procurement model. All building contractors were asked to respond to five set questions, including:

� Which delivery options the firm would be likely to tender for

� Experience in the Cairns region

� Experience in the balance of Queensland

� Other Performing Arts experience

� Affects of development staging on willingness to tender

The results indicated that there was strong interest from all contractors in the CEP with a general preference towards Managing Contractor or Construction Management forms of contract. Most firms demonstrated relevant experience and had completed projects in Queensland and Cairns.

The results provide a high level of confidence that the market place (inclusive of Tier 1 and Tier 2 contractors) has the necessary skills and appetite to build the CEP to achieve the project objectives.

The updated contractor market sounding is included at Appendix 10

PPAACC MMaannaaggeerr

The current CCT is managed by CRC. The FSR operating position assumes a continuation of that arrangement. However, a sounding of potential non CRC managers for the PAC was undertaken by Creative Economy (CE). Five companies were identified and contacted, including; The Marriner Group, Pegasus, Century Venues, QPAC and Ogdens AEG. QPAC, Pegasus and Ogdens AEG expressed interest. Marriner was not interested. A summary of market sounding results for Ogdens AEG, Pegasus, QPAC and Century Venues is provided in Table 24.


71

NONONONO LOWLOWLOWLOW MEDIUMMEDIUMMEDIUMMEDIUM HIGHHIGHHIGHHIGH VERY HIGHVERY HIGHVERY HIGHVERY HIGH

LEVEL OF LEVEL OF LEVEL OF LEVEL OF INTERESTINTERESTINTERESTINTEREST

Yes – Ogdens Yes - QPAC

Yes - Pegasus Yes - Century

FEASIBLEFEASIBLEFEASIBLEFEASIBLE Yes – QPAC Yes – Pegasus Yes - Century

Yes – Ogdens

CAPABILITYCAPABILITYCAPABILITYCAPABILITY Yes – Ogdens Yes – QPAC Yes – Pegasus Yes - Century

CAPACITYCAPACITYCAPACITYCAPACITY Yes – QPAC Yes – Pegasus Yes - Century

Yes – Ogdens

MATURITYMATURITYMATURITYMATURITY Yes - Pegasus Yes – Ogdens Yes – QPAC Yes - Century

SUPPLY CHAINSUPPLY CHAINSUPPLY CHAINSUPPLY CHAIN Yes - Pegasus Yes – Ogdens Yes – QPAC Yes - Century

TRADITIONS, TRADITIONS, TRADITIONS, TRADITIONS, ATTITUDES & ATTITUDES & ATTITUDES & ATTITUDES & PRACTICESPRACTICESPRACTICESPRACTICES

Yes – QPAC Yes - Pegasus

Yes - Ogdens Yes - Century Table 24 – PAC market sounding results The sounding confirmed;

� A high level of interest for involvement in the management of the CEP PAC

� Recognition of a high level of maturity for the PAC and potential to increase the industry’s development

� A medium (on average) response to the need for the proposed capacity

� A medium / high opinion of the feasibility of the CEP

Full details of the PAC Manager market sounding is included in the CE Report which is included at Appendix 7.

Strong interest exists for both the construction and operational phases of the CEP. This provides a high level of confidence that the market place (inclusive of Tier 1 and Tier 2 contractors and experienced operating/management entities) has the necessary skills and appetite to build and manage the CEP to achieve the project objectives.

6.3 Consideration of Legislative Requirements

EEnnvviirroonnmmeennttaall,, ppllaannnniinngg,, ccuullttuurraall hheerriittaaggee aanndd NNaattiivvee TTiittllee iissssuueess

All environmental, planning, cultural heritage and native title issues have been further considered and analysed by Urbis and MacDonnells. A summary of the results is included below and complete reports are included at Appendix 11.

The Sustainable Planning Act 2009 (SPA) is the primary legislative mechanism governing the Queensland planning framework. A range of approval processes are applicable, and these consider various types of development including making a material change of use of premises, reconfiguring a lot and the carrying out of building, operational, plumbing or drainage work. The SPA is aimed at achieving ecological sustainability by coordinating and integrating planning at the local, regional and state levels and managing the process by which development occurs, and managing the effects of development on the environment.

The Act provides a mechanism for gaining various development approvals via the IDAS, including required approvals under other Acts such as the Environmental Protection Act 1994 (EP Act), Nature Conservation Act 1992 (NCA) and Vegetation Management Act 1999 (VMA).


72

The assessment of and issue of development application determination in general is undertaken by Regional Councils, however of particular relevance to this project, being situated on Strategic Port Land governed by the Cairns Port Authority, development approval is subject to an alternative mechanism. Under the provisions of the Transport Infrastructure Act 1994 (TIA) the Port Authority is conferred the power to prepare and administer its own planning scheme, governing land use activity on Strategic Port Land. As such, development applications for all aspects of the development will be prepared and lodged for assessment by Cairns Port Authority. The application process follows the IDAS process established under the SPA, and will be subject to all referral processes relevant under the Act.

As such, development applications to be prepared for the project will be developed having consideration of all relevant federal and state legalisation, Planning Scheme matters, regional planning and state matters.

In order to ensure compliance with all relevant legislative and policy requirements, CRC has appointed specialist consultants to undertake technical assessment and design in all required fields as noted in Section 7.1.

Importantly, through the process of design and technical assessment, and linked to the preparation of all required development applications, Environmental Management Plans for both construction and operational phases of the development will be prepared and implemented. These plans will identify those areas of potential impact on the raft of legislative requirements identified above, and importantly also on continuing operation of strategic port activity, and identify appropriate mitigation and management strategies and actions to be applied throughout the course of the project.

The complete Urbis advice is included at Appendix 11

The Project has been assessed for native title and Aboriginal cultural heritage compliance against each of the compliance options under the Native Title Act 1993 (NTA) and the cultural heritage protection provisions in the Aboriginal Cultural Heritage Act 2003 (ACHA) and the Guidelines made pursuant the ACHA.

A Due Diligence assessment of the outcomes of the compliance assessment concludes:

� Native title has been extinguished over the project area and in particular:-

� native title is extinguished on freehold land;

� native title is extinguished by the construction of public works before 23 December 1996; and

� native title is extinguished over road reserves, dedicated prior to 23 December 1996.

� No further native title compliance is required to construct the project works.

� There are no Aboriginal cultural heritage sites registered on the Database or Register of Aboriginal Cultural Heritage maintained by the Cultural Heritage Coordination Unit within the site.

� Assuming an EIS is not required, the construction of the Project Works are likely to be able to proceed under either Categories 1, 2, 3 or 4 of the Guidelines, without the need for further Aboriginal cultural heritage assessment on the basis that either:-

� the surface of the ground within the site has been substantially disturbed; and

� the project works will be undertaken within a developed area.

.


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6.4 Consideration of Whole of Government Policy Issues

The CEP design will continue to be developed and be consistent with the principles and objectives of the Commonwealth, State and Local Government Plans, Policies and Strategies identified in Table 25. This approach will also be adopted during construction and operational phases. Detailed consideration of alignment with policies is included at Appendix 12.

GOVERNMENT GOVERNMENT GOVERNMENT GOVERNMENT LEVEL / LEVEL / LEVEL / LEVEL / DEPARTMENTDEPARTMENTDEPARTMENTDEPARTMENT

PLAN, POLICY, STRATEPLAN, POLICY, STRATEPLAN, POLICY, STRATEPLAN, POLICY, STRATEGYGYGYGY ALIGNMENTALIGNMENTALIGNMENTALIGNMENT

Commonwealth GovernmentCommonwealth GovernmentCommonwealth GovernmentCommonwealth Government

Regional Development Regional Development Regional Development Regional Development AustraliaAustraliaAustraliaAustralia

� Regional Road Map – FNQ & Torres Strait. Yes

Australia CouncilAustralia CouncilAustralia CouncilAustralia Council � Mission, vision and goals generally.

� Community Partnerships sector plan 2010-2012.

� Dance sector plan 2010-2012

� Inter-arts sector plan 2010-2012

� Literature sector plan 2010-2012

� Music sector plan 2010-2012

� Theatre sector plan 2010-2012

� Visual Arts sector plan 2010-2012.

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

OtherOtherOtherOther � Disability Discrimination Act

� Disability Services Act 1992

� Building Code of Australia

� Australian Standards

Design will comply with all statutory requirements


74

State GovernmentState GovernmentState GovernmentState Government ALIGNMENTALIGNMENTALIGNMENTALIGNMENT

Arts QueenslandArts QueenslandArts QueenslandArts Queensland � Queensland Arts and Cultural Sector Plan 2010 - 2013

� The Aboriginal and Torres Strait Islander Arts Policy 2009-2013

� Creative Queensland

� Visual Arts and Craft Strategy

� arts, culture + me

� Touring Strategy

� Contemporary Music Strategy

� Design Strategy 2020

� Regional Arts Strategy

� Queensland Museum Strategic Plan 2009-13

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

No

Department of Department of Department of Department of Infrastructure & PlanningInfrastructure & PlanningInfrastructure & PlanningInfrastructure & Planning

� FNQ Regional Plan 2009-2031 Yes

Department of Department of Department of Department of Employment, Economic Employment, Economic Employment, Economic Employment, Economic Development and Development and Development and Development and InnovationInnovationInnovationInnovation

� Cairns’ Economic Future: A plan for jobs and the economy 2009-2011

Yes

Queensland GovernmentQueensland GovernmentQueensland GovernmentQueensland Government � Toward 2 – Tomorrows Queensland

� Indigenous Employment Policy

� Smart State Strategy – Queensland’s Smart Future 2008 – 2012

� Queensland Tourism Strategy 2006-2016

� Local Industry Policy – A fair go

� Aboriginal Cultural Heritage Act 2003

� Torres Strait Islander Cultural Heritage Act 2003

� Sustainable Planning Act 2009

� Vegetation Management Act 1999

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Local GovernmentLocal GovernmentLocal GovernmentLocal Government ALIGNMENTALIGNMENTALIGNMENTALIGNMENT

CRCCRCCRCCRC � CRC Cultural Plan: Strengthening our Cultural Vitality 2009

– 2014. Yes

� CRC Corporate Plan 2009-2014 Yes

� CRC draft community plan 2011-2031

� Indigenous Employment Strategy

� Draft Cairns City Centre Masterplan

� Cairns Plan Planning Scheme

Yes

Yes

Yes

Yes

Department of Department of Department of Department of Environment & ResoEnvironment & ResoEnvironment & ResoEnvironment & Resource urce urce urce ManagementManagementManagementManagement

� Environmental Protection (Water) Policy 2009

� Trinity Inlet environmental values and water quality objectives - Basin No. 111 (part)

Yes

Yes

Ports NorthPorts NorthPorts NorthPorts North � Ports North Masterplan Yes Table 25 –Whole of Government Policy


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PPrriivvaaccyy aanndd sseeccuurriittyy iissssuueess

We note the Government’s standard on information security sets out the principles for addressing information security risks, including: classification and control of material; personnel security; and physical and environmental security.

These issues have been considered in the assessment of project options as part of the public interest assessment and the results are detailed in Section 6.7.

6.5 Employment and Training Impact Statement

CRC engaged PWC to undertake an Employment and Skills Development Impact Statement (ESDIS) in accordance with the PAF requirements and the Employment and Skills Development Impact Statement Guidelines, as developed by the Department of Employment, Economic Development and Innovation (DEEDI),

The purpose of the ESDIS is twofold:

� identify where employment opportunities are (and are not) being generated under all project options for the CEP; and

� recognise skills development potential under the project options.

As shown in Figure 35, Option 6, Stage 1 is preferred on the basis of both employment impacts and skills development impacts.

Together with sustaining employment during the construction phase and fostering regional growth during the operational phase, the CEP will encourage participation in the arts and cultural activities, thereby harnessing the associated benefits. These benefits include improved languages skills, more developed critical thinking ability, and increased confidence to engage with the education system.

Having a local population that is increasingly able to think critically and is more confident and culturally aware, will lead to a more productive workforce that can meet the challenges of a growing region.

A complete copy of the ESDIS is included at Appendix 13.


76

Employment impacts

Skills development

impacts

Construction phase

Operational phase

Operational phase

Construction phase

Preferred

option based

on impactBase CaseOption 6 – Stage 1

Option 6 – Stage 1

N/A

N/A

The construction of the Precinct may

directly sustain employment for up to

70 persons.

The flow-on employment from the

construction of the Precinct may not

be substantial. This construction may

simply direct resources away from

other construction (or mining) activity.

Operation of the Precinct may directly

sustain employment for 30 people.

Ongoing operation of the Precinct may

directly sustain employment for 20

people

Tourist activity, together with

expenditure in, for example, retail and

restaurant/catering industries, may

support economy wide employment.

Economy-wide employment supported

by the Precinct is expected to be far

greater than that under the Base Case,

due to its additional facilities and

capacity to attract visitors.

While the construction of the Precinct

may contribute to skills shortages

currently being experienced in

Queensland’s construction industry,

there are numerous government

programs in place to address this issue.

Once construction of the Precinct is at

its peak, there may be an increase in

labour supply in the local construction

industry the due to these programs.

For artists and performers that

participate creatively in artistic and

cultural centres, increased knowledge

sharing and collaboration will have

benefits for their skills and techniques.

Receptive and creative participation by

consumers at the Precinct may assist in

enhancing learning ability and

performance in the work place.

While the Civic Theatre and other

venues throughout Cairns currently

encourage both creative and receptive

participation in arts and cultural

activities to some extent, the Precinct,

with its larger complementary

facilities, will foster and encourage

much greater participation, thereby

harnessing additional community-wide

skills development benefits.




Figure 35 – Summary and comparison of key employment and skills development impacts for both options (PWC)

6.6 Consideration of Regulatory Issues

At this time it is not considered that any change is required to regulations which currently apply to the site or the proposed development and as such no Public Benefit Test and National Competition Policy review has been undertaken. There is no indication that the development has the potential to unreasonably restrict competition.


77

6.7 Public Interest Assessment

A Public Interest Assessment of the two project options has been undertaken based on the identified public interest elements and criteria identified in Table 27. Each option was rated against the defined public interest elements using the assessment scale set out in Table 26 below. The results are provided in Table 28.

RATING (Scope v Need/Outcome)

0 Does not meet

1 Partially meets

2 Meets Table 26 – Assessment Scale

Table 27 – Rating criteria

RATINGRATINGRATINGRATING 0000 1111 2222

EFFECTIVENESS CRITEREFFECTIVENESS CRITEREFFECTIVENESS CRITEREFFECTIVENESS CRITERIAIAIAIA

Service requirementService requirementService requirementService requirement Fails to meet requirement

Partially meets requirement

Meets or exceeds requirement

Stakeholder impactStakeholder impactStakeholder impactStakeholder impact Significant disruption to services including, adverse cultural impacts

Minimal measurable improvement to cultural outcomes or services

Improvement of existing services and increased cultural benefit

Accountability / transpareAccountability / transpareAccountability / transpareAccountability / transparency (Probity)ncy (Probity)ncy (Probity)ncy (Probity) Regime not in place Regime poorly structured

Regime exists including monitoring and reporting procedures

Public access and equityPublic access and equityPublic access and equityPublic access and equity Fails to comply with key legislative requirements

Some areas of non-compliance with some barriers remaining

Removes barriers currently experienced

Consumer rightsConsumer rightsConsumer rightsConsumer rights Severely compromised Partially compromised Not affected

SecuritySecuritySecuritySecurity Security provisions inadequate

Security considered but with system / monitoring limitations

Security provisions adequate

PrivacyPrivacyPrivacyPrivacy Severely affected Partially affected Not affected

History, Heritage, the Arts and CultureHistory, Heritage, the Arts and CultureHistory, Heritage, the Arts and CultureHistory, Heritage, the Arts and Culture No improvement Minimal measurable improvement to outcomes

Improvement of existing services and increased benefits

Quality of LifeQuality of LifeQuality of LifeQuality of Life No improvement Some improvement, however not significant

Significant opportunity for improvement

EmploymentEmploymentEmploymentEmployment No increase to employment opportunities

Some increase in opportunities (in number and across various sectors)

Significant increase in opportunities (in number and across various sectors)

EducationEducationEducationEducation No additional opportunities

Some opportunities to provide educational benefits

A range of opportunities to provide educational benefits


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PUBLIC INTEREST ELEMENT APPROACH

OP

TIO

N 1

- B

ase

Ca

se

OP

TIO

N 6

(S

tag

e 1

)

� Consider whether the Option meet the service requirements and outcomes identified 0 1

� Consider the effects of the Option on the existing performing arts community 0 1

� Does the Option take into consideration all levels of Government policy 1 2

� Relevant rights of affected individuals and communities, including: 1 2

� any legal requirements� current government policy requirements� minimum requirements from previous similar projects

Accountabil ity and transparencyAccountabil ity and transparencyAccountabil ity and transparencyAccountabil ity and transparency � Are mechanisms proposed to ensure that the community can be well informed about

the obligations of the government and any private providers involved in the process0 1

� Are there adequate venues of independent oversight 2 2

Public accessPublic accessPublic accessPublic access � Are mechanisms proposed to ensure ongoing public access to essential infrastructure

– including a continuous supply of services0 2

� Are adequate arrangements to ensure that disadvantaged groups can use the

infrastructure effectively1 2

Consumer RightsConsumer RightsConsumer RightsConsumer Rights � Does the CEP adequately provide for those recipients to whom government owes a

high level of duty of care 1 2

� those who are most vulnerable 1 2

Do any rights or needs of these recipients need to be provided for, or protected by Gov:1 1

� at law� under government policy

SecuritySecuritySecuritySecurity Are adequate mechanisms proposed to provide assurance that the health and safety of

the community is secure.2 2

PrivacyPrivacyPrivacyPrivacy Does the CEP address: 1 2

� the users’ rights to privacy

� government’s obligations to the public under law

� government’s obligations to the public under government policy

� government’s political accountability to the public

� any other undertaking by government to the public, to protect the rights to privacy

identified above

History, Heritage, the Arts and History, Heritage, the Arts and History, Heritage, the Arts and History, Heritage, the Arts and

CultureCultureCultureCulture

� Does the CEP adequately respond to the site's history, heritage constraints, Arts

community and Cultural needs?0 2

Quality of LifeQuality of LifeQuality of LifeQuality of Life � Does the CEP provide an opportunity to increase the quality of life for the Cairns

community?0 2

EmploymentEmploymentEmploymentEmployment � A Does the CEP result in an increase in employment opportunities for Cairns residents?0 2

� Will the CEP result in direct and indirect employment opportunities for a range of

sectors including construction, management, retail, commercial, etc?0 1

EducationEducationEducationEducation � Will the CEP provide enhancement of education opportunities with respect to european

heritage, cultural heritage, the Arts, and indigenous heritage?0 2

TOTAL SCORETOTAL SCORETOTAL SCORETOTAL SCORE 11 31

Distributional equity and impact Distributional equity and impact Distributional equity and impact Distributional equity and impact

on stakeholderson stakeholderson stakeholderson stakeholders

Effectiveness in meeting the Effectiveness in meeting the Effectiveness in meeting the Effectiveness in meeting the

service requirementservice requirementservice requirementservice requirement

Table 28 – Public Interest Assessment Results Option 6, Stage 1 achieved the highest score of 31 which reflected its superior ability to address the identified public interest elements. The Base Case did not satisfactorily address these requirements.


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6.8 Needs and Outcomes Assessment

The results of the assessment of the Base Case and Option 6, Stage 1 against the identified needs and outcomes are described in Table 29 below. The results clearly indicate that Option 6, Stage 1 provides a superior outcome and either meet or exceed the identified cultural, community and performing arts needs and outcomes sought.

IDENTIFIED NEED OUTCOME SOUGHT

OP

TIO

N 1

- B

ase

Ca

se

OP

TIO

N 6

(S

tag

e 1

)

Promotion and Enhancement of Cultural Promotion and Enhancement of Cultural Promotion and Enhancement of Cultural Promotion and Enhancement of Cultural

Vital ity – Vital ity – Vital ity – Vital ity –

� Social cohesion.1 2

� Social capital through engagement and participation of a community. 1 2

� Education opportunities through expression and participation. 1 2

� Employment and economic benefits. 1 2

� Health through active participation and cognitive stimulation. 1 2

� Sense of place and pride in the community. 1 2

� Promotion of community cultural diversity and tolerance. 1 2

A Community Meeting Place A Community Meeting Place A Community Meeting Place A Community Meeting Place � A focal point for the community – a meeting place which enjoys a high level of

community ownership.1 2

� Creation of new cultural and shared community experiences. 0 2

� Welcome and profile cultural expression from the Indigenous communities of

the region, and from the surrounding communities.1 2

� Provide a place for multicultural celebration, events and performance. 0 2

� Present music, dance and drama that meet the needs of a modern, diverse

Queensland community both now and into the future.1 2

� Present performances that are appealing to the tourist market and which

increase the length of stay and/or experience of tourists visiting Cairns.1 2

� a growing population, � Present new and hybrid art-forms, including digital media work. 1 2

� members of the community with a

disability,

� Present large commercial entertainment events that require significant box

office revenues to be feasible. 1 2

� touring performing groups that need larger

venues

� Welcome and profile cultural expression from the Indigenous communities of

the region, and from the surrounding communities.0 2

� performances that require modern

acoustics

� Create a cultural hub for the whole region – encouraging artistic and cultural

exchange and collaboration.0 2

� space for rehearsals and flexible stage

arrangements

� Creation of new cultural and shared community experiences. 1 2

� orchestras commensurate in size with

larger performances

� Provide a focal point for the community – a meeting place which enjoys a high

level of community ownership.0 2

� industry standard ancillary facilities � Increase the economic impact of performing arts to the regions GRP.

� whole of school performances or events.

TOTAL SCORE TOTAL SCORE TOTAL SCORE TOTAL SCORE 15 40

Performing Arts Infrastructure that meets Performing Arts Infrastructure that meets Performing Arts Infrastructure that meets Performing Arts Infrastructure that meets

the needs of – the needs of – the needs of – the needs of –

Improvement of Cultural Infrastructure to the

city of Cairns and the region of FNQ that

identifies and defines the community’s cultural

diversity.

21

Table 29 – Needs & Outcomes Assessment Results


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6.9 Cultural Vitality Assessment

The results of the assessment of the Base Case and Option 6, Stage 1 against the cultural vitality indicators are described in Table 30 below. The results clearly indicate that Option 6, Stage 1 provides a superior outcome and either partially meets, meets or exceeds the identified measurable criteria. The Base Case fails to provide any increase in the quality or quantity of arts and cultural, community and economic outcomes.

INDICATOR ASSESSMENT CRITERIA

OP

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N 1

- B

ase

Ca

se

OP

TIO

N 6

(S

tag

e 1

)

Arts & Cultural Measures � Increase number of existing cultural venues and facilities. 0 1

� Increase number of new works developed locally. 0 1

� Increase number of new works presented locally. 0 1

� Increase number of touring products presented locally. 0 2

� Increase number of attendances at ticketed/free or low cost events. 0 2

� Increase satisfaction of local artists hirers, arts organisations with the arts

& cultural venues.0 2

Community Engagement � Increase participation of arts and cultural volunteering (number of venue

volunteers, frequency and hours).0 1

� Increase participation of non-arts groups and organisations in arts and

cultural events and activities (eg schools, seniors groups, social service /

welfare / health organisations, sporting groups etc.)

0 1

� Increase opportunities for community story telling / community history and

heritage.0 1

� Increase in employment generated by existing cultural venues. 0 1

� Increase on the local expenditure on arts and culture. 1 1

� Increased tourist expenditure on arts and culture. 1 1

� Increase funds injected into local businesses through contracting with arts

& cultural venues.0 1

TOTAL SCORE TOTAL SCORE TOTAL SCORE TOTAL SCORE 2 16

Economic Outcomes

Table 30 – Cultural Vitality Assessment Results 6.10 Summary of Results

Objective assessments of each option against public interest, needs and outcomes, risk, and cultural vitality indicators were completed separately and in addition to the analyses undertaken by PWC. Table 31 below summarises and ranks each option following assessment of the above indicators. Option 6, Stage 1 clearly ranks as the Preferred Option, ranking 1 for all assessment criteria other than cost.

OPTIONOPTIONOPTIONOPTION PUBLIC PUBLIC PUBLIC PUBLIC INTERESTINTERESTINTERESTINTEREST

NEEDS & NEEDS & NEEDS & NEEDS & OUTCOMESOUTCOMESOUTCOMESOUTCOMES

CULTURAL CULTURAL CULTURAL CULTURAL VITALITYVITALITYVITALITYVITALITY

RISKRISKRISKRISK OVERALLOVERALLOVERALLOVERALL

Base CaseBase CaseBase CaseBase Case 2 (11) 2 (15) 2 (2) 2 2222

Option 6 Stage Option 6 Stage Option 6 Stage Option 6 Stage 1111

1111 (31) 1111 (40) 1111 (16) 1 1111 Table 31 – Ranking of options


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6.11 Preferred Option

Option 6, Stage 1 is the Preferred Option. The results of detailed analyses clearly demonstrate that it will provide a superior outcome in terms of addressing key public interest criteria. Preferred Option 6, Stage 1 will satisfy and exceed the identified needs and outcomes and generally provide an economically viable and vibrant arts and cultural hub for Cairns. The Base Case analysis shows that the existing CCT cannot meet the above criteria and presents an unacceptable risk to the longevity and viability of the Cairns arts and cultural community, related stakeholders and user groups.

6.12 Consideration of Procurement Strategies

CCoonnssuullttaannttss

Consultants were invited to submit tenders to provide design consultancy services associated with DA documentation, design development, tender preparation and detailed design. A two stage process was adopted whereby consultants were invited to submit an Expression of Interest (EOI), followed by a Request for Tender (RFT).

EOI’s were assessed against predetermined evaluation criteria, and in accordance with CRC’s procurement and probity guidelines. A shortlist of consultants was then requested to provide a lump sum tender (RFQ). Again, submissions were assessed against predetermined evaluation criteria.

Following further interviews and negotiations with a preferred party for each consultancy, a consultant was appointed. This process was adopted for all consultancies.

CCoonnssttrruuccttiioonn

Through a series of risk and procurement workshops with State, Commonwealth and CRC officers, as part of the PE process, it was agreed that the preferred delivery model for the CEP is either a Construction Management (CM) or Managing Contractor (MC) form of contract. The key issue is whether the detailed design responsibility is transferred to the Contractor or retained with CRC.

It is now proposed that a Managing Contractor (MC) contract be used with the Principal (CRC) having the right to transfer the detailed design responsibility to the Contractor but no obligation to do so. With this model CRC will be able to decide as the design progresses if it is confident that the required design standards can be maintained with the Contractor holding design responsibility.

It is proposed to use the Queensland Government’s, Department of Public Works’ Managing Contractor Design and Construction Management form of contract as the base document. This allows CRC to either proceed on a D&C form of delivery (stage 2 of the Contract) or to go to another form of delivery if it is not confident that the design integrity will be maintained with the transfer of design responsibility.

It is recognised that if CRC retains the design responsibility, it is accepting additional risks in relation to the supply of information and the accuracy of the documentation. These risks can in part be passed on to the design team and can be mitigated by limiting the Contractors grounds for Extensions of Time and Variations.

The market sounding, undertaken as part of this BC, demonstrates that there is strong interest from tier one builders to tender for this work, and that they will accept either a CM or MC form of contract.

It is proposed to call for Expressions of Interest and to then tender the Preliminaries and Margin from a selected short-list.

Under the above contract there is a first stage during which the design is developed with the Contractor’s input and with the Contractor checking the pricing for the works so that it can make an offer for an agreed scope for an agreed Guaranteed Construction Sum (GCS). If the scope and GCS is acceptable to CRC it will then proceed to stage two with the Contractor accepting design responsibility.

It is proposed to undertake a separate Early Works package during the first stage which is accommodated in the above form of contract. This will allow works to proceed whilst the design is being finalised. It is important that at least the majority of the funding from the Commonwealth Government is expended in FY12. The cost of these works will have to be consistent with the Cost Plan prepared by the Quantity Surveyors (WT Partnership).


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7.0 Implementation

This section describes how the preferred project option will be implemented. It confirms that implementation is adequately planned for and can be delivered. All costs and timeframes associated with delivery have been included in the detailed evaluation of the Preferred Option. Consideration of the key implementation issues identified is included below.

7.1 Scope

The scope of the Preferred Option 6, Stage1 specifically includes the design and delivery of the following key components of the CEP;

� Approximately 1,100 seat proscenium theatre

� Stabilisation and adaptive reuse of the heritage-listed White’s Shed

� Extensive public plaza and canopy

� Basement parking

� Pedestrian bridge link to Convention Centre

� Off site and enabling works

Floor plans, sections and elevations, of the Preferred Option (completed by CA-Cox Rayner) are included at Appendix 14.

The project budget for these works has been established as $154.611 million. WT Partnership has prepared a cost plan which supports the project budget and includes a contingency allowance of 10%. WT Partnership has also confirmed that this cost plan is to a P90 level of certainty. The cost plan and P90 certificate is included at Appendix 15.

A schedule of major CEP component areas is provided in Table 32 below.

CEP SCOPE ITEMCEP SCOPE ITEMCEP SCOPE ITEMCEP SCOPE ITEM AREA (m2)AREA (m2)AREA (m2)AREA (m2)

Basement CarparkingBasement CarparkingBasement CarparkingBasement Carparking 6,388

White’s ShedWhite’s ShedWhite’s ShedWhite’s Shed 1,192

PACPACPACPAC 8,303

Public PlazaPublic PlazaPublic PlazaPublic Plaza 2,274

TOTALTOTALTOTALTOTAL 18,15718,15718,15718,157 Table 32 – Option 6, Stage 1 Area Schedule DDeessiiggnn

The following design consultants have been appointed thus far to develop a coordinated design for the Preferred Option:

Architect – CA Cox Rayner Cost Planner – WT Partnerships Electrical Engineer – Steensen Varming

Mechanical Engineer – Arup Fire Services – SPP Group Hydraulic Engineer – SPP Group

Structural Engineer - Arup Civil Engineer - Cardno Vertical Transport – Steensen Varming

Acoustic Engineer – Acoustic Studio Theatre Planner – Schuler Shook Heritage Planner – Converge Heritage

Traffic Engineer - Arup Facade Engineer - Arup Landscape Architect – Tract

Geotechnical Engineer – TBA Town Planner - Urbis Maritime Consultant – GHD

Legal adviser – MacDonnells Law Probity Adviser – BDO (Nth Qld) Surveyor – Brazier Motti


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The consultant team has commenced the preparation of the development applications and the preparation of tender documents. Tenders have been received and assessed for the full scope of work, however appointment is on a staged basis. Providing funding is available, the design team will continue to undertake the full design and will continue until MC appointment, at which time CRC will have the option to novate the design consultants to the MC, but will be under no obligation to do so.

DDeelliivveerryy

To implement the Preferred Option in accordance with the preferred procurement method, the project will be delivered by the following six distinct project phases, including:

� Phase 1 - Masterplan and Concept/Schematic Design Phase (Completed)

� Phase 2 - Development Application Phase

� Phase 3 - Tender Documentation and Assessment Phase

� Phase 4 - Design Development Phase

� Phase 5 - Construction Documentation and Delivery Phase

� Phase 6 – Post Construction / Operations / Management

OOppeerraattiioonnss // MMaannaaggeemmeenntt

PACPACPACPAC

The current proposed operational model for the PAC is via a separate CRC owned management entity – this is discussed in further detail in the CE Report which is included at Appendix 7. CRC would retain the option of utilising external management expertise. This model is consistent with performing arts venues owned by Gold Coast City Council, Toowoomba Regional Council, Townsville Council, Queensland Government and Victorian Government.

It is envisaged at this stage that the governance arrangements following project handover is to adopt a sole purpose company with CRC as sole shareholder. The proposed structure of this model could be as follows:

Figure 36 – Proposed operational & management model structure


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The advantages and disadvantages of the preferred model are described below.

ADVANTAGESADVANTAGESADVANTAGESADVANTAGES DISADVANTAGESDISADVANTAGESDISADVANTAGESDISADVANTAGES

� Ownership of management entity by CRC � Establishment of costs of separate entity

� Alignment of facility and management ownership � Change management required from existing operations

� Management company bears substantial component of risk and liabilities

� Termination, redeployment or transitional arrangements

� Broader expertise and skills base through independent directors

� Independent financial management to drive efficiency

� Flexible employment arrangements through relevant Industry Awards

� Lower employment costs and savings assed to clients and CRC

� Benefits of CRC procurement when there are cost advantages

� Balance of community and entrepreneurial activity

Procurement of the said management expertise would be undertaken in accordance with CRC procurement and probity guidelines and likely consist of the following stages:

� Review and update market sounding

� Develop operational brief and define operational financial hurdles

� Undertake EOI / Tender

� Assess, appoint, monitor and report

CEPCEPCEPCEP ManagementManagementManagementManagement

With respect to the wider CEP management, the following process would be followed to ensure an appropriate manager is appointed:

� Review Operational and Maintenance manuals

� Develop management brief, define operational budgets and specialist sub-contractor requirements

� Undertake EOI / Tender

� Assess, appoint, monitor and report

7.2 Breakdown of Tasks

CRC will be responsible for implementing the Preferred Option 6, Stage 1. Key delivery events are summarised below:

EVENTEVENTEVENTEVENT DURATIONDURATIONDURATIONDURATION

� Business Planning Aug 2011 – Nov 2011

� Main Contractor Procurement Sept 2011 – 15 Feb 2012

� Landowners Approval Oct 2011

� Planning Approvals Sept 2011 - Aug 2012

� Early Works Package, Appointment and Commencement Oct 2011 - April 2012

� Construction Period April 2012 –March 2015

� Pre-opening marketing 2013 - 2015

� Establish operational management framework October 2014 –March 2015

� Active operational management April 2015 - ongoing


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A Gannt chart outlining the breakdown of project tasks has been included in Appendix 1.

7.3 Human Resources (HR)

Human resources required to implement the Preferred Option include both internal and external resource requirements.

The roles required for project delivery include:

� CRC Project Team:

� Project Manager

� Project Officer

� Administration

� CRC Management which includes:

� Probity Officer

� Communications and Marketing Manager

Refer to Section 4.0 for proposed governance framework.

� Project consultants

Refer Section 7.0 Design, for list of required consultants.

� Existing CCT staff

The human resource requirements will change post project handover. The envisaged roles will be:

� CRC

� Management

� Probity Officer

� Venue Management entity

� Performing Arts Staff

Refer to the ESDIS included at Appendix 13 for identification of staff requirements for the existing CCT and the CEP.

The estimated human resource cost for project delivery for the Preferred Option is estimated to be $2 million.

The estimated human resource costs for ongoing operations of the PAC, has been estimated as follows:

� staff commencement cost at FY 2015 at $523,000

� range from $2.163 million - $2.698 million from FY 2016 to 2021

7.4 Governance Arrangements

The governance arrangements required to implement the Preferred Option have been identified in Section 4.

The proposed operational governance arrangements and structure are identified in Section 6.

7.5 Reporting Arrangements

Reporting arrangements for the Preferred Option during implementation and operational phases include:

� Monthly Project reports from the Project Control Group. These reports have been written to be directed to both the PCG and CEP Committee. The report covers all specific project delivery aspects of the CEP project. This is prepared by a Project Management Consultant on behalf of CRC.

� Monthly independent Finance and Probity reports from CRC’s finance and probity auditors.


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� Monthly Marketing and Communications Report. These reports will be directed to both the PCG and CEP Committee. The report outlines proposed marketing and communication information to be adopted for the CEP and requires approval by the PCG and CEP Committee. This is prepared by a Senior Account Manager from CRC Marketing and Communications.

� Active operational phase. The final arrangements are yet to be defined however it is likely that they will consist of a monthly report by the management entity to CRC (in a similar manner to the current CCT) which outlines revenues and expenditures against pre-determined hurdles and budgets along with status of other operational matters including performances (actual, booked and likely), maintenance, attendance (tourist / local) and other matters.

7.6 Stakeholder Engagement

The CEP project demands a comprehensive and coordinated communication and engagement plan that acknowledges and manages the risks involved in its successful delivery. Minimising project risks through effective stakeholder engagement will be pivotal in reducing the possibility of project delays and associated cost implications.

The Communications and Stakeholder Management plan (‘The Plan’) highlights the project’s ‘pressure points’ and provides appropriate mechanisms to deliver timely, transparent and targeted information to stakeholders. It builds upon the goal of the CRC’s March 2011 Community Engagement Strategy - Communications Plan (‘The Strategy’) – specifically, to “engage with the wider community and stakeholder groups” and expanded to reflect the specific requirements of implementing the Preferred Option. Key stakeholders impacted by the implementation of the Preferred Option have been identified and are summarised below.

GROUPGROUPGROUPGROUP KEY KEY KEY KEY STAKEHOLDERSSTAKEHOLDERSSTAKEHOLDERSSTAKEHOLDERS

Federal GovernmentFederal GovernmentFederal GovernmentFederal Government � Department of Infrastructure

� Members of Parliament

State Government State Government State Government State Government � Arts QLD

� DPW

� Treasury

� DLGP

� Ports North

� Members of Parliament

Local Government:Local Government:Local Government:Local Government: � CRC Councillors

� CRC Project Control Group

� CRC Staff

Local CommunityLocal CommunityLocal CommunityLocal Community � Residents of the CRC, Port Douglas and Pacific Rim areas

� Indigenous and multi cultural groups

� Business community

� Arts community

OtherOtherOtherOther � Local Media

� User Groups

� Consultants

� Primary

� Secondary

� Contractors

� Services Providers Table 33 – CEP Stakeholders The CEP requires ongoing engagement with many of these stakeholders and calls for a careful process of informing and consulting. An action plan has been included which outlines the project phases, the project activity, what has been communicated, to whom, when and outlines who is responsible. This action plan is the ‘road map’ for communications and stakeholder management for each of the project phases and is included in the Community Engagement Strategy (CES) which is included at Appendix 3.


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Key messages of the project have been established and agreed by CRC and include the following main categories:

� What is it and what’s in it for me?

� The Location

� The History

� Centre Design

� Cost

� Economic Benefits

� Survey Results

� Other Benefits

� Who can use it?

These main categories have been expanded to form an extensive list of key messages that form the basis of all dialogue with the public and interest groups. These will be updated by the CRC as the project progresses.

Communication protocols have been established and provide for a dedicated contact person to approve all communication content to stakeholders, formulation and maintenance of a consultation contact database, a rigid communications material sign-off process and Media Communications protocol. These protocols will apply to CEP project phases 2 – 5.

The communication and stakeholder management plan will be regularly monitored and reviewed. Establishing and understanding the Key Performance Indicators (KPI) and regularly maintaining them will provide an effective monitoring tool.

The CMP and SMP are included at Appendix 3.

7.7 Risk Management

Risk Management has been described in detail in Section 6.1.

7.8 Benefits Management

Figure 31 summarised and compared the monetised, quantified and qualified costs and benefits under each of the five impact categories for Option 6, Stage 1.

The costs and benefits represent clear targets across the five impact categories identified in Section 5.3, including;

� Direct & Indirect expenditures

� Labour

� Social cohesion / quality of life

� Education & skills training

� Environment

The Benefits Realisation Strategy (BRS) will;

� relate to community stakeholders and cultural groups

� address the success criteria

� focus on establishing KPI’s relating to project objectives and sustainability objectives

� describe where and when the benefits will occur and who will be responsible for their delivery

� will be integrated into, and coordinated with, the PMP and will clearly detail handover and responsibilities for the ongoing management and operation of the CEP

There will also be a tracking process which monitors achievements of benefits against expectations and targets. The tracking process will be capable of tracking both “hard” (number of visitors, amount of spend, etc) and “soft” (safety, functionality, etc) benefits.


88

In addition, there will be evidence of realisation of actual benefits, through the tracking process. Regular summary progress reports will be provided to CRC throughout the development and operational phases.

7.9 Change Management

Implementation of Preferred Option 6, Stage 1 for the CEP will generate both organisational and operational changes. These changes must be identified and managed during the delivery and ongoing operation of the project.

The aim of the Change Management Strategy (CMS) is to achieve a shared understanding of the changes to the provision of cultural activities, facility capacity and location, operational and business practices delivered through the CEP.

This will be achieved through:

� Clearly identifying, prioritising, articulating and implementing the changes in cultural opportunities arising from the project

� Communicating effectively with stakeholders, staff, consumers, local community and other identified interested parties

� Clearly defined and rigorous Governance structures to oversight the change processes required before, during and after project completion

� Managing changes to the project scope, project objectives and to the project management plan

� Documenting and monitoring the impact of changes

� Allocation of appropriate and adequate resources to manage the change processes

In summary, the project will utilise an endorsed change management methodology to deliver the project objectives.

The Change Management Plan (CMP) is an iterative document subject to review and change as the CEP delivery programme progresses.

The CMS and the CMP are included at Appendix 16.

7.10 Quality Management

The approach to quality management for each significant development phase is described below.

DDeessiiggnn MMaannaaggeemmeenntt

Quality Management for the design of the CEP is achieved through the implementation of;

� Consultant appointment criteria

The selection and formal engagement of suitable design consultants for the remaining project phases 2 – 5, are required to demonstrate their consultancy’s quality assurance certification and policy to the CRC. This will be required for the duration of the project. This is a pre-requisite before execution of the Terms and Conditions agreement and formal appointment.

� Quality Management Plan

The Quality Management Plan and procedures are compliant with ISO 10006-2003, and ISO9001. A project quality plan for project delivery has been prepared and is included at Appendix 17.

This quality framework is utilised to manage the design process and as a means of ensuring appropriate levels of design quality. Periodic peer review will also be conducted for select disciplines during design development. There will also be ongoing stakeholder review of developing design.


89

CCoonnssttrruuccttiioonn

The level of quality required to be delivered by the successful contractor, in terms of output and process, will be monitored by the Project Manager and Superintendent as prescribed in the construction contract documents. The project quality plan will be in place for the delivery of the CEP. Documentation will comprise:

� Client Brief

� Tender Documentation

� Construction Performance Specifications

� Conditions of development consent (including referral agencies)

� Conditions of Contract

OOppeerraattiioonnaall // MMaannaaggeemmeenntt

The level of quality required during the operational and management phases will be monitored by an officer or division nominated by CRC or external contractor, as prescribed in the Management Contract documents, comprising:

� Client Brief

� Tender Documentation

� Performance Specifications

� Contractor Operational & Maintenance Manuals (including structural and other warranties).

� Operating Model

7.11 Funding Framework

The proposed funding for the Preferred Option (Option 6, Stage 1) is:

� Commonwealth Government $40,000,000

� State Government $57,305,500

� CRC FAA Reserve $11,000,000

� CRC Loan Facilities $30,305,000

� CRC Asset Sales $16,000,000

TOTALTOTALTOTALTOTAL $15$15$15$154444,,,,611611611611,000,000,000,000

CRC resolved at its meeting of 21 September 2011 to fund its $57,305,500 share of the Capex.

The assumed cash flow for the contributions from Government is:


($’000)($’000)($’000)($’000)


($’000)($’000)($’000)($’000)


($’000)($’000)($’000)($’000)


($’000)($’000)($’000)($’000)


($’000)($’000)($’000)($’000)

Option 6 (Stage 1) CapexOption 6 (Stage 1) CapexOption 6 (Stage 1) CapexOption 6 (Stage 1) Capex 154,612154,612154,612154,612 25252525,811,811,811,811 67,36267,36267,36267,362 36,71236,71236,71236,712 24,72624,72624,72624,726

Federal FundingFederal FundingFederal FundingFederal Funding 40,00040,00040,00040,000 25,811 14,189 - -

State FundingState FundingState FundingState Funding 57,30557,30557,30557,305 - 26,586 18,356 12,363

CRC FundingCRC FundingCRC FundingCRC Funding 57,30557,30557,30557,305 - 26,586 18,356 12,363 Table 34 – Option 6 Stage 1 Projected Cash Flow


90


($’000)($’000)($’000)($’000)


($’000)($’000)($’000)($’000)


($’000)($’000)($’000)($’000)

FYFYFYFY 14141414

($’000)($’000)($’000)($’000)


($’000)($’000)($’000)($’000)


($’000)($’000)($’000)($’000)

Option 6 (Stage 1) COption 6 (Stage 1) COption 6 (Stage 1) COption 6 (Stage 1) Capexapexapexapex 154,612 25,811 67,362 36,712 24,726 0

FSR Capex FSR Capex FSR Capex FSR Capex 154,612 39,608 66,313 38,351 9,318 1,022

DifferenceDifferenceDifferenceDifference 0000 13,79713,79713,79713,797 (1,049)(1,049)(1,049)(1,049) 1,6391,6391,6391,639 (15,408)(15,408)(15,408)(15,408) 1,0221,0221,0221,022 Table 35 – Comparison of Option 6, Stage 1 Capex and FSR The funding identified is in addition to contributions already made by the Queensland Government including those made to provide the agreed site.

A conservative analysis of the cash flow for the project indicates the likely expenditure in FY 12 will be $25.8 million. With additional effort this expenditure may be increased to $30 million but expenditure in excess of $30 million is likely to result in inefficiencies.

SSuummmmaarryy

A detailed funding strategy has been developed and is founded on commitments from all levels of Government to the funding contributions identified above. Evidence of these commitments is included at Appendix 18. Specific and telling comments from Premier, The Hon. Anna Bligh, include;

Extracts from Press Release – 08.06.10 entitled - Cairns Cultural Precinct gets $42.5 million...and that's just the beginning: Bligh

"Our Government commits in this year's budget to be a one third funding partner in making this facility a reality."

"This is a firm commitment that the State Government will be an equal partner with the Cairns Regional Council and the Federal Government to develop the Cairns Cultural Precinct.

"When the business plan comes back, the State will fund a third of this project.

Extract from Transcript of ABC North Interview 3.11.11:

“We're very close to finalising our decision in relation to that, that will happen as part of our mid-year review of the budget, we've already committed the land to it, so the Queensland Government I think has pretty good bonafides on this project.”

The outcomes sought as identified in the BC can only be achieved through the development of the Preferred Option 6, Stage 1. This also includes making White’s Shed acceptable as an entrance statement to the CEP whilst also affording an opportunity for additional performance and sources of revenue, and constructing a pedestrian bridge to the Convention Centre. This bridge will tie the Convention Centre to the PAC and through White’s Shed to the Cairns tourist waterfront. Therefore, the CRC is seeking funding at this time from the Commonwealth and Queensland Governments for Option 6, Stage 1.

A pre-opening and development budget of up to $3.5 million is outlined in the report by CE to develop product; and market and launch the new PAC. $1.0 million of this has been included in the Capex used in the PWC FA and EA, which is in addition to the building Capex estimates prepared by WTP.

Securing the additional support that is required to achieve a successful launch of the PAC as a major driver of additional tourism revenue to the FNQ region, will involve leveraging existing programs run by tourism, commercial and cultural organisations external to CRC. This is seen as a cost effective way of realising this outcome and minimising direct cost to CRC.

Option 6, Stage 1 (the Preferred Option) consistently ranks as the highest ranking option against the nominated evaluation criteria.


Appendices

appendix 1 – Programme appendix 2 – PAF BC Checklist appendix 3 – Community and Stakeholder Engagement appendix 4 – Project Management Plan appendix 5 – Probity Plan appendix 6 – FA and EA Databook appendix 7 – Performing Arts Centre Analysis appendix 8 – Financial and Economic Analyses appendix 9 – Risk Management appendix 10 – Market Sounding appendix 11 – Planning Advice appendix 12 – Policy Alignment appendix 13 – ESDIS appendix 14 – Concept Plans appendix 15 – Options Cost Estimates appendix 16 – Change Management Plan appendix 17 – Quality Management Plan appendix 18 – Government Funding Commitments

cairns entertainment precinct l cairns regional council 10 … · appendix 1 – programme appendix...

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