CAPITAL EXPENDITURE REQUEST

Transcription

1 CAPITAL EXPENDITURE REQUEST Gungahlin Lakes Irrigation Project Executive Summary The Gungahlin Lakes Golf Course is a significant asset of the Ainslie Group and the ACT generally and has improved as a golf facility over the past 5 years as a result of extensive capital investment. The irrigation system is now 17 years old and the components are inefficient and obsolete. The cost of maintaining the current irrigation system is increasing together with the cost of renovating the turf that is affected by inadequate irrigation. The golf course is deteriorating to the extent that it is expected to have a negative effect on membership and visitation. We expect the finance cost of a new system can be funded by up to 50% from levies and fees collected from members and visitors over a finance period of approx. 5 years. The completion (or planned completion) of this project will significantly reduce our exposure to the annual payment of the government s water abstraction levy (WAC).The irrigation project was approved in principle at the Board meeting held 8 August 2013 subject to approval by the Finance Committee. Background In June 2011 the Gungahlin Lakes Golf Committee (GLGC) engaged a consultant, at its cost, to examine the existing course irrigation system and to provide recommendations and costs for a new modern upgraded irrigation system. A nine page report was prepared by Matthew Wilson, Director of Total Irrigation Designers, and was presented at the July 2011 Ainslie Football and social Club (AFSC) consultative meeting. The indicative cost for a new irrigation system with a single stage implementation was estimated to be approx. $900k excl. GST (includes project manager costs of approx. $120k). An accurate figure will be obtained when the design has been executed. The decision at the consultative meeting was that AFSC was not in a sufficiently strong financial position to fund the proposal at that time. A second proposal was put to the consultative meeting held 7 February 2013 but was not endorsed at Board level due to AFSC still being in a consolidating financial position. A third proposal by the GLGC Committee to establish a funding model was approved by the Ainslie Group Board in June 2013, and has been recently implemented after consultation with GLGC members. The funding model involves the collection of an increase in competition fees for GLGC members and from green fees of social and corporate golfers together with the continuation of the Water Levy (to be renamed Irrigation Levy) paid annually with GLGC membership renewal. A general funding model would be as follows: Projected Monthly Income (ex. GST): Source Number (p.a.) * Mthly Income Junior Membership Levy 80 $180 Other Membership Levy 540 $2,500 Total Competition Rounds 16,500 $2,500 Total Visitor Rounds 16,500 $2,500 *As at (Assumes no increase due improved quality of course facility.) Total $7,680 Estimated Cost and Expected Shortfall per Month: Est. Cost (Ex. GST) Term Mthly Repayments* Income Shortfall $650, months $11,600 $7,680 $3,920 (34%) $750, months $13,400 $7,680 $5,720 (43%) $850, months $15,200 $7,680 $7,520 (49%) *Assumes interest rate of 7.0%. Payback period for $750k is 11.7 years based on 2013 projected income levels. (Should projected income increase 25% and cost of project is $650k payback is 6 years. No additional subscription revenue from increased membership included.) Application of the ACT government s WAC is currently being reviewed. Under guidance of ClubsACT, AFSC has not been invoiced for this charge in recent years while the review was being undertaken. (WAC accrued to-date this year is approx. $60k.) It is expected that this charge will be entirely or partially waived if we can produce evidence that we are committed to completing major works to improve water efficiency

2 generally on our golf course. This new irrigation scheme would meet this objective. (See Appendix I - Briefing Paper Water Abstraction Charge 1 July 2013) The Options 1. Do ASAP The ACT endured a series of heatwaves last summer, and accentuated the problem with the course condition rapidly deteriorated on several of the fairways, despite the best endeavours of the green staff. This situation is due almost entirely to the inefficiencies of the irrigation system and not due to water reserves. When several large sections of a fairway or green are lost, it may take 1-2 years before the sections are restored to the original condition. During this period, members and social golfers may become dissatisfied with the overall course condition and leave, while the course reputation will be diminished and prove difficult to restore. It is expected that this will cause deterioration in membership levels and green fee revenue. If the irrigation does not proceed within 12 months the course superintendent has advised that he would need to expend $40,000 to top dress and seed the worst affected areas of the fairways. If the irrigation work commences in 2014 this top dressing work would be deferred until spring upon completion of the irrigation project because of the general disruption and earthworks of the fairways. GLGC has hosted two national golf tournaments and has been approached to host a further national tournament. While these tournaments provide a large additional workload for the Committee, they bring significant additional revenue to the club and generally improve the status of GLGC. To maintain this standing GLGC needs to maintain the high rating that the course holds, coupled with the quality club facilities. The solution is for a funding model to be developed now so that members can see that the AFSC and the GLGC Committee are acting proactively and have a plan in partnership to fund a new course irrigation system. 2. Defer Project or multi stage approach over 3 years The consultant s report assessed in the event of a multi stage approach, that Stage 1 upgrade would cover $12,000 for the design costs, the pump discharge filter, the ring main around the main lake including associated new control system and irrigation sprinklers. Back to back sprinklers to all greens would be an efficiency feature of any new system. Stage 2 would be to complete the new main arms to the northern side of the road and complete a new central control controller. The final stage upgrade would be the pumping unit itself. These would not be 3 equal costs as it is very difficult on any course to design 3 equal cost stages. A multi stage approach would be disruptive to all golfers and potentially increase the overall cost by over 20% due to inefficiencies and re-establishment costs. If the project was deferred for several years, then the course condition would deteriorate with increasing maintenance costs, potential for membership losses and loss of status for national tournaments. 3. Do nothing The green staff is managing a system, that given the very nature and location of the site and the limitations, extremely well. However the current system fails to meet the high demands of a system needed to provide overlapping coverage to fairways, greens, tees and proximity rough at the required pressure, with minimum water wastage and efficient use of our dams. Break downs from sprinkler malfunction, valve malfunction, controller malfunction, along with electrical and hydraulic inefficiencies in pump stations and lost water that is being pumped unnecessarily, are hidden costs associated with aging systems. When calculated they can run well into tens of thousands of dollars a year. The current irrigation system is Hunter which is now obsolete (17 years old) and the cost of repairs is now approx. $30k YTD. In Irrigation Capex Submission August

3 addition, should we not commit to an efficient irrigation system it is expected the ACT government will apply the full Water Abstraction Charge (approx. $60k p.a.) Proposal The existing system needs to apply more water for longer periods when compared to a current highly efficient and flexible design of higher application and vastly improved distribution uniformity rates. Current systems are designed around sprinkler performance and as individual valve in head pressure regulating sprinklers. These offer precise water delivery at precise pressure anywhere on the course at any time. Further to the problems associated with the fairway watering, the greens sprinklers water both the greens and the greens surrounds. Given both of these areas need very different amounts of water and often at different times and for different lengths of time, the modern course design is and has for many years now included two sets of sprinklers around greens. This allows for the watering of these two distinct areas separately and thus reduces water wasted, operational time and provides far superior greens surfaces and greens surrounds. This cannot be achieved under the current system and requires a full replacement of greens heads to achieve this flexibility and improvement. The current control system is becoming obsolete as it is no longer in production and parts and circuit boards are become increasingly difficult to resource. Today s modern control systems offer more flexibility and for example the Toro dedicated Golf control systems enjoy off site technical back up and remote support for a very reasonable cost which can include off site back up of data and 24hr replacement parts on most components and can include a 48hr complete computer replacement in the event of a catastrophic failure. The modern Central controller operates on a hydraulic tree in its data base which will compress the watering time to the limits of the pump station and hydraulic legs imputed into the data base to ensure that every watering program minimises time and maximises pump duty and pipe work capability. The current system doesn t have this flow capability and the system is really relying very heavily on a very thorough knowledge of the system hydraulics by the operator to get the best benefit from the pipe network and the existing pump station. The course has never been able to enjoy the maximum benefit of the pump station as was originally installed due to limitations of the immediate restriction of the 100mm pipe loop which is unable to carry the volume of water that the pump station was capable of producing. The whole system is limited by the initial 100mm ring main around the lake. If this was 150mm the pump station could have been more effectively utilised especially given the long legs to the north east and north west. The current pump station is set up with a small jockey pump and one VFD main pump on alternating basis start with the other pumps then coming on line as demand requires. This style of pump arrangement was quite the norm for a golf course in the late 80 s through to the early 2000 s. Technology has however improved significantly since then. Pumps stations, while looking very similar, are now typically far more efficient in both improvements in flow and pressure for the same size motor, and also motor efficiency has improved dramatically. Many systems now do not run a jockey pump but rather will run 2 half pumps and then a number (usually around 3) of main pumps. All the pumps will be running VFD (variable frequency drive) motors. While this set up is slightly more costly the electricity efficiency benefits the smooth operation right across the flow demand range, which on an 18 hole golf course can be anything from 1 litre per second to 40 or even 50 litres per second. This feature has huge saving potential not only on power consumption but also system components and longevity, as pressure surges are almost completely eradicated. Irrigation Capex Submission August

4 The current pump station is capable of around litres per second but is limited by 3 main factors; (1) the filter size (2) the manifold size of the pump station itself and (3) the initial 150mm discharge pipe work and then the 100mm ring main around the lake. These three factors limit the supply from the pump station in reality to the hydraulic limit of the filter and pipe work of between 25 and 30 litres per second. Flow rates above this are possible but only accompanied by very high friction losses, risk of pressure surges and much higher than desirable velocities. At a flow rate of 30 litres per second, if the system performance is not right up there at 85% efficiency or greater, the course may become subject to a very lengthy water window. Given the geographical location of the ACT where extreme summer temperatures and evaporation rates can be incurred for many days, the current system is simply not capable of delivering the necessary supply around the course from all aspects of the system, control system, sprinkler delivery and hydraulic pipe network without involving extensive operational run times impeding well into daylight hours and impacting on play and players. On all new system designs, the focus includes close attention to function and high efficiency from all aspects, and demands of a given system electrical consumption, hydraulic and sprinkler performance, flexibility and ongoing system support from manufacturer/supplier. Construction time is likely to take weeks and would be programmed during April 2014 to September 2014 during non-daylight savings period to minimise impact on golfers and social golf revenue. The design is based on an estimated irrigated area of 1 Ha tees, 9000m2 of greens and 11Ha of fairways and greens surrounds and would likely require around a minimum 40lt/sec to meet this demand coupled with superior sprinkler performance, hydraulic design and flow managed control system. A full design would need to be completed to gain a more accurate flow requirement and costing. Design costs are likely to be around $12,000+GST which would include a current GPS survey of all Tees, Greens, Fairways edges, bunkers and water hazards. Formed cart paths, buildings etc would be added from recent and approximate scale aerial imagery Tender documents, tender review and report, contract set up and periodic supervision with a full GPS survey of the works as they are installed will vary depending on whether the project is staged or completed as a single project. Typically these may be around $16,000 - $20,000+GST as a single project. Daily inspection of the workmanship and liaising of areas, golfing issues etc would be required by a Site Project Manager. The GLGC Vice-President Norm Loughton is a qualified professional engineer with over 40 years experience in electrical civil and mechanical engineering who has project managed many multi-million dollar projects (Australian Maritime Safety Authority). Norm has offered to fully project manage this project for us without charge potentially saving $120k. Irrigation Suppliers There are three main suppliers of turf irrigation; Toro (not the cheapest but appears to offer the best value for money, has the best response time, has approx. 80% of the golf irrigation market, is the only organisation that has modified its technology and has local service providers. Rainbird is not as purpose built for golf courses and Hunter (current system) has a very small market share and limited in golf irrigation. Finance We are advised that Toro offers finance for 70% of the project (all works including consultants) over 5 years with the 30% balance (balloon) being paid in full or refinanced over a further term at interest rates at that time. Regardless of which product is chosen, finance would be considered given the current favourable interest rates and increased cashflow from the Irrigation Levy and other income. Progress payments in cash could be considered at the time (depending on priorities and general availability of funds incl. proceeds from the sale of Coffs property). Should it be financed from cash on hand, the collection of Irrigation Capex Submission August

5 the Irrigation Levy and other income should still be fixed for 5 years to essentially repay the cost. ANZ has been consulted in the matter and agree that the work needs to be completed for this significant asset. Their advice will be sought as to how the project will be funded closer to the time when the costs are determined. Recommendation 1. That we proceed to tender for this capital works with a view to appointing and commencing by April 2014 (subject to tender and finance options being approved by the Finance Committee). 2. That Norm Loughton is appointed Project Manager and that his 2013/14 annual golf subscriptions are waived in lieu of payment of services and if a recommendation is made for Life Membership of the Golf Club for Norm is not approved, then no further golf subscriptions by Norm would be payable. Richard Hogg CEO, Ainslie Group 20 August 2013 Irrigation Capex Submission August