Agenda item

The report provides additional information requested from Audit & Governance Committee regarding the financial considerations for capital borrowing to fund a two-storey extension to Two Riversmeet Leisure Centre (2RM) to address the identified need for dedicated studio space in Christchurch.  The investment aims to enhance the centres health, fitness and cultural offer, increase membership and income whilst supporting community wellbeing and aligning with the Council’s corporate strategy.

NOTE: In relation to this item of business, the Committee is asked to consider the following resolution in relation to any discussion on exempt appendix 2, 3, 5, 8, and/or 9 to the report:

“That under Section 100(A)(4) of the Local Government Act 1972, the public be excluded from the meeting for the following item of business on the grounds that it involves the likely disclosure of exempt information as defined in Paragraph 3 of Schedule 12A of the Act and that the public interest in withholding the information outweighs such interest in disclosing the information.”

This item was partially restricted by virtue of paragraph 3 of Schedule 12A of the Local Government Act 1972.

Exempt information – Category 3 – Information relating to the financial or business affairs of any particular person (including the authority holding that information)

The Portfolio Holder for Destination, Leisure and Commercial Operations presented a report, a copy of which had been circulated to each Member and a copy of which appears as Appendix 'G' to these Minutes in the Minute Book.

The report provided additional information requested by the Committee regarding the financial considerations for capital borrowing to fund a two-storey extension to Two Riversmeet Leisure Centre (2RM) to address the identified need for dedicated studio space in Christchurch.  The investment aimed to enhance the centre’s health, fitness and cultural offer, increase membership and income whilst supporting community wellbeing and aligning with the Council’s corporate strategy.

Committee members asked a range of questions around the assumptions in the business case including the case for change and whether the project was realistic, affordable and deliverable. In terms of the Committee’s specific remit, some members expressed concerns about the risks involved in repaying the borrowing. They felt that the investment was premature and queried why the project wasn’t included in the forthcoming wider strategic review of BCP leisure centres. They asked how the projected increase of 15% had been calculated when sector growth was only 6%. They were also concerned about the impact of global events on the deliverability of the project and the potential for costs to rise due to increased construction costs and uncertainties around interest rates and inflation. Other members spoke in support of the proposal as it was presented in the report and commented that it would never be possible to eliminate risk entirely.

The Portfolio Holder and the Head of Leisure and Events provided the following information in response to the concerns raised:

·       The projected additional income was based on 50% membership – this included new members and an increase in retention of current members – and a 50% mix of facility hire, pay as you go (PAYG) users and secondary spend.

·       Assumptions were based on national leisure trends, current membership levels, competitor analysis, customer insights at 2RM and professional experience and judgement. It was noted that 2RM had waiting lists and was currently having to turn away customers wanting to use the sports hall.

• It was confirmed that 2RM did not yet operate on a cost neutral basis and that further work was required to bring down the subsidy.
• Improved facilities would attract more members and membership would be more cost effective than PAYG (on a like for like basis).

·       The business case had been developed taking into account population and demographic at the current time but with the knowledge of an increasing population and changing demographic.

• Appendix 8 gave details of the built in contingency of 20% for build costs. This had increased from a 10% contingency in the original business case to respond to the most up to date information and was still being refined.
• Best/worst case scenarios were set out in the report. The sensitivity analysis was included as an exempt appendix to offer further information and assurance.
• The governance structure was detailed in the report. It was noted that there would be a series of milestones throughout the project and an ongoing monitoring of risk. It was confirmed that the project could be halted if necessary, prior to construction.
• The preferred option would deliver the highest long term financial return and had a positive impact on the Medium Term Financial Plan. The ‘Do Nothing’ option was deemed to present the highest long term risk.

In order to discuss the exempt appendices the Committee agreed to pass the following resolution:

RESOLVED that under Section 100(A)(4) of the Local Government Act 1972, the public be excluded from the meeting for the following item of business on the grounds that it involves the likely disclosure of exempt information as defined in Paragraph 3 of Schedule 12A of the Act and that the public interest in withholding the information outweighs such interest in disclosing the information.

Voting: For – 6, Against – 1, Abstain – 1

Note: Cllr M Andrews wished to be recorded as voting against the above resolution.

Following the discussion on exempt matters, the meeting resumed in public session.

In response to a query the Interim Chief Financial Officer confirmed that his team had worked from a financial perspective with the leisure team on the proposal and were content with the robustness of business case as presented, with a caveat that specific issues such as leisure memberships, although evidenced, were not his team’s area of expertise.

In general terms there was support from Committee members for the principle of improving leisure facilities in Christchurch and an acknowledgment of the community benefits this would bring. There was also an appreciation of the work and commitment of the project team in bring forward the proposal. However, views differed in terms of whether or not they felt able to support the recommendation in the report. Some felt that a strong case had been made financially and that there was sufficient governance and risk management in place for it to make good business sense to proceed. Others questioned the subjectivity of the assessment and the achievability of the assumptions and felt that the risks were too great, particularly in light of current economic uncertainties.

RECOMMENDED to Council the approval of authorised borrowing of the Council to accommodate the £1.8m financing for the extension at Two Riversmeet Leisure Centre proposal.

Voting: For – 4, Against – 3, Abstain – 1