Stage 1: Colocation feasibility study racing codes and exhibition facilities. Chief Minister, Treasury and Economic Development Directorate

Transcription

1 Stage 1: Colocation feasibility study racing codes and exhibition facilities Chief Minister, Treasury and Economic Development Directorate 16 September 2014

2 Stage 1: Colocation feasibility study racing codes and exhibition facilities Contents Glossary... i Key findings... i Executive Summary... iii 1 Introduction Purpose of the report Structure of the report Background Colocation Urban renewal Framework for analysis Stakeholder consultations Approach Colocation options Urban renewal Strategic assessment Qualitative cost-benefit assessment Risk assessment Economic environment Economic trends Demographic trends Financial assessment Methodology Costs and Benefits Results Options assessment Strategic alignment Risk versus strategic alignment Conclusion Next steps References Appendix A : Consultations Record of stakeholder consultations Appendix B : Stakeholder views Canberra Racing Club Canberra Harness Racing Club Canberra Greyhound Racing Club Liability limited by a scheme approved under Professional Standards Legislation. Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity. Please see for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms Pty Ltd

3 Stage 1: Colocation feasibility study racing codes and exhibition facilities Exhibition Park in Canberra Appendix C : Requirements for a new facility Limitation of our work Charts Chart 5.1 : Australian interest rates Chart 5.2 : Housing investment as a share of GDP Chart 5.3 : ACT share of national population and output Chart 5.4 : Total population in the ACT, Chart 5.5 : Long run annual population growth in the ACT Chart 5.6 : Changing age demographics in the ACT to Chart 6.1 : Projected BCR Ranges (ACT Government) Tables Table 2.1 : ACT Government dwelling sites to Table 3.1 : Colocation options for analysis Table 3.2 : Estimate of relocation costs by category of cost ($ million) Table 4.1 : Qualitative cost-benefit assessment Table 4.2 : High-level risk assessment - colocation options Table 4.3 : Options categorised by risk Table 6.1 : Colocation Options and Corresponding Development Scenarios Table 6.2 : Key Parameters Table 6.3 : Assumed Nominal Indexation Rates Table 6.4 : Key Costs and Benefits Considered Table 6.5 : Projected BCRs Table 7.1 : Options categorised by alignment with objectives Figures Figure 3.1 : EPIC site Figure 3.2 : Thoroughbred Park site Figure 7.1 : Alignment of colocation options to objectives Figure 7.2 : Risk versus strategic alignment for colocation options ii

4 Stage 1: Colocation feasibility study racing codes and exhibition facilities Glossary ACT CRC CHRC CGRC EPC EPIC ICRC Australian Capital Territory Canberra Racing Club Canberra Harness Racing Club Canberra Greyhound Racing Club Exhibition Park Corporation Exhibition Park in Canberra Independent Competition and Regulatory Commission

5 Stage 1: Colocation feasibility study racing codes and exhibition facilities Key findings The ACT Government committed in the 2012 election to undertake a feasibility study into the colocation of the ACT racing codes. Colocation of the exhibition facilities with the racing codes is also being considered, given the proximity of Exhibition Park in Canberra (EPIC) to Thoroughbred Park and because the Canberra Harness Racing Club (CHRC) is currently located on the EPIC site. has assessed ten colocation options for the Canberra Racing Club (CRC), CHRC, the Canberra Greyhound Racing Club (CGRC) and EPIC. Colocation options considered Colocation option Option 1 - CRC and CHRC at Thoroughbred Park, EPIC consolidation on site Option 1a - CRC and CHRC at Thoroughbred Park, EPIC at a greenfield site Option 2 - CRC, CHRC and CGRC at Thoroughbred Park, EPIC consolidation on site Option 3 - CRC, CHRC, CGRC and EPIC at Thoroughbred Park Option 4 - CRC, CHRC, CGRC and EPIC at a greenfield site Option 5 - CRC, CHRC and CGRC at a greenfield site, EPIC at a separate greenfield site Option 6 - CHRC, CGRC and EPIC at a greenfield site Option 7 - CHRC and EPIC at a greenfield site Option 8 - CGRC and CHRC at Symonston, EPIC consolidation on site Option 8a - CGRC and CHRC at Symonston, EPIC at a greenfield site Land made available Part of EPIC site Full EPIC site Part of EPIC site Full EPIC site EPIC and Thoroughbred Park EPIC and Thoroughbred Park Full EPIC site Full EPIC site Part of EPIC site Full EPIC site The analysis considered the strategic and financial viability of each colocation option. The strategic analysis considered the qualitative costs and benefits of each of the options for the ACT racing codes, EPIC and the ACT Government. For the ACT racing industry, the benefits of colocation are increased scale of operations, shared facilities and reduced administration and maintenance costs. Colocation also provides the opportunity for the racing industry to develop a racing entertainment precinct, beyond what each code can achieve independently. i

6 Stage 1: Colocation feasibility study racing codes and exhibition facilities These benefits would need to be balanced against increased governance and operational complexity that may result from colocation. The potential short-term disruption to activities at Thoroughbred Park or Symonston to allow for construction work and consolidation of existing infrastructure would also need to be considered. Similarly, for EPIC the key trade-off is between the synergies from colocation, balanced against the increased governance and operational complexity. For the ACT Government, the key trade-off is between the costs of the colocation and the benefits from urban renewal. The relocation costs for the colocation options are estimated to be between approximately $20 million and $220 million depending on the option, thus in order for colocation to work, the ACT Government would need to explore urban renewal options to finance the colocation options. Our analysis suggests that there are a number of colocation options that are align with the strategic and financial considerations for the ACT Government and are worthy of further consideration: Option 4 or 5 colocate the racing codes and EPIC at a greenfield site, with an option for EPIC to be at a separate greenfield site; Option 6 or 7 colocate the CHRC and EPIC at a greenfield site, with or without CGRC; Option 8 or 8a colocate CHRC and CGRC at Symonston with EPIC either consolidated on its existing site or at a greenfield site. This option is more complicated than colocation at a greenfield site but could be pursued if a suitable greenfield site cannot be identified; and Staged approach implement Option 6 or 7 in the first instance, with a long-term plan to achieve colocation of all the racing codes and EPIC (i.e. Option 4 or 5). The ACT Racing Clubs were also given the opportunity to review and provide comments on our findings. In summary, their views were: The Canberra Racing Club has firmly resolved that it is not in the best interests of the Canberra Racing Club to proceed further with any future relocation. The Canberra Harness Racing Club is comfortable with the preferred options and would welcome the opportunity to be part of the first stage of development, if the project was to proceed. The Canberra Greyhound Racing Club is content to stay at Symonston. However, if further analysis of the cost and benefits of a move to a greenfields site was positive, the Canberra Greyhound Racing Club would be supportive of a move. We would like to acknowledge the assistance provided by the ACT racing clubs and EPIC in the preparation of this report. Their assistance was essential to the analysis of the options and we thank them for their time and contributions to the study. ii

7 Stage 1: Colocation feasibility study racing codes and exhibition facilities Executive Summary has been engaged by the ACT Government to consider the feasibility of colocating the three ACT racing clubs the Canberra Racing Club, the Canberra Harness Racing Club and the Canberra Greyhound Racing Club onto a single site. The potential to colocate Exhibition Park in Canberra (EPIC) with the racing codes has also been assessed. In addition to providing benefits for the racing industry and EPIC, the potential colocation could also provide opportunities for urban renewal along Flemington Road. This report is Stage 1 of the ACT Government s analysis of the colocation options for the racing codes and EPIC. The outcomes of Stage 1 will determine the second stage of work on possible colocation and whether or not the Territory will pursue these options further. Background The ACT racing industry consists of the Canberra Racing Club (CRC) located at Thoroughbred Park, the Canberra Harness Racing Club (CHRC) located on the EPIC site and the Canberra Greyhound Racing Club (CGRC) located in Symonston. EPIC is a Territory-owned exhibition centre and is the largest of its kind in the ACT and surrounding region. Colocation options In consultation with the ACT Government, has identified ten options for colocation of the racing clubs and EPIC (as shown in Table i). These can be grouped into three broad categories, whereby some or all of the clubs and EPIC are colocated at: the CRC s existing site at Thoroughbred Park; a yet to be determined greenfield location; or the CGRC s existing site at Symonston. iii

8 Stage 1: Colocation feasibility study racing codes and exhibition facilities Thoroughbred Park Table i: Colocation options for analysis CRC CHRC CGRC EPIC Land made available Option 1 Part of EPIC site 1 Option 1a * EPIC site Option 2 Part of EPIC site Option 3 EPIC site Greenfield site (to be determined) Option 4 Option 5 * EPIC and Thoroughbred Park EPIC and Thoroughbred Park Option 6 EPIC site Option 7 EPIC site Symonston (current Greyhound track) Option 8 Part of EPIC site Option 8a * EPIC site * Under these options, EPIC is located at a separate greenfield site. Colocating some or all of the clubs and EPIC will require new facilities to be built or existing facilities to be upgraded, which is estimated to cost between $22.2 million and $223.1 million depending on the colocation option. These costs are presented in Table ii. Colocation option Table ii: Estimate of colocation costs Minimum range of facilities Full range of facilities 1 $54.0m $75.5m 1a $92.1m $125.0m 2 $89.6m $122.6m 3 $163.8m $223.1m 4 $125.6m $165.3m 5 $128.7m $169.5m 6 $68.6m $91.5m 7 $60.0m $80.3m 8 $22.2m $31.8m 8a $63.7m $85.2m The costs were developed based on consultations with the racing clubs and EPIC, who were asked to identify the minimum range of facilities that they would require at a new location, 1 The CHRC is currently a tenant on the EPIC site. If they are relocated some of the EPIC site would become available for development. iv

9 Stage 1: Colocation feasibility study racing codes and exhibition facilities and the full range of facilities that would enable them to achieve the strategic and commercial goals for their businesses. Our analysis assumes that the ACT Government will bear the costs of relocation. The highest costs occur under Option 3, when all of the racing clubs and EPIC are colocated at Thoroughbred Park. The high cost of this option is driven by the complexity of colocation at Thoroughbred Park. We have assumed it will require most of the current facilities to be rebuilt to accommodate the additional racing codes and EPIC. We have also assumed that a multi-story carpark will need to be built due to space constraints. The feasibility of this option could increase if neighbouring blocks of land could be used, which would increase the size of the sites. However, this is yet to be analysed and would require negotiation with relevant stakeholders. The lowest costs arise for Option 8, where the CHRC is colocated with the CGRC at Symonston. This is due to the lower costs required to build facilities for CHRC and CGRC compared to the CRC and EPIC. Urban renewal In order for the ACT Government to make the colocation options a reality, it needs to explore options for urban renewal of the land made available under the colocation options. Without the proceeds from redevelopment, the ACT Government will be unable to finance the colocation options. The colocation options deliver three potential parcels of land for redevelopment 2. Scenario 1 - the full EPIC site; Scenario 2 - the full EPIC and Thoroughbred Park sites; and Scenario 3 - part of the EPIC site. The redevelopment scenarios also need to be considered in light of Deloitte Access Economics research into the ACT property market. In recent years, the ACT property market has bucked the national trend and there has been a surge in residential housing construction. However, the ACT property market is expected to contract in the future, and this will likely be driven by further reductions in the Australian Public Service, and a reduction in the population growth rate driven by demographic ageing. Strategic considerations The report identified the qualitative costs and benefits of each of the options which provide an indication of the trade-offs for the ACT Government in deciding which option to pursue. There are different trade-offs for the racing industry, EPIC and the ACT Government, which are summarised below. For the racing industry, the key trade-off is between the benefits that colocation will bring in terms of increased scale of operations, shared facilities and reduced administration and maintenance costs, balanced against the increased governance and operational complexity 2 Note that the redevelopment of the CGRC s site at Symonston was not considered as its location limits its suitability for residential development. v

10 Stage 1: Colocation feasibility study racing codes and exhibition facilities that may result. Colocation also provides the opportunity for the racing industry to develop a racing entertainment precinct, beyond what each code could achieve independently. The potential short-term disruption to current activities at Thoroughbred Park or Symonston to allow for construction work and consolidation of existing infrastructure would also need to be considered, depending on the option chosen. For EPIC, the potential benefits would include reduced operational costs through a smaller footprint or colocation with the racing industry. The opportunities offered by a new site would include new purpose built facilities and, depending on the location, no longer being subject to noise constraints. These would have to be balanced against potential relocation costs and disruption to other tenants on the EPIC site, a loss of revenue from CHRC (depending on the option) and potential scheduling conflicts with the racing clubs. This is likely to be complex given the range of activities on the EPIC site. For the ACT Government, the key trade-off is between the benefits that redevelopment would bring, beyond the financial return, such as urban renewal and improving the entrance to the ACT, compared to the complexity and costs of the colocation. This includes negotiations with the racing industry, acquisition of land and possible new transport infrastructure (e.g. access roads or public transport routes) to a new site. This study also assessed the viability of the colocation options which would be financed by redevelopment scenarios and the result are included below. A potential greenfield site for the colocation has not yet been identified. If the ACT Government wishes to pursue colocation to a greenfield site, it will need to consider the costs of access and the opportunity cost of allocating this land for colocation. Risk assessment For colocation to work and to enable the benefits of colocation to be achieved, the ACT Government and the racing industry would need to work together. However, there remain risks associated with the colocation options that the ACT Government will need to be mindful of in deciding which option to pursue. undertook a high-level risk assessment of each of the colocation options. The colocation options were assessed against the following risks: Achievability risk can the option be implemented? Will it require significant changes to current legislative or planning processes? Commercial risk what is the risk that the option will not be commercially viable? Operational risk what is the risk that the option will negatively impact on the operations of the racing industry or EPIC? Will the option disrupt the operation of the industry while construction occurs? Financial risk does the option expose the ACT Government to financial risks? Governance risk does the option create risks for the governance structure of the new facility? Stakeholder risk how are stakeholders likely to respond to the option? The summary of risk analysis is contained in Table iii. vi

11 Stage 1: Colocation feasibility study racing codes and exhibition facilities Table iii: Colocation options categorised by risk Low risk Medium risk Medium-high risk High risk Options 6 and 7 CHRC and EPIC (with and without CGRC) at a greenfield site Options 1, 1a and 2 CHRC located at Thoroughbred Park with and without CGRC (EPIC consolidated or moved to greenfield site) Options 8 and 8a CHRC and CGRC at Symonston (EPIC consolidated or moved to greenfield site) Source: analysis. Options 4 and 5 Relocating all of the clubs and EPIC to a greenfield site (option for EPIC to be on a separate site) Option 3 Locating all of the racing clubs and EPIC at Thoroughbred Park The low-risk options represent the most straightforward colocation options. These options are low risk because they are less complex for the racing codes and the ACT Government as they involve construction on a greenfield site and would not disrupt operations at existing facilities. There is also a lower governance risk and stakeholder risk as the options involve fewer parties and the governance processes can be determined from an equal starting point between all parties as the new site does not have any existing arrangements to take into account. Colocating CHRC at Thoroughbred Park is achievable and does not raise risks about having to separate different types of animals. If CGRC is also relocated to Thoroughbred Park, this would be more complex due to the requirement to fit additional facilities onto the site and provide appropriate physical separation between horses and dogs. The operational risk is manageable as there would be some disruption to the operations at CRC but it should not require CRC to significantly alter its racing or training schedule. These options would require negotiation with CRC to allow CHRC and CGRC to colocate at Thoroughbred Park. Relocating CHRC to Symonston is also assessed as medium risk but has a different profile of risks. This option has a high operational risk as it would likely require the full redevelopment of the site to fit all of the colocated facilities on the current Symonston site. The medium-high risk options have a higher risk rating because they involve all four parties. However, moving to a greenfield site makes the option more achievable as the new sites would be able to be designed without having to account for existing infrastructure. These options have the highest commercial risk because they involve the redevelopment and sale of the full EPIC and Thoroughbred Park sites. The options would require negotiation with CRC about the ACT Government acquiring Thoroughbred Park. The high-risk option would require substantial redesign of the Thoroughbred Park site to fit all of the parties on the site and would likely require Thoroughbred Park to cease racing and training operations while the site is redeveloped. The financial risk is also high as there is significant uncertainty around how the option would be made to work (for example, fitting all of the tracks onto the site may require the tracks to be fitted one inside the other and to access the middle tracks may require construction of tunnels, which would be costly), which vii

12 Stage 1: Colocation feasibility study racing codes and exhibition facilities may further increase costs. This option would also require all parties to agree to new governance arrangements and requires CRC to agree to lease its land to the other parties. Cost-benefit assessment To realise the benefits from the colocation options, the options need to be financially viable for the ACT Government. Table iv presents the Benefit-Cost Ratio (BCR) of each of the three development scenarios for the ACT Government, under the different colocation options. The net impact on the ACT Government reflects the relocation costs, development cost and proceeds from urban renewal. As can be seen, most of the scenarios generate a positive BCR for the ACT Government, with the highest net benefits occurring under redevelopment scenario 2 (colocation of all parties to a greenfield site(s) and the redevelopment of the full EPIC and Thoroughbred Park sites). The net benefit for the ACT Government is typically higher under a low density scenario due to the higher stamp duty rates which are levied on detached dwellings. Table iv: Benefit-cost ratio of options for the ACT Government Development Scenario Colocation Option Low High Scenario 1: Full EPIC site, Low Density Scenario 2: Thoroughbred Park and EPIC, Low Density Scenario 3: Part EPIC site, Low Density Scenario 1: Full EPIC site, High Density Scenario 2: Thoroughbred Park and EPIC, High Density Option 1a Option Option Option Option 8a Option Option Option Option Option Option 1a Option Option Option Option 8a Option Option Scenario 3: Part EPIC site, Option High Density Option Option Estimates are in current prices with all cash flows indexed over time. Cash flows are discounted at a nominal discount rate of 9% p.a. over a 30 year evaluation period. A BCR that is greater than 1 is favourable and means the benefits are greater than the costs, a BCR that is less than one means the costs are greater than the benefits. viii

13 Stage 1: Colocation feasibility study racing codes and exhibition facilities Assessment against objectives In 2011, the Independent Competition and Regulatory Commission (ICRC) released its report into the future of the ACT racing industry. It recommended that the ACT Government undertake a detailed investigation into the feasibility of colocating the three different racing codes at the one location. The ICRC concluded that the potential benefits for the racing industry from colocation are more efficient use of shared facilities, the better utilisation of capital across the three codes and increased standards of the facilities. Drawing on the findings of the ICRC s report and the requirement for the ACT Government to benefit from urban renewal to deliver the colocation options, our analysis has been guided by two core objectives: Optimising investment and leveraging synergies for the racing industry and EPIC; and Optimising urban renewal in the ACT to enable financing of colocation alternatives. We have disaggregated these objectives into the following elements which provide detailed criteria against which to assess each of the options: Deliver a practical and achievable colocation solution. Increase operational efficiency and synergies for the racing industry and EPIC. Improve the financial sustainability of EPIC and the racing industry through enabling additional revenue opportunities. Address constraints at current sites (e.g. noise and governance constraints). Ensure financial viability of the colocation options for the ACT Government. Deliver colocation by undertaking urban renewal. The results of this analysis are contained in Table v. As can be seen, the assessment determined that options 4 and 5 (relocation of all of the racing codes and EPIC at a greenfield site) had the highest alignment with the overall objectives of the project. Table v: Overall alignment with objectives Low alignment Medium alignment High alignment Options 1, 1a, 2 and 3 These options involve colocating a mix of CHRC, CGRC and EPIC at Thoroughbred Park. Options 6 and 7 CHRC and EPIC (with and without CGRC) at a greenfield site Options 8 and 8a CHRC and CGRC at Symonston (EPIC consolidated or moved to greenfield site) Options 4 and 5 Relocating all of the clubs and EPIC to a greenfield site (option for EPIC to be on a separate site) The options with the lowest alignment to the objectives for the colocation are the options that would involve moving the other racing codes and EPIC to Thoroughbred Park. These options would provide some synergies and operational efficiencies, however the complexity of colocation on an existing site mean the efficiencies are lower than they would be at a at a greenfield site. These options provide some opportunities for urban infill, but fewer than the other options as they would not involve developing the Thoroughbred Park site. Our analysis also shows that Options 2 and 3 are financially prohibitive and ix

14 Stage 1: Colocation feasibility study racing codes and exhibition facilities unaffordable for the ACT Government, and while Options 1 and 1a are within the Government s means, the net benefit to the ACT Government would be lower than under the other options. The options with a medium alignment would provide synergies and operational efficiencies for the racing industry and EPIC. Additional revenue opportunities would be possible and could be further enhanced through the design of a new site. These options may also address the current noise restrictions and could increase autonomy for CHRC. These options all provide an opportunity for urban renewal although not as much as the options including Thoroughbred Park. All of these options appear to be affordable for the ACT Government. However, the revenue to the ACT Government is lower because they do not involve developing Thoroughbred Park, although this is partly offset by lower relocation costs. The colocation of EPIC and CHRC at a greenfield site would not prevent the future colocation of CRC, and could be undertaken as a first step. The options with the highest alignment to the objectives for the colocation are the options that involve moving all of the racing codes and EPIC to a greenfield site or sites. These options would provide operational efficiencies and additional revenue opportunities, which could be included as part of the design of the new facilities. These options would also address the constraints of the current sites. They also provide the greatest opportunity for the ACT Government for urban renewal opportunities, and the ability to finance colocation. However, these options have a medium-high risk rating, which needs to be considered in deciding whether the comparative benefits of these options are worth the additional risk. x

15 Stage 1: Colocation feasibility study racing codes and exhibition facilities Risk versus strategic alignment In addition to the strategic alignment of each of the options, it is also important to consider the relative risks of each option. This is shown in the figure below. At this stage, the risk assessment has not considered what actions the ACT Government could take to mitigate or ameliorate the identified risks. Consideration of risk mitigation strategies would need to be undertaken as part of the next stage of analysis. Figure i: Risk versus strategic alignment for colocation options High strategic alignment Option 4 Option 5 Option 7 Option 6 Option 8 Option 8a Low risk High risk Option 1 Option 1a Option 3 Proposed colocation site Thoroughbred Park Greenfield site Symonston Source:. Option 2 Low strategic aligment Figure i shows that while Options 4 and 5 (relocating all of the clubs and EPIC to a greenfield site) have the highest strategic alignment, they also have a relatively higher risk profile than the options with a medium strategic alignment. Options 8 and 8a (relocating CHRC to Symonston, with EPIC remaining on site or moving to a greenfield site) have a lower strategic alignment but are also lower risk, compared to Options 4 and 5. Noting that these options would require CGRC to cease operations while new facilities were constructed and the CGRC are uncertain that this option would be able to be easily implemented due to concerns around topography of the current site. Options 6 and 7 (EPIC and CHRC relocated to a greenfield site, with and without CGRC), have a lower risk and only a slightly reduced strategic alignment compared with Options 4 and 5. xi

16 Stage 1: Colocation feasibility study racing codes and exhibition facilities Options 2 and 3 are not financially viable. Furthermore, all the options to colocate at Thoroughbred Park have a lower strategic alignment, with generally higher risk. Given that they also generate a lower (or negative) financial benefit, we consider that these options are not worth pursuing further. Conclusion Our analysis suggests that there are a number of colocation options that are feasible and align with the objectives for this project. Further, our analysis suggests that these options are also financially viable for the ACT Government. The colocation options that we have assessed as worthy of further consideration are: Option 4 or 5 colocate the racing codes and EPIC at a greenfield site, with an option for EPIC to be at a separate greenfield site; Option 6 or 7 colocate the CHRC and EPIC at a greenfield site, with or without CGRC; Option 8 or 8a colocate CHRC and CGRC at Symonston with EPIC either consolidated on its existing site or at a greenfield site. This option is more complicated than colocation at a greenfield site but could be pursued if a suitable greenfield site cannot be identified; and Staged approach implement Option 6 or 7 in the first instance, with a long-term plan to achieve colocation of all the racing codes and EPIC (i.e. Option 4 or 5). Next steps The ACT Government may now wish to undertake further investigation of some of these options with the racing industry. There are two elements to the further work that is required to progress these options: Engagement with the racing industry; and Detailed analysis of the colocation options and urban renewal possibilities. Acknowledgments would like to acknowledge the assistance provided by the ACT racing clubs and EPIC in the preparation of this report. Their assistance was essential to understanding how the options would operate, the facilities required under the different colocation options and providing the context and background for the report. We thank the ACT racing industry and EPIC for their time and contribution to the report. xii

17 Stage 1: Colocation feasibility study racing codes and exhibition facilities 1 Introduction The ACT Government is currently assessing the feasibility of colocating the three ACT racing clubs the Canberra Racing Club, the Canberra Harness Racing Club and the Canberra Greyhound Racing Club onto a single site. Colocation of Exhibition Park in Canberra (EPIC) with the racing codes is also being considered in light of the proximity of EPIC to Thoroughbred Park (the current site of the Canberra Racing Club) and because the Harness Racing Club is currently located at EPIC. The options for the new colocated site are either at Thoroughbred Park or a greenfield site that has yet to be identified. Economic Development within the Chief Minister, Treasury and Economic Development Directorate engaged to undertake a feasibility study of the colocation options for the three racing clubs and EPIC. The study includes three main sections: As assessment of the strategic benefits, costs and risks of each option to determine the nature of the benefits that could be realised, the likely costs for the ACT Government, racing codes, EPIC and users of the facility and to identify the risks of each option for these parties. An overview of the economic environment in the ACT to support the financial assessment of the colocation options. A cost-benefit analysis for each of the options to determine the impact of the options on the ACT Government. 1.1 Purpose of the report The purpose of this report is to assess the different options for the potential colocation of the racing codes and EPIC. This report is the first stage of the ACT Government s analysis of the options for the racing codes and EPIC. The outcomes of Stage 1 will determine the second stage of work on possible colocation and whether or not the Territory will pursue these options further. Stage 1 does not include a detailed design of a colocated site, an assessment of the location of a potential greenfield site or the governance and operating arrangements for a colocated site. Further analysis would be required to understand these elements as part of a second stage of work, if the ACT Government chose to investigate this further. 1.2 Structure of the report The remainder of the report is structured as follows: Chapter 2 outline of the broader ACT Government priorities that are relevant to this study and the framework for analysis for the report; Chapter 3 our approach for the study, including the options that we have assessed and the key assumptions underpinning our analysis 1

18 Stage 1: Colocation feasibility study racing codes and exhibition facilities Chapter 4 qualitative cost-benefit analysis and a high-level risk assessment of each of the colocation options; Chapter 5 assessment of the economic and demographic trends in the ACT; Chapter 6 cost-benefit analysis of each of the colocation options from the ACT Government s perspective; Chapter 7 overarching assessment of the colocation options; and Chapter 8 key considerations and next steps for the ACT Government. The report also contains two appendices: Appendix A summary of stakeholder consultations and the feedback from the ACT Racing Codes on the report. Appendix B provides details of the views on the colocation from the racing industry and EPIC; and Appendix C provides the requirements for a new facility for the racing industry and EPIC. 2

19 Stage 1: Colocation feasibility study racing codes and exhibition facilities 2 Background In 2010, the ACT Government directed the Independent Competition and Regulatory Commission (ICRC) to undertake a review of the ACT racing industry. The review was requested to consider an appropriate system of product payments; an appropriate funding outcome for the ACT racing industry; an appropriate allocation of ACT budget funding among the three racing clubs; and the future structure of the ACT racing industry. In 2011, the ICRC released its final Report into the future of racing in the ACT. The ICRC recommended that the ACT Government and the three racing clubs undertake a detailed investigation into the costs and benefits of replacing existing administrative structures and establishing a single independent administrative body to oversee the management of the three racing codes. Following this, the ICRC recommended that there should also be a detailed investigation into the feasibility of colocating the three different racing codes at one location, which the ACT Government committed to do in the 2012 election. This report considers the feasibility of the colocating the racing codes but does not consider changes to the governance structures of the racing clubs. The colocation of the racing industry may also provide additional vacant land along Flemington Road that will provide opportunities for urban renewal. This chapter provides details of the broader context that feeds into the analysis in this report in terms of colocation, urban renewal and the framework we have used to assess the colocation options. 2.1 Colocation ACT racing industry The ACT racing industry consists of three clubs that represent the three racing codes: thoroughbred, harness and greyhound racing. The clubs are located at separate venues and are run independently. The Canberra Racing Club is located at Thoroughbred Park and the Club has a 99-year lease on the land that terminates in The facilities at Thoroughbred Park include two turf tracks, a synthetic track and a sand track, a grandstand with function facilities, a betting ring and offices for both race days and the general operation of the club, stables and training facilities, including an equine pool and horse walkers. The Club holds 25 races per year, with two big race days on Melbourne Cup day and Black Opal Stakes day. It is the largest training venue in New South Wales outside of Sydney, there are around 250 horses stabled at Thoroughbred Park and they train every day of the year. The Canberra Harness Racing Club is located at EPIC and the facilities are rented by the Club. They have access to a race track and a training track, a grand stand and stables. The Club holds 20 races per year and horses train every day of the year in the morning and evening. The Club is constrained in what other services it can offer because it leases the facilities from EPIC and does not own or have the right to build additional facilities. CHRC would support moving to a greenfield site where they have greater autonomy over the use 3

20 Stage 1: Colocation feasibility study racing codes and exhibition facilities of the site, whereas moving to Thoroughbred Park would not address this concern. The Club is also constrained when it can hold races due to other events held at EPIC, for example, it cannot use the track when the Canberra Show is on. The Canberra Greyhound Racing Club is located at Symonston. It rents the land from the ACT Government at a rate of $14,000 per annum. The facilities at Symonston include a race track, kennels, a grandstand and administration buildings. The Club holds 44 races per year and trials twice per week. The land is also used for some additional purposes unrelated to greyhound racing, such as an outdoor fitness club which provides an additional source of revenue. The Club also allows Club Members to access the enclosed, off the leash, dog exercise areas to encourage responsible dog ownership, exercise and play Exhibition Park in Canberra Given the proximity of EPIC to Thoroughbred Park and the potential for synergies between EPIC and the racing codes, the investigation has been broadened to consider possible options to relocate EPIC. EPIC is a Territory-owned exhibition centre and is the largest of its kind in the ACT and surrounding region. EPIC hosts indoor and outdoor events for businesses and the community. Principal events include the Royal Canberra Show, Summernats Street Machine Car Festival, the National Folk Festival, the Capital Region Farmers Market, the Home and Leisure Show, Ski Expo and the National Wine Show. There are many other events that use part of the site for shorter periods each year, including trade fairs, warehouse sales and community events. There are also a number of long-term tenants that use the EPIC site, including the Royal National Capital Agricultural Society, the organisers of Summernats, the ACT Canine Association, the Canberra Harness Racing Club and the ACT German Shepherd Dog Association. EPIC is managed by the Exhibition Park Corporation (EPC). EPC s mission as set out in its Annual Report (EPC 2013) is: To provide an economic and environmentally sustainable venue facility, enriching the economic and cultural development of Canberra and the region by providing indoor and outdoor opportunities for entertainment, recreation and commercial interests. In , EPIC received the majority of its funding from user charges, $3,534,000 or 84% of total income. This included $202,000 or 5% from the ACT Government through user charges. EPIC also receives a small proportion of income from the Government as payments for outputs, $412,000 or 10% of total income in (EPC 2013). One of the objectives for the EPC is to become self-sufficient. Looking forward, EPC expects the estimated income for to increase with anticipated increases in events, camping revenue and additional income streams, such as the low cost tourist accommodation development. 4

21 Stage 1: Colocation feasibility study racing codes and exhibition facilities 2.2 Urban renewal In order for the colocation options to be implemented, it will require the ACT Government to realise benefits from urban renewal. Any urban renewal options will need to be considered in the context of the current planning policies and the other ACT Government urban renewal priorities Planning considerations The development of the EPIC and Thoroughbred sites will require consideration of the ACT land supply strategy, the Territory Plan and the National Capital Plan, because the EPIC site is located on the Federal Highway. The areas will also require rezoning from broad acre to allow for residential and commercial development. For the purposes of this report it is assumed that the ACT Government will rezone the land as appropriate. ACT Land Release Programs Each year the ACT Government prepares four-year Indicative Land Release Programs setting out the Government s intended program of residential, commercial, industrial, community and non-urban land releases. The Programs are indicative and are subject to change as market conditions alter or as Government priorities are adjusted. The ACT Government has set out a number of objectives that the land release program seeks to fulfil. The objectives as set out in the Land Supply Strategy (EDD 2013) are: promoting the economic and social development of the Territory, including contributing to the vision set out in the Canberra Plan of a city representing the best in Australian creativity, community living and sustainable development; meeting the ongoing demand for residential land in the Territory; establishing an appropriate inventory of serviced land; facilitating the provision of affordable housing; maintaining flexibility of land releases to ensure they reflect market conditions and do not contribute to rapid land price changes; providing a variety of land and housing options; addressing the locational objectives set out in key Government documents such as the Territory Plan and the ACT Planning Strategy; achieving satisfactory returns to the Territory from the sale of unleased Territory land; and assisting in the operation of a competitive private sector land development market. The ACT Government released the current Indicative Residential Land Release Programs in June 2013 for the period to Since then, the estimated number of dwellings that will be released has been reduced. Table 2.1 shows the revised target number of dwellings for release over this period. The reduction in dwelling sites over the four years reflects the ACT Government s expectation that the ACT economy will slow over the period. This level of supply is expected to maintain stable land prices, improve housing affordability and allow the Government to establish an inventory of unsold sites. 5

22 Stage 1: Colocation feasibility study racing codes and exhibition facilities Dwelling sites Table 2.1: ACT Government dwelling sites to Total 4,000 3,600 3,300 3,300 3,300 17,500 Source: Economic Development Directorate estimates, March The ACT Government through the ACT Planning Strategy has set a target to deliver 50 per cent or more of new housing through urban intensification. This objective is designed to support greater urban sustainability and increase the focus for development on Canberra's town centres and along the major public transport corridors. The Territory Plan The Territory Plan sets out the ACT Government s vision for the development of the Territory. The objectives of the Plan are to: ensure, in a manner not inconsistent with the national capital plan, the planning and development of the ACT provide the people of ACT with an attractive, safe and efficient environment in which to live, work and have their recreation. (ACT Government 2008). The Territory Plan also sets out the current zoning for land in the ACT. The EPIC and Thoroughbred Park sites are currently zoned as broadacre. For the purposes of this analysis, we have assumed that the ACT Government would agree to change the zoning to residential, if it decided to pursue further development of the sites. The National Capital Plan The objective of the National Capital Plan (2013) is: to ensure that Canberra and the Australian Capital Territory are planned and developed in accordance with their national significance. The National Capital Plan provides a framework determined by the Commonwealth for land use and development throughout the Territory. Areas of land that have the special characteristics of the National Capital are labelled Designated Areas. This includes the main approach routes and avenues. The Plan may set out detailed conditions of planning, design and development in Designated Areas. The National Capital Plan covers some of the EPIC site as it is located on one of the main approach routes, along the Federal Highway. The area covered by the Plan is a 200m zone from the centre line of the main approach route and it runs the full length of the Federal Highway barrier. There are special requirements for developments in this zone that are set out in a Development Control Plan that was developed by the National Capital Authority in It covers requirements such as the height, width and quality of any buildings, landscaping, lighting and the visual impact of car parking. 6

23 Stage 1: Colocation feasibility study racing codes and exhibition facilities Related ACT Government urban renewal priorities The ACT Government is concurrently pursuing large-scale projects in the central Canberra area, including City to the Lake and the Northbourne Avenue redevelopment. The potential redevelopment of the EPIC and Thoroughbred Park sites would complement these projects and could be an important part of the ACT Government s strategy to revitalise the city from Lake Burley Griffin as far as the Gungahlin Town Centre. City to the Lake City to the Lake is the ACT Government's long term planning initiative for Central Canberra, which aims to bring more lifestyle and residential facilities closer to Lake Burley Griffin. The plan features a number of distinct elements: Residential apartments catering for 15,000 to 20,000 new residents; Commercial, retail and cultural facilities; The Australia Forum, which encompasses a new convention and exhibition centre; and A 30,000 seat stadium. Any development at the EPIC and Thoroughbred Park sites is outside of the areas that will be developed for City to the Lake. Plus, the City to the Lake development will be focused on apartments whereas the potential redevelopment at EPIC and Thoroughbred Park is more likely to be houses and townhouses. However, the interaction between construction and release of land for these two projects would need to be considered. Northbourne Avenue redevelopment The ACT Government is also planning to release government land along Northbourne Avenue for residential and other developments to increase density along the corridor. The impact of the development along the Northbourne corridor will need to be considered alongside the potential development at the EPIC and Thoroughbred Park sites. The timing of these developments is likely to be different with the ACT Government likely to release the land along Northbourne Avenue earlier than our estimated timeline for development at EPIC or Thoroughbred Park. The dwelling types are also likely to be different, with more apartments likely to be built along Northbourne Avenue, and will cater for a different market. Gungahlin Town Centre In 2010, the ACT Government released its Master Plan for the Gungahlin Town Centre. Gungahlin is expected to grow from 32,500 residents to 55,000 by 2019, and ultimately is expected to have between 90,000 and 100,000 residents by the time Gungahlin is fully developed (ACT Planning Authority 2010, p9). In light of the increased development in Gungahlin, it is prudent to consider the opportunities along the entirety of the City to Gungahlin corridor. Capital Metro The ACT Government has committed to constructing Stage 1 of the Capital Metro light rail project between Gungahlin and Canberra City, with construction due to begin in 2016, and 7

24 Stage 1: Colocation feasibility study racing codes and exhibition facilities expected to take two to three years. The land currently occupied by EPIC and Thoroughbred Park is an important component of this corridor and consideration of the future uses of this land will be critical to the Territory s broader land supply program, transport strategy and land use policies. 2.3 Framework for analysis The focus of this report is on the potential colocation options for the ACT racing clubs and EPIC and the resulting opportunities for urban renewal. Our analysis has been guided by two core objectives: Optimising investment and leveraging synergies for the racing industry and EPIC; and Optimising urban renewal in the ACT, including revenue potential and broader community benefits. In order to provide a more detailed assessment of the options and a high-level ranking of the extent that each option addresses these objectives, we have disaggregated the objectives into elements that are used to assess the relative merit of each option. Each of these elements is assessed at different stages of the report and a consolidated assessment is provided in Chapter 7. Detailed objectives Deliver a practical and achievable colocation solution. Increase operational efficiency and synergies for racing industry and EPIC. Improve racing industry and EPIC financial sustainability through enabling additional revenue opportunities. Address constraints at current sites (e.g. noise and governance constraints). Ensure financial viability of the colocation options for the ACT Government. Deliver colocation by undertaking urban renewal. Assessment method Risk assessment (Chapter 4) Strategic assessment (Chapter 4) Strategic assessment (Chapter 4) Strategic assessment (Chapter 4) Financial assessment (Chapter 6) Strategic assessment (Chapter 4) 2.4 Stakeholder consultations undertook a series of stakeholder consultations, including site visits, with the three ACT racing codes and EPIC as part of the analysis. Through the stakeholder consultations, we were able to gather information on: the facilities that the racing codes and EPIC would require at a new site; issues that would need to be addressed before colocation or relocation could occur; possible benefits and opportunities from colocation or relocation; and the views of each of the racing codes and EPIC on the proposed options. 8