Council Minutes - Town of Cambridge

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COUNCIL MINUTESTUESDAY 26 JUNE 2012DETAILS:The Town has met with the State Underground Power Program unit of Western Power todiscuss the preliminary project parameters for undergrounding power to the remaining areas ofthe Town. A basic desktop analysis suggests that the total cost of the project would be in thevicinity of $47.5 million, but that this estimate could be reduced to $41.5 million if an alternateinternal cost recovery model was adopted by Western Power. In addition, with a contribution byWestern Power of 10% (recognising the financial benefit they would enjoy from undergroundpower), the cost to the Town/Property Owners would be approximately $37.4 million.Consistent with the March 2012 decision of Council, a one third contribution by the Town wouldrequire $12.5 million from the Town's reserves and the Endowment Lands Account, with thebalance of $25 million being funded by the property owners. The following tables outline thetotal costs and the average cost per lot.Underground Power Indicative Costs Total Western Town PropertyPowerOwnersNumber of Lots 3,300Total Project Costs (cost drivers @ 20%) $47,500,000 $15,833,000 $31,667,000Adjusted Project Costs (cost drivers @5%) $41,563,000 $13,854,000 $27,709,000Less Western Power Contribution @ 10% $37,407,000 $4,156,000 $12,469,000 $24,938,000Underground Power Cost Per Lot Per Lot Western Town Property$ Power OwnersNumber of Lots 3,300Total Project Costs (cost drivers @ 20%) $14,400 $4,800 $9,600Adjusted Project Costs (cost drivers @5%) $12,600 $4,200 $8,400Less Western Power Contribution @ 10% $11,300 $1,300 $3,800 $7,600Logistically, it is envisaged that implementation could be achieved over eight years, with thesize of the projects being around 800 lots. However, the commencement of the overall projectis constrained by the Town's ability to finance the project and Western Power's capacity todesign and manage the project. This is elaborated later in this report.Of note, the cost per lot is approximately $11,300 assuming that the Town is successful innegotiating a reduced cost model and a 10% contribution from Western Power. The 1/3 subsidyfrom the Town brings the average cost per lot down to $7,600 with maximum amount aproperty owner would pay being $11,400 (50% more). However, it should be noted that thisfigure is only indicative due to the structure of the cost and charging model, which needs tofactor in a number of variables, including:• existing underground power pillar connections;• individual pricing for high load properties;• capping on underground power charges;• the number of strata titled properties;• discounts;• payment plans; and• interest rates and charges.H:\CEO\GOV\COUNCIL MINUTES\12 MINUTES\JUNE 2012\C CR.DOCX 177
COUNCIL MINUTESTUESDAY 26 JUNE 2012Whilst these variables are also reliant largely on a more comprehensive design beingundertaken by Western Power (at the Town's cost), they are sufficiently indicative for thepurpose of this report.Project CashflowAppendix one outlines the cashflow over a twelve year period for the total project, and for thetwo main funds; the Endowment Lands Account and the Area Improvement Reserve. Themodel is simplified to the extent that:• An escalation in the estimated project costs has not been applied;• Project financing costs are not built in;• Interest charges on property owner contributions has not been applied;• The model assumes properties in the project area are split 50% in the EndowmentLands Area and 50% Non-ELA; and• An assumed 20% of property owners opt for an upfront payment with the balancepaying by instalments over five years.Whilst the project requires a $6.4 and $6.1 million contribution from the ELA and AreaImprovement Reserve respectively, the peak draw on the funds, given that the funds arefinancing the project's cashflow, is $10.4m and $10.1m in years four and eight of the project.Underground Power: draw on funds$ million$12.0$10.0$8.0$6.0$4.0$2.0$0.0Year 1Year 2Year 3Year 4Year 5Year 6Year 7Year 8Year 9Year 10Year 11Year 12ELAReservesFund BalancesOver the next five to seven years, both the ELA and Area Improvement Reserve funds are duesignificant amounts of cash deposits from the proceeds of land sales. These sales includeOcean Mia, 'Area F & G', the Catalina Estate (Tamala Park), the potential development of theNursery site and the Perry Lakes Stadium Site.Whilst Ocean Mia lot sales can be realised over the next two years, the remainder of theproceeds are unlikely to impact the Town's cash reserves until 2016/2017. In the short term, itis essentially the proceeds from Ocean Mia deposited into the Endowment Lands Account thatCouncil has available. At this point in time, $9 million is held in this account with a further $27million yet to be realised.Capital ProjectsThe application of these funds is a matter for Council to determine. At this point in time,proceeds from land sales deposited in the ELA are earmarked for the Surf Club andCommercial Facilities development at City Beach and the Wembley Golf Course HospitalityH:\CEO\GOV\COUNCIL MINUTES\12 MINUTES\JUNE 2012\C CR.DOCX 178
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Council Minutes - Town of Cambridge

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