Deloitte reports released to public

Posted: 14/04/15

UPDATED 16th April: The Deloitte feasibility studies on the Hundertwasser and Harbourside projects, commissioned by the Whangarei District Council, have been released to the public.

Key points

We’re still reading through the material and we’ll bring you more detail as we analyse it further, but key information from the Deloitte reports includes:

  1. The difference between the two projects in upfront cost for the Whangarei District Council is negligible ($2.8m for Hundertwasser and $2.5m for Harbourside)
  2. Deloitte has confirmed the estimated visitor numbers for Hundertwasser (150,000) but have revised the estimated Harbourside visitor numbers down to 35,000.
  3. The ‘break-even’ point for both projects is 95,000 visitors per annum
  4. The Hundertwasser project will not cost the WDC any money after the initial $2.8m investment in making the building ready for renovation and is forecast to return a profit to WDC when it is gifted back to the city; the Harbourside project will run at a deficit of between $400-$800k per annum that must be met by WDC ratepayers or fundraising
  5. The Hundertwasser project will be profitable well before 2022; the Harbourside project will be running at a deficit of approximately $800,000k by that year (and has a high risk of even worse financial performance).
  6. ‘Cost overuns’ and ‘financial operating’ risks to WDC for Hundertwasser are considered low/low, while the same risks for Harbourside are considered medium/high.

You can read all the information supporting these reports, plus the Peer Review material, on the WDC website here.

Updated information (16th April 2015):

Also included in the series of reports released by Council is the Peer Review document prepared by Richard Dunbar of Nexus Planning & Research Limited.

As we see it, the key points we can take from the Peer Review are as follows:

  1. There are areas of uncertainties about both projects that require further investigation, especially pertaining to operating revenues (which are contingent on visitor numbers + pricing strategies)
  2. Nexus are not disagreeing with the figures per se, but clearly pointing to the fact that more work is needed ascertain the final validity of any figures
  3. Nexus does not like the methodology Deloitte used for estimating visitor numbers for the Hundetwasser art centre (which is different to what Deloitte used to estimate visitor numbers for Harbourside) and suggest a new model and reworking would produce more accurate (although not necessarily different) figures
  4. Nexus recommends that whatever option is chosen by ratepayers, a more thorough marketing strategy is completed before any project is embarked upon.

As we’ve already stated, Deloitte estimate 150,000 paying visitors per annum for Hundertwasser, with a break-even point of 95,000 (based on the admission fee proposed). As we see it, that allows considerable leeway for tweaking admission prices in response to higher or lower visitor numbers to easily achieve a break-even point. We agree that these figures need to be more fully researched in a comprehensive marketing strategy.

The opposite situation exists for Harbourside; estimated visitor numbers range from a low of 20,000 to a high of 50,000, but with the same break-even requirement (95,000) – there is no way Harbourside can operate profitably through ticket sales.

Note: the above is our interpretation of the Deloitte and Nexus reports and we urge readers to take the time to have a look through them and draw their own conclusions.