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STUDIES AND PROPOSALS
A Feasibility Study for A Public Indoor Tennis Facility
Krause House Info-Research Solutions
For the Cromarty Tennis Club
Sydney, Nova Scotia, Canada
April 11, 2006
Revised: January 16, 2009
(V) FINANCIAL ISSUES
NOTE OF JANUARY 16, 2009:
Some of the recommendations below are now outdated because of later developments.
To The Financial Issues
(Please Click On The Topic Of Your Choice):
|(A) Capital Costs||(B) Operational Costs||
(C) Revenue Projections,
Source of Funding, and Profitability Analusis
(A) Capital Costs
There are a finite number of capital costs which should be determined and amortized over 20-25 years as a yearly cost.
Naturally, any non-repayable matching or lesser grant from a federal or provincial capital programme which the business plan might identify as available could serve to significantly reduce this charge. As well, both a business plan [BusinessPlan.pdf] and a marketing plan [MarketingPlan.pdf] may be required to actually gain such government funding.
Furthermore, fund raising efforts could also substantially reduce this capital burden. Fund raising - spurred on by the fact that the CCITC had a tax deductible charitable status - would include, but not limited by, gifts from individuals, or gifts from corporations or businessess.
(i) Capital Cost Reduction
(a) Nova Scotia Grant
For example, the Nova Scotia Government, Office of Health Promotion (Coleen Chisholm, Regional Representative, Cape Breton Region Contact Person - Chishoco@gov.ns.ca ), has several programmes designed to assist community incorporated not-for-profit societies in the construction, and acquisition of facilities for public recreation purposes [See http://www.gov.ns.ca/ohp/physicalActivity/grantsCapital.asp for details]. Here, in summary, an applicant may apply as follows:
To the "RECREATION FACILITY DEVELOPMENT PROGRAM" for up to 1/3 of the total cost of the project. The deadline is the first Monday in February of each year. Applicants are only eligible for either the Community Recreation Capital Grant Program or Recreation Facility Development Program, once in any four year period.
To the "PLANNING ASSISTANCE PROGRAM" for up to 50% of the total cost of a consultant's, professional engineer, or architect's fee, or up to $5,000 in planning for a proposed facility (i.e. feasibility study). This aspect must be tendered (at least three estimates). Applications are possible year round. Applicants are only eligible for either the Community Recreation Capital Grant Program or Recreation Facility Development Program, once in any four year period.
To the "COMMUNITY RECREATION CAPITAL GRANTS PROGRAM" for small scale programs for 1/3 of total capital cost to a maximum of $3,000. Applications are possible year round. Applicants are only eligible for either the Community Recreation Capital Grant Program or Recreation Facility Development Program, once in any four year period.
(b) Canada - Nova Scotia Grant
Here the "MUNICIPAL RURAL INFRASTRUCTURE FUND" is a possibility". For example see: http://www.mrif.ns.ca/ where the objective "is to construct, restore or improve recreation, physical activity and sports public Infrastructure to encourage a higher proportion of Canadians, from all segments of society, to integrate sports and physical activities in their daily life. ... The total funding from all federal sources will not exceed fifty percent (50%) of the total Eligible Costs for a Project. ... Please note that projects must be duly authorized by the project’s local government by way of an approved resolution by the Municipal Council ... Sufficient information must be included on the application form to support the rationale for the proposed project and to provide evidence of a commitment by the applicant to pay their share of eligible costs and ongoing operating costs ..."
(c) Canada - Cape Breton Grant
ECBC funding help is, of course, always a possibility. For example, see: http://www.ecbc.ca/e/default.asp
(d) Information and Resources on Financing a Business in Nova Scotia, including guides on different forms of financing and sources of funding: http://bsa.canadabusiness.ca/gol/bsa/site.nsf/en/su06895.html
(e) Cromarty Community Indoor Tennis Centre Fund Raiser(s)
There are currently numerous high-dollar fund raising drives underway in the CBRM area. Houses, condominiums, cars, and 50/50 give-aways seem to be everywhere and the market here may be close to the saturation point.
(ii) General contractor
It might be wise to retain a lawyer to write up a contract(s), whether the Cromarty Community Indoor Tennis Centre hires a general contractor or instead acts as its own general contractor. While the cost of any project consists of labour, materials, profits, and overhead, before actual construction on the public facility were to begin, all costs are only estimates. Thus there are financial risks here in who is to pay for any cost over-runs or who retains savings if the project were to come in under estimate. It should also be determined what aspects are to be payment in a lump sum (stipulated sum), in a unit price (piece work), in guaranteed maximum price (profit limited to a specified amount), or cost plus, all best handled by a lawyer.
The lawyer should also determine whether it would be prudent to purchase default insurance to cover the general contractor and sub-contractors.
The hiring of a general contractor may be the best decision to be made despite the increased cost.
(b) Act as Own Project Manager
If the Cromarty Community Indoor Tennis Centre were to act as its own general contractor and project manager, financial savings could be made here, though there are also costly dangers if inexperience became an issue. Thus the following should be examined closely for guidance:
- Nova Scotia Government Construction Contract Guidelines (a.k.a. Request for Quotation (RFQ), Invitation to Tender (ITT), or Request for Proposals (RFP) [TenderGuideline.pdf]
- A bid document ought to include technical, operational and performance specifications as well as financial and contracting requirements. For example, see the Cambridge Ontario tender and quote for the construction of three outdoor tennis courts (CambridgeOutdoorCourts.pdf)
One savings would be the mark-up of the public facility charged by the general contractor (need not be paid). However numerous responsibilities would return to the Cromarty Community Indoor Tennis Centre, including project design, the resolution of design conflicts, the identification of accidental construction deviations, sub-contracting out, the ordering of materials (at discount without a general contractor mark-up), the estimation of the project cost, the scheduling of subcontractors, the resolution of scheduling conflicts, the keeping of the job process on time, and the daily on-site inspections of the work to ensure that the next scheduled item was done properly.
Other savings are possible too if the Cromarty Community Indoor Tennis Centre itself were to undertake assorted work: e.g. site preparation, site clean-up, or installing doors.
(iii) Land Preparation
(a) Cromarty Tennis Club Area
Excavation, drainage and retaining wall work costs are the greatest unknown, and may require a drilling probe investigation to determine the extent of rock and the degree of difficulty in arriving at the necessary level site required for foundation work.
(b) Sydney Area
A flat site would minimize land preparation costs.
A flat site would minimize land preparation costs.
(iv) Building (Purchase)
(a) Rigid Frame
The initial capital cost of this building will contribute to approximately 1/3rd of the total cost of the public facility over 20-25 years. Thus future savings are possible here if the initial design allowed for cost effective installations in the first place in the area of lighting and heating.
Between $9 and $13 USA per square foot for a rigid-frame structure, and between $4 to $12 USA per square foot for a metal rib arch building, is an industry standard south of the border. This includes materials and delivery (but not the slab or insulation). So, for a building of 7,200 square feet (60'x120'), with a high ceiling, perhaps $72,000 USA would be an average figure, with the larger the building the less cost per square foot.
It offers significant advantages over a pre-engineered building with its low cost, its ease of relocation, its expandability and its clear open playing space. The larger the size of the bubble the smaller the cost of each square foot covered. Costs generally range from $8.00 to $10.00 USA per square foot for the building alone, depending on the overall size and configuration of the building (i.e. $58,000 to $72,000 per court).
(v) Building (Assembly)
(a) Assembly - Rigid Frame
Joneljim would assemble a rigid-frame building for a ball-park figure of $50,000.000 CND plus HST. Here then, the labour charge works out to be approximately $6.67 CND plus HST per square foot. For a rib arch style building, the labour charge would be significantly lower. The labour charge clearly should not exceed the cost of the kit.
(vi) Thermal Insulation Work
(a) Insulation Materials and Insulation Labour
The labour and materials charge may be:
(vii) Foundation Work
Joneljim has "ball-parked" a charge for concrete with a reinforced slab on grade (assuming a flat site) as $135,520.00 CND plus HST for a building of 120' x 60'. Here then, for the concrete work, the per square foot charge is approximately $18.82 CND plus HST . For a rib arch style building, the concrete price would be approximately the same. These figures were checked with a second engineering source and appear in line with Cape Breton pricing practice. Here the figures would be 167 cubic metres of concrete @ $400.00 CND per cubic metre or $67,000 CND plus the cost for reinforcing materials (e.g. wire mesh and steel rebars) which would increase that charge to at least close to that of Joneljim's all-inclusive slab estimate.
Because anchor bolts or foundational industrial arch connectors may or may not be included in the frame kit, this cost may need be included in the foundation cost work. For example, anchor bolts would need be set plomb during the pouring of the concrete.
One doubles indoor court would, for example, require fourteen impact resistant fixtures (indirect base), each with a 1,000-Watt Metal Halide lamp which, at c. $500.00 USA each, would cost c. $7,000.00 USA.
The initial cost of T5HO [high Intensity] Fluorescent indirect light fixtures is the same or less than metal halide, but the maintenance and energy costs will be lower. One court may require 18 ten-lamp T5 fixtures.
A suspended ceiling is not contemplated.
(x) Heating and Cooling (Terminal Energy)
Two Modine MT 120 high intensity infrared heating units - one at each end of the building - might be sufficient to heat the said structure at a total cost for the two heaters of c. $1,200.00 USA.
An Envirolet electric waterless toilet by Sancor might cost $1,400 USA. No cost for chemicals, incinerating, or septic. To bring water into the building and associated plumbing and sewer line costs could easily exceed this amount.
(xii) Wiring Installation
Electrical wiring costs will be at the standard rate for the recommended lighting system.
(xiii) Automatic Active Fire Suppression System
The cost is unknown until the type of system is determined.
(xiv) Court (contractor)
Novacrylic Ultracushion being an acrylic surface applied to new asphalt or new concrete built upon on a base costs approximately $11,000 USA per court (i.e. over and above the cost of the asphalt or concrete base).
Generally, many cushion coatings will add approximately 0.95 cents USA per square foot to the overall cost of a court, is a one time investment, and if amortized over 20-25 years, the extra cost if increased user participation is the goal may be worth it.
- Hard courts, such as the Cromarty Tennis Club's four existing outdoor "fast game" courts, covered with a simple acrylic surface - adjusted for speed by the amount, type and sand - are less expensive, costing circa $18,000 USA including the asphalt base.
- Har-Tru which is a clay/fast-dry surface constructed over a rock base might cost $15,000-$20,000 USA for an indoor installation.
- Natural clay and fast-dry courts with above ground irrigation systems typically cost between $18,000 USA and $24,000 USA per court.
- Fast-dry courts with subsurface irrigation systems are usually more expensive (more involved construction), and range between $25,000 USA and $30,000 USA per court.
- Synthetic granular courts (an experienced contractor and available materials is critical), usually cost between $25,000 USA and $30,000 USA per court for outdoor installations, and $15,000 USA to $18,000 USA for indoor installations.
All soft courts require some sort of regular maintenance and how much to spend initially versus how to spend on annual up-keep, might be the determining factor.
A court with above-ground irrigation might be less expensive to construct than a subsurface irrigated court, but more expensive to maintain over the life of the court because of its greater need for water and daily maintenance.
Synthetic clay courts, meanwhile, require no watering at all and significantly less maintenance.
(xv) Interior Amenities
The added cost for padding the columns will be minimal.
(a) Cromarty Tennis Club Area
The additional security fencing price will be relatively minor compared to other input cost. However, total cost here is impossible to determine until the building is actually sited.
(b) Sydney Area
(B) Operational Costs
Because operational costs will contribute to 2/3rds of the total cost of the public facility over 20-25 years, great savings are possible here if the initial design addressed annual energy consumption and maintenance issues in the most efficient manner possible.
(i) Annual Energy consumption
In 2005, the total electricity charge for the Cromarty Tennis Club's 4 outside courts that included 24 court light fixtures (Metal Helix - 1500-Watts each) was just $867.00 CND with Kwh used being only 6180. Clearly, the lighting requirements of a public indoor facility would exceed that dollar amount, but fixture type and number can dramatically reduce cost. For example, whereas a single indoor Tennis Court using 14 indirect 1,000-Watt Metal Halide Lamps, operating 17 hours per day, at $0.10 USA per KWH, would cost $771 USA per month [510 or 527 hours], that same court using the Courtlite Direct Recreational energy efficient lighting system, will deliver better lighting quality, and only cost $286 USA per month [ http://www.courtlite.com/main.htm ].
In other words: Approximately $1.51 USA versus $0.56 USA [$0.70 CND] maximum per hour.
Because energy costs will no doubt continue to rise, a high insulation value for the building envelope and a high efficiency heating system is critical to minimize their cost effects.
An infrared gas heater is at least 50% more fuel efficient than a hot-air system.
http://store.h-mac.com/heloca.html has an interesting free downloadable heat load calculator in excel format where approximate calculations can be easily made. For example, for a building that measured 60'x120' and say averaged 30' high overall, with the walls R20, the ceiling R32, total exterior insulated door openings of 96 square feet, no concrete slab insulation other than an insulation skirt, and 55 F degrees [12.7 degrees C] inside when the outside temperature is 0 F, the calculated loss can be measured as 240,834 BTUHS (or 70,564 watts) (where BTUHS or BTUH Sensible = Pounds of air per hour x change in air temperature x 0.24). The British Thermal Unit per Hour content of propane is normally about 91K or .29307107 watts.
The consumption of propane is measured in litres with propane having an energy content of about 25.3 MJ/L [megajoules per litre] or, more precisely 24,500 BTU of energy per litre.
Superior Propane's locked-in 2006 commercial unit price for propane is presently $0.49 CND per litre. Given the estimated heat loss for the proposed minimal sized building, it would cost approximately $4.82 CND per hour to heat this structure to 55 degrees F [12.7 degrees C].
(ii) Maintenance Expenses
(1) A steel building is virtually maintenance free.
(2) For a bubble, spots can be removed with warm, clear water. Special cleaning liquids are required once a year. In case of damage, the bubble must be taken down. Smaller injuries can repaired with a repair set (glue and patch material); more severe damage may have to be repaired by the manufacturer.
A bubble can be folded and stored only when it is dry and placed in a rodent free environment.
Air structure fabric membranes typically have a life expectancy of 10 to 12 years.
Washed occasionally to get maximum life.
The wearing surface of a Ultrcushion court is non-fading, high performance 100% acrylic, and is environmentally friendly. The top surface, the Novacoat in the Novacrylic combination surface, will look attractive for 5-8 years - depending on the quality of housekeeping - between recoating, with a minimum amount of maintenance. It is coloured all the way through from the top to the substratum. In the event of damage, such as gouges from racquets, vandalism, court equipment, etc., the damaged area will be the same colour as the rest of the court.
Average life of 12-15 years outdoors before requiring major work. Much longer lifespan indoors.
From time to time a net will need be purchased.
(c) Heating System Maintenance
Utilization of a propane heating system requires a maintenance contract to ensure routine checks and safe operation.
(d) Automatic Active Fire Suppression System Inspection, Testing and Maintenance
An active fire suppression system (if installed) will need to be inspected monthly and annually. Consequently a maintenance contract will be required to meet insurance requirements.
(e) Security and Fire Monitoring; Lock and Key System
An annual fee will be required for the security and fire monitoring system.
(iii) Insurance (Property and Third-Party)
Insurance costs for a pre-engineered steel structure such as the proposed public facility - with few combustibles, low occupancy fire-risk, and fully sprinklered - should draw Sydney's lowest possible rate. For example, for a steel structure (concrete slab and footings not included), with a materials and assembly construction cost of $200,000 CND and insured for 80% of value at an annual rate of $0.08 CND per $100.00 CND of coverage, the annual insurance premium ought to be circa $128.00 CND
The existing outdoor third-party insurance should be extended to functions within the public facility since the tennis function is the same here. Further consideration should be given to obtaining insurance to cover other events such as extra-ordinary fund-raising and specified alternate than tennis use (like yoga lessons).
As a matter of comparison, the existing insurance cost for the outdoor summer programme [both property and third party liability] is $935.00 CND.
(iv) Insurance (Directors and Officers Liability)
This insurance would protect the board from wrongful act suits. For a non-profit existing society like the Cromarty Tennis Club for example, without employees, etc., such a policy would be relatively straightforward. A $2,000,000.00 coverage is the minimum which ought to be purchased. Present costs vary from c. $750.00 ($1,000,000.00 coverage) to c. $1250.00 ($2,000,000.00 coverage).
(C) Revenue Projections, Source of Funding, and Profitability Analysis
The goal of this public facility is to generate sufficient revenue to cover off a 12-month operating expense of lights, heat, security, maintenance, as well as a yearly amortized capital cost. Naturally, a business plan that was able to access any initial non-repayable matching or lesser grant from a federal or provincial capital programme would go far to ensure profitability.
Maximum revenue projections could be based on a 360 year 17-hour day player operation, or 6120 operational hours per year, with the user fee rooted in singles and doubles play. For example:
(1) 17 hours per day x 360 days x 4 players would generate 24,480 summer-winter player hours
(2) 17 hours per day x 360 days x 2 players would generate 12,240 summer-winter player hours
(3) 17 hours per day x 208 days x 4 players would generate 14,144 winter player hours
(4) 17 hours per day x 208 days x 2 players would generate 7,072 winter player hours
(5) Any combination based on the above
In this scenario, a profitability analysis would need to consider that all of these hours would incur an hourly player-required lighting cost. Furthermore, the 208 17-hour winter playing days (November 1-May 31) would attract 3536 of player-required heating costs, with another 1456 hours of building-required heating costs when the public facility was not operational late at night and early in the morning (i.e. 7 additional hours per day).
Then there is reality in that these ideal targets may never be met, but as a tool, they are suggestive.
In the everyday world, one would combine the yearly operational costs and the firmed up yearly amortized capital cost, and then calculate what it would take to generate the required revenue to produce no less than a financially break-even operation.
In the executive summary, the following capital scenario was provided:
"The capital funding of such a public facility will be more difficult. For example, at a 6% mortgage rate amortized over 20 years, the payment for a $200,000.00 obligation would be approximately $1,425.00 per month or $17,100 per year. However, if it were only $100,000.00, then it would be $712.00 per month or $8,550 per year; and etc."
Furthermore, if, the rate were 8% amortized over 20 years, the payment for a $200,000.00 obligation would be approximately $1,675.00 per month or $20,100 per year. And so on.
According to a previous discussion [lighting, heating, maintenance expenses, insurance], year to year operational costs are much less when compared to the yearly capital load.
Reality suggests strongly that a reasonably priced November 1-May 31 winter programme just by itself would fund the total yearly operational and capital costs, and that any funds generated by a summer indoor programme (June 1 - October 31) would be gravy. For example, during the winter session, the number of available hours (less 4 storm days) would be as follows:
PRIME TIME (1571 hours or 53 hours per week) - Non-Retired Players Have Priority
(1) Every night: 6 pm-11 pm - 5 hours x 208 days or 1040 hours
(2) Weekend days: 9 am-6 pm - 9 hours x 59 days or 531 hours
OFF-HOURS (1341 hours or 45 hours per week) - Retired and Non-Retired Players have Equal Priority
(1) Week Days: 9 am-6 pm - 9 hours x 149 days or 1341 hours
Clearly, given a reasonable per hour charge, one would expect prime hours to be fully booked and off-hours booked to a lesser degree. Adding the actual results of the two bookings together, a winter court fee as low as $10.00 per hour (and certainly $20.00) could conceivably meet all capital and operational obligations for the entire year!
From a player's perspective, a low winter hourly charge would encourage multiple sessions per week (whether singles or doubles), whereas a higher charge would obviously discourage both multiple per-week and singles play.
The Centre will charge an hourly, tennis booking fee, first come, first serve, with one exception, when the Centre is running a group community tennis programme as pre-scheduled on its website.
The summer outdoor operation at the Cromarty Tennis Club has successfully sustained itself now for many years with a relatively low membership fee, with an active volunteer participation, and with some key grants. The summer indoor public facility (which will utilize hourly rather than yearly membership fees) should have a similar goal in mind - i.e. low hourly rates, active volunteers.
In the winter, highly motivated recreational and competitive players, as well as large playing families - competing over one court - will want two to three sessions per week. In essence, this is a multiple participation use that must be encouraged through an affordable hourly rate.
An economically-sound indoor user regime might want to take the following format:
(a) Public Indoor Winter Programme (November 1 – May 31)
Clearly, operational charges will be higher during the winter months and the fee will need to reflect how best to recoup costs. A realistic per-hour user charge (i.e. based on 60 minutes, not 40 minutes, not 90 minutes, etc.) would probably best meet this requirement.
Player fairness would be ensured through an on-line internet booking system similar to the one previously used by the Cromarty Tennis Club
As already noted above, the number of available prime time hours per week would be 53 with non-retired players having a priority. Another 45 hours per week would be available to retired and non-retired players during the off-times.
(b) Public Indoor Summer Programme (June 1-October 31)
During the summer months public participation would no doubt fall off due to the wide variety of competing recreational activities including outdoor tennis. To encourage the participation of outdoor tennis clubs in the area, as well as the public in general (including the travelling visitor), a lower fee (i.e. based on 60 minutes, not 40 minutes, not 90 minutes, etc.) would be charged for those wishing to use the public facility.
A paper booking system like that used for the Cromarty Tennis Club's outside courts would be best as this would assure both planned as well as spontaneous play (e.g. when the outdoor courts were fully occupied, or when visitors arrived).
(iv) Cost-Recovery Winter School, After-School, and Junior Development Tennis Programmes
A winter school tennis programme should be designed as an option for those now using the existing Ski Ben Eoin programme. For example, youth/school ski program rates there range from a weekend charge of $27.00 for a lift pass, lesson and rental to a $3.00 charge for a midweek lesson only. In particular, the tennis programme should concentrate on midweek bookings so as not to intrude upon the more popular tennis weekends. During this midweek period, the ski program charges $20.00 for a lift pass, lesson and rental and $3.00 for a lesson only, fees with which a public indoor facility could easily compete.
A separate winter "after-school" tennis programme modeled upon the Cromarty Tennis Club's summer one might be quite popular as well.
A winter junior development programme, separate from the above school programmes, designed to fast-track the CBRM's best players to national prominence is a must. Presently these players are at a national disadvantage during winter months as they have no place to maintain and increase their skills.
Within the cost-recovery aspect of the winter school programme, there would certainly be sufficient funds to entice a retired player(s) to provide the required lesson and supervisory component; Similarly there would be enough for a stipend to entice a player of, say Bill Buckland's national calibre (5th in his category), to provide the required lesson and mentor component for a junior programme.
(v) Extraordinary Club Closed Programmes
Specialized programmes designed to raise Cromarty Community Indoor Tennis Centre money (e.g. private lessons, exhibition tournaments, etc.) would not be deterred by the whims of weather and could thus be quite appealing because of the certainty of an event being held.
(vi) Alternate Uses
Other groups, such as yoga, are known to be looking for an inexpensive, reliable public facility where to hold their programmes.
(vii) Yearly Operating Grants
CBRM might be willing to match the summer grant amount for a winter programme if it included a junior and school programme. Frank Bruleigh, CBRM Recreation Department, 320 Esplanade, Sydney, Nova Scotia, B1P 7B9, email@example.com , should be consulted on this.
Any winter fitness programme that the Cromarty Community Indoor Tennis Centre might run during the winter in association with schools might be eligible for a provincial or federal grant, now or in the future:
- Province of Nova Scotia After-School Physical Activity Grant: go to the web site at: http://www.gov.ns.ca/ohp/physicalActivity/grantspa.asp - After-School Physical Activity Program (Nova Scotia Health Promotion and Protection)
- Sports Nova Scotia Grant List: http://www.sportnovascotia.ca/contents/sport_funding/other_sources.htm - Sport Nova Scotia After-School Physical Activity Program with support from Doctors Nova Scotia, Nova Scotia Health Promotion and Protection and the Government of Canada.
- RBC Stay In School Project - After School Grants Programme - http://www.rbc.com/community/donations/after-school/index.html
- Nova Scotia – Finding and Funding Employees: http://bsa.canadabusiness.ca/gol/bsa/site.nsf/en/su07023.html
(viii) Donations and Bequests
Tax deductible donations and bequests would be possible if the public indoor facility were operated as a registered non-profit charitable trust.
(vix) Corporate Sponsorships
Sponsorships are an integral part of the marketing and promotional activities of many companies, including RBC which promotes amateur sports - http://www.rbc.com/sponsorship/guidelines/prog_02.html