kempsey shire council€¦ · march 2016 appendix c 15mar2016 page 15 item 4. ii | ghd | report for...

GHD | Report for Kempsey Shire Council - Kempsey Regional Saleyards, 22/18154 | i

Kempsey Shire Council

Kempsey Regional Saleyards

Financial Plan March 2016

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Executive summary GHD were engaged by Kempsey Shire Council (the Council) to develop a financial plan for the

Kempsey Regional Saleyards (the Saleyards)

After reviewing previous reports, GHD visited the facilities to consider potential upgrades and

consult key stakeholders, including Council staff, agents and a selection of producers.

Potential improvements were identified, costed and prioritised (section 2.3) based on the

Council’s ability to finance future works.

Current financial position

Historically the Saleyards have typically returned an annual loss or small profit, which after

accounting for loan repayments has resulted in an annual operating deficit absorbed by Council.

However in recent years, the financial position of the Saleyards has been steadily improving, as

loans are repaid. Throughput and revenue has also increased since the second agent was

provided access to the facilities. 2014/15 saw an increase in revenue of over $90K, due to

increased throughput (28K to 36K head) and also an increase in yard dues.

Forward projections suggest the facility will continue to return modest annual profits. Without

additional borrowing, the facility will return its first annual operating surplus in 2017/18.

Year Source Revenue Expenses Profit/Loss Loan repayments

Operating Surplus/Deficit

2004/05 Historical $190,494 $170,824 $19,670 $70,943 -$51,273

2005/06 Historical $192,059 $240,603 -$48,544 $78,820 -$127,364

2006/07 Historical $220,992 $267,835 -$46,843 $105,909 -$152,752

2007/08 Historical $254,138 $240,409 $13,729 $126,492 -$112,763

2008/09 Historical $257,983 $306,536 -$48,553 $156,331 -$204,884

2009/10 Historical $278,933 $339,550 -$60,617 $183,521 -$244,138

2010/11 Historical $276,606 $260,214 $16,392 $193,355 -$176,963

2011/12 Historical $238,787 $249,947 -$11,160 $204,557 -$215,717

2012/13 Historical $215,941 $222,628 -$6,687 $182,207 -$188,894

2013/14 Historical $208,282 $252,469 -$44,187 $174,271 -$218,458

2014/15 Historical $300,796 $258,295 $42,501 $138,557 -$96,056

2015/16 Budget $297,285 $215,693 $81,592 $122,118 -$40,526

2016/17 Forecast $307,121 $243,271 $63,850 $93,626 -$29,776

2017/18 Forecast $330,035 $241,093 $88,942 $64,379 $24,563

2018/19 Forecast $354,728 $240,996 $113,732 $31,258 $82,474

2019/20 Forecast $381,339 $243,643 $137,696 0 $137,696

2020/21 Forecast $410,019 $247,795 $162,224 0 $162,224

The expiration of the current lease agreement in coming years will provide an opportunity for the

facility to increase throughput, by providing access to all agents, through the introduction of

multi-agent sales. To facilitate multi-agent sales, the facility would most likely need to introduce

pen selling (in addition to ring selling), to ensure operational efficiency.

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GHD | Report for Kempsey Shire Council - Kempsey Regional Saleyards, 22/18154 | iii

Limit of Council subsidisation

The above projections suggest there will be some capacity for the facility to finance future loans

from annual profits, however any substantial borrowing will likely return the facility to deficit.

Council’s position is that the facility should be independently financially viable, without ongoing

Council subsidisation through annual deficits. While Council is prepared to cover occasional

deficits, ideally the facility would return a net surplus over the coming 5 years. Council is

committed to continuing to provide in kind staffing support for the facility, which does not appear

in the financial analysis.

Proposed Capital Works Schedule

The proposed capital works schedule (below) aims to implement high priority and less

expensive capital improvements in 2016/17 (CCTV, new scales and pneumatic gates, replace

water troughs) before moving onto longer term priorities in 2017/18 (new office building, raised

walkways, secondary effluent treatment). The construction of a roof over delivery yards

(discussed below) is delayed until 2018/19 to allow time for Council to monitor throughput and

financial performance and seek additional funding.

2016/17 2017/18 2018/19 2019/20 2020/21

CCTV

High (short term)

$8,000

Signage and safety $2,000

Fix bent gates $2,000

Scales and gates $26,500

Replace water trough and cover copper pipe

$17,000

WWTS maintenance works

$50,000

New office

High (long term)

$20,000

Raised walkways $62,000

Secondary effluent treatment System

$140,000

Roofing over delivery yards (initial)

$460,000

Roofing over delivery yards (final)

$460,000

Total capital cost $105,500 $82,000 $140,000 $460,000 $460,000

Construction of roof over delivery yards

The construction of a roof over the delivery yards is the major long-term investment decision for

the facilities. This investment will address a number of issues facing the facilities, by:

Reducing the amount of wastewater entering the wastewater treatment system (WWTS),

by allowing clean captured rainwater to be diverted either to tank storage or nearby

drainage;

Eliminating the need for town water top-up during warmer months;

Reducing animal welfare issues associated with excessive heat, including water trough

overheating;

Addressing OH&S and amenity issues associated with heat and rain;

Helping facilitate pen selling; and

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Allow the introduction of sawdust flooring, to prevent hoof injuries and lameness.

Financial projections

The financial projections below assume annual operating cash surpluses (excluding

depreciation) will be held in a reserve fund and used for future capital improvements. The

funding shortfall (i.e. when the balance of the reserve fund falls below zero in 2019/20 and

2010/21 will be obtained from internal borrowings and rapidly repaid in the following year.

Modelling has been conducted using the following assumptions:

• Improvements lead to an increase in annual saleyard throughput of 3% per annum until

2020/21 after which throughput plateaus.

• Annual costs and fees increase with CPI.

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Projections 2015/2016 2016/2017 2017/2018 2018/2019 2019/2020 2020/2021 2021/2022 2022/2023 2023/2024

Throughput

(assuming 3% annual increase)

36,255 37,343 38,463 39,617 40,805 42,029 42,029 42,029 42,029

Revenue $297,285 $307,121 $330,035 $354,728 $381,339 $410,019 $421,499 $433,301 $445,434

Operating expenses (including interest)

$215,693 $243,271 $241,093 $240,996 $243,643 $247,795 $252,097 $256,556 $261,177

Annual operating profit (loss) $81,592 $63,850 $88,942 $113,732 $137,696 $162,224 $169,402 $176,745 $184,257

Existing loan repayments $122,118 $93,626 $64,379 $31,258 $- $- $- $- $-

Annual operating surplus (deficit) -$40,526 -$29,776 $24,563 $82,474 $137,696 $162,224 $169,402 $176,745 $184,257

Reserve Fund

Input

(Annual operating surplus excluding depreciation costs)

$68,149 $99,124 $147,737 $199,130 $246,960 $263,132 $269,527 $276,064 $282,747

Withdrawal

(Proposed capital works)

$- $105,500 $82,000 $140,000 $460,000 $460,000 $- $- $-

Balance $68,149 $61,773 $127,510 $186,640 -$26,400 -$223,268 $46,259 $322,323 $605,070

Internal borrowings $- $- $- $- $26,400 $223,268 $- $- $-

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Sensitivity analysis

The sensitivity analysis below shows how the total funding required from internal borrowings

(i.e. the funding shortfall) would vary, under changes to key assumptions around annual

throughput growth.

Annual increase in annual throughput

(20/21 throughput level)

Total funding required from internal borrowings (funding shortfall)

0% (36K) $486,313

1% (38K) $393,233

2% (40K) $299,930

3% (42K) $249,666

4% (44K) $198,515

5% (46K) $146,465

Conclusion

Having undergone previous capital works and repaid debt, the Kempsey Regional Saleyards

are expected to return operating surpluses in coming years, allowing Council to undertake

additional targeted capital improvements.

The capital works schedule proposed in this report aims to prepare the facility for servicing

multiple agents following the expiration of the current lease, without burdening Council with

unsustainable debt levels.

Failure to reinvest in the facility will most likely lead to a steady decline in operational efficiency

and increased scrutiny on animal welfare, environmental management and OH&S.

A summary of recommendation from this report is provided below.

Summary of recommendations

1. Implement the capital works program as outlined in this report, while monitoring annual

changes to throughput, revenue and expenses against projections.

2. Investigate opportunities to draw on the Environmental Levy or the NSRF to help fund the

construction of a roof over delivery yards.

3. Ensure all usage fees are regularly adjusted for CPI.

4. Revisit the business development actions outlined in the Saleyard Business Plan

including activities aimed at improving promotion, broaden the Saleyards supply area and

improving security/revenue collection.

5. Begin planning and preparations for beyond the current lease agreement. If Council is to

hold multi-agent sales, how will sales be managed? Will additional resources be

required?

6. If the Council is not fully committed to managing the facility to its full potential, including

the management of multi-agent sales, the Council should seek to outsource management

or sell the facility.

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Table of contents

1. Introduction..................................................................................................................................... 1

1.1 Purpose of this report........................................................................................................... 1

1.2 Terms of reference ............................................................................................................... 1

1.3 Methodology ........................................................................................................................ 1

1.4 Scope and limitations ........................................................................................................... 2

2. Background .................................................................................................................................... 3

2.1 Previous analysis and reviews ............................................................................................. 4

2.2 Completed works ................................................................................................................. 6

2.3 Current financial position ..................................................................................................... 8

2.4 Limit of Council subsidisation .............................................................................................. 8

2.5 Potential sources of capital .................................................................................................. 8

3. Identified improvements ............................................................................................................... 10

3.1 Roofing over delivery yards ............................................................................................... 10

3.3 Roofing over holding pens ................................................................................................. 12

3.4 Shade membrane .............................................................................................................. 13

3.5 Raised walkway ................................................................................................................. 14

3.6 New office building ............................................................................................................. 14

3.7 New scales and pneumatic gates ...................................................................................... 15

3.8 Secondary effluent treatment system ................................................................................ 16

3.9 Scour cleaning system ....................................................................................................... 17

3.10 Replace water troughs and cover copper piping ............................................................... 19

3.12 WWTS maintenance works ............................................................................................... 20

3.13 Minor upgrades and general maintenance ........................................................................ 21

3.14 Summary of priority investments ....................................................................................... 22

5. Proposed capital works program ................................................................................................. 23

5.1 Capital improvements excluded from the program ............................................................ 25

6. Financial plan ............................................................................................................................... 26

6.1 Sensitivity analysis ............................................................................................................... 1

6.2 Low investment option ......................................................................................................... 1

7. Summary of findings and recommendations .................................................................................. 2

7.1 Summary of recommendations ............................................................................................ 2

8. References ..................................................................................................................................... 3

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Table index

Table 1 Summary of identified projects (Huefner & Associates 2006) ............................................. 4

Table 2 Capital works program expenditure since 2004/05 ............................................................. 6

Table 3 Financial performance (historical, current budget and forecast) ......................................... 8

Table 4 Prioritisation rating system ................................................................................................. 10

Table 5 Improvement summary: Roofing over delivery yards ........................................................ 11

Table 6 Improvement summary: Roofing over holding pens .......................................................... 12

Table 7 Shade membrane options .................................................................................................. 13

Table 8 Improvement summary: Shade membrane ....................................................................... 13

Table 9 Improvement summary: Raised walkways ........................................................................ 14

Table 10 Improvement summary: New office building ...................................................................... 15

Table 11 Improvement summary: New scales and pneumatic gates ............................................... 16

Table 12 Improvement summary: Secondary Treatment System .................................................... 17

Table 13 Improvement summary: Scour cleaning system ................................................................ 18

Table 14 Improvement summary: Replace water troughs and cover copper piping ........................ 19

Table 15 Improvement summary: WWTS efficiency works .............................................................. 20

Table 16 Improvement summary: Minor upgrades and general maintenance ................................. 21

Table 17 Summary of capital improvements by priority .................................................................... 22

Table 18 Proposed capital works program ....................................................................................... 23

Table 19 Excluded capital improvements ......................................................................................... 25

Table 20 Capital works schedule ...................................................................................................... 26

Table 21 Financial projections ............................................................................................................ 1

Table 22 Sensitivity analysis: impact on net funding shortfall from changes in annual

throughput ............................................................................................................................ 1

Table 23 Description and assumptions for financial modelling items ................................................. 7

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Figure index

Figure 1 Kempsey Regional Saleyards Site Plan .............................................................................. 3

Figure 2 Delivery pens ..................................................................................................................... 11

Figure 3 holding yards ...................................................................................................................... 12

Figure 4 Proposed location for new office ........................................................................................ 15

Figure 5 Scale and gates ................................................................................................................. 16

Figure 6 A Secondary effluent treatment system installed at the Braidwood Livestock

Truck Wash (For Earth Pty Ltd) ......................................................................................... 17

Figure 7 Delivery yards with solid waste build-up ............................................................................ 18

Appendices

Appendix A – Summary of recommended management options for WWTS (ERM 2011)

Appendix B Financial modelling

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GHD | Report for Kempsey Shire Council - Kempsey Regional Saleyards, 22/18154 | 1

1. Introduction

1.1 Purpose of this report

GHD has been engaged produce a Financial Plan and Capital Works Program for Kempsey

Regional Saleyards, which will help build the asset’s competitive advantages and ensure

compliance with current and future regulatory and animal welfare requirements.

Kempsey Shire Council’s (KSC’s) investment in the Kempsey Regional Saleyards is consistent

with the Council’s economic development focus which seeks to stimulate growth of higher value

and value-added agribusiness ventures.

1.2 Terms of reference

The terms of reference for the project are to:

1. Review the 2013 Kempsey Regional Saleyards business Plan and other support

documentation, including Kempsey Regional Saleyards, Market Analysis and Financial

Modelling (GHD Pty Ltd, 2013) and Kempsey Regional Saleyards Infrastructure Review

and Feasibility Study (Huefner & Associates Pty Ltd, 2006);

2. Conducting a site visit to the site and liaising with key industry stakeholders and Council

staff; and

3. Developing the Financial Plan, including future fee modelling and a five-year capital

works program.

1.3 Methodology

The financial plan has been completed over the period from November 2015 – February 2016.

Following are the activities completed in conducting the review:

a) Review of previous reports and financial data;

b) Site visit and consultation with Council employees, livestock agents, producers and

suppliers;

c) Identification, costing and prioritisation of potential capital improvements;

d) Financial planning; and

e) Reporting.

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1.4 Scope and limitations

This report: has been prepared by GHD for Kempsey Shire Council and may only be used and relied on by Kempsey Shire Council for the purpose agreed between GHD and the Kempsey Shire Council as set out in section 1.1 of this report.

GHD otherwise disclaims responsibility to any person other than Kempsey Shire Council arising in connection with this report. GHD also excludes implied warranties and conditions, to the extent legally permissible.

The services undertaken by GHD in connection with preparing this report were limited to those specifically detailed in the report and are subject to the scope limitations set out in the report.

The opinions, conclusions and any recommendations in this report are based on conditions encountered and information reviewed at the date of preparation of the report. GHD has no responsibility or obligation to update this report to account for events or changes occurring subsequent to the date that the report was prepared.

The opinions, conclusions and any recommendations in this report are based on assumptions made by GHD described in this report. GHD disclaims liability arising from any of the assumptions being incorrect.

GHD has prepared this report on the basis of information provided by Kempsey Shire Council and others who provided information to GHD (including Government authorities)], which GHD has not independently verified or checked beyond the agreed scope of work. GHD does not accept liability in connection with such unverified information, including errors and omissions in the report which were caused by errors or omissions in that information.

GHD has prepared the preliminary cost estimates set out in section 3 of this report using information reasonably available to the GHD employee(s) who prepared this report; and based on assumptions and judgments made by GHD.

The Cost Estimate has been prepared for the purpose of Kempsey Saleyard financial planning for and must not be used for any other purpose.

The Cost Estimate is a preliminary estimate only. Actual prices, costs and other variables may be different to those used to prepare the Cost Estimate and may change. Unless as otherwise specified in this report, no detailed quotation has been obtained for actions identified in this report. GHD does not represent, warrant or guarantee that the works can or will be undertaken at a cost which is the same or less than the Cost Estimate.

All cost estimates presented in the report exclude GST.

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2. Background

Kempsey Regional Saleyards is a community asset owned and maintained by Kempsey Shire

Council. With 66 sales held per annum, the Saleyards provide a regular venue for livestock

buyers and sellers across the region to generate income and undertake herd development

activities. The weekday markets are attended by an average of 150-300 buyers and sellers, with

this number increasing to over 3-400 at the Saturday markets.

Local Government has managed Saleyards in the Macleay Valley since the early 1900s and at

the current saleyard site since 1969. The Saleyards provide an essential service to beef and

dairy industry producers, operators and end users and is ideally located mid-way between

Saleyards at Taree and Grafton. Council owns the Kempsey Regional Saleyards facility and is

responsible for providing all infrastructure, ongoing upgrading and maintenance.

Under current leasing arrangements, livestock sales are a function of two agents, with Kempsey

Stock & Land (KSL) operating under a five-year lease which provides exclusive use on

Thursdays and Midcoast Rural having operating on Tuesdays. Other interested agents can

operate on other days.

Over the past 12 years, Kempsey Shire Council has invested $2M in upgrade and infrastructure

works to ensure the Saleyards comply with environmental standards, meet OH&S requirements

and offer ‘best practice’ facilities capable of processing more than 2000 head of cattle per day.

Loans associated with these upgrades expire in 2017/2018.

Council has long-term plans to upgrade the saleyard facility to address effluent disposal issues

and improve the selling yards (2014/15 Annual Report).

While Saleyards have historically formed an integral part of the economic and social fabric of

rural communities in Australia, it is acknowledged that improved technology, transportation and

regionalisation have driven a consolidation of Saleyards and the growth of alternative selling

methods, placing pressure on their financial management.

Figure 1 Kempsey Regional Saleyards Site Plan

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2.1 Previous analysis and reviews

This section provides a summary (in chronological order) of previous analysis and reporting on

the Kempsey Saleyards, including recommended capital improvements.

2.1.1 Kempsey Regional Saleyards Infrastructure Review and Feasibility

Study (Huefner & Associates Pty Ltd, 2006).

Huefner & Associates Pty Ltd conducted an infrastructure review and feasibility study in 2006.

The project included an inspection of the Saleyards, as well as stakeholder consultation with

staff, operators and vendors. The report highlighted the projects below as priorities, which

helped shape the capital works program in subsequent years (outlined in section 2.2).

Table 1 Summary of identified projects (Huefner & Associates 2006)

Identified projects Project description Estimated cost (2005)

Saleyard signage Provide additional signage at main roads (allowance) $4,000

Buffers Visual and noise buffers to be planted $6,000

Northern Yards Require complete replacement

1. New unloading ramps

2. New receival yards

3. New drafting facilities

4. New holding pens

5. New bull pens

6. New calf pens

7. New ring and ring seating

8. New delivery pens

$1,550,000

Kiosk and canteen Required to provide service $300,000

Calf building To be demolished Profit

Pavements Need some rehabilitation $60,000

Truck Wash New - Required Use existing funds

Lighting Requires additional open air lighting $40,000

Effluent treatment Review required Use existing funds

Soft flooring Trial required $10,000

2.1.1 Wastewater Treatment Report (ERM 2011)

In 2011 Environmental Resource Management Australia Pty Ltd (ERM) were engaged

undertake a site inspection of the saleyard wastewater treatment system (WWTS) and provide

recommendations for system improvements and ongoing management.

This study followed the previous WWTS Design Upgrade (ERM 2008) and Operation and

Maintenance Manual (ERM 2006).

The study found that improving the maintenance program for the WWTS was one of the most

cost-effective solutions for Council. Other cost effective solutions included the instillation of

baffle weirs, and the management of ponds as a constructed wetland. The study identified roof

construction as an effective long-term means of improving wastewater quality, however

requiring a higher capital outlay for Council. With this in mind, the study recommended a staged

approach to roofing. Other potential improvements were found to be more cost effective in the

short term. A summary of the recommended management options is provided in Appendix A.

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2.1.2 Kempsey Regional Saleyards, Market Analysis and Financial

Modelling (GHD Pty Ltd, 2013)

This 2013 report provides an analysis of factors impacting on the long term viability of the

Kempsey Regional Saleyards, including local cattle numbers, changing selling trends, operating

costs etc.

The report provided a review of local market conditions and the past financial performance of

the Saleyards, which was used to provide projections of future throughput and financial

performance under different investment scenarios.

The report anticipated an increase in throughput to around 35,000 head, largely due to a

second agent (Midcoast Rural) being provided access. Overall the report found the Saleyards

are well placed to deliver operating profits of between $12,000 and $72,000 per annum going

forward (depending on future capital improvements).

Projections from the report were used to inform the Saleyard Business Plan (below).

2.1.3 2013 Kempsey Regional Saleyards Business Plan

The Kempsey Regional Saleyards Business Plan highlights some major immediate challenges

currently faced by Kempsey Regional Saleyards, including:

acceleration of direct selling methods;

changes to the operating environment;

increasing regulations; and

ongoing competition from larger neighbouring Saleyards (e.g. Armadale, Grafton, Taree),

abattoirs and alternative sale methods.

The report detailed two investment scenarios (low and high investment). The high investment

scenario incorporates a range of potential upgrades and improvements to the saleyard facilities

which may be required into the future, and/or are likely to improve the facilities operations,

throughput and profitability. These upgrades and improvements are examined in more detail

below, including estimated costs and benefits.

Soft flooring: Approximately 5000 square meters of soft flooring would be required at a

cost $80 per square meter. The total cost of the flooring upgrade would be approximately

$400,000.

Roofing over delivery yards: The cost of roofing the delivery yards is estimated at

$445,000, based on the 2006 estimate1 adjusted for inflation.

Roofing over holding pens: The cost of roofing the holding pens is estimated at $635,000,

based on the 2006 estimate2 adjusted for inflation.

Raised walkway: The approximate cost for installing a catwalk around the pens would be

$89,000, based on the 2006 estimate3 adjusted for inflation.

Effluent disposal system: The cost of the effluent disposal system upgrade is estimated at

approximately $50,000. Revenue from manure sales is estimated at $5,000 per annum

(125 M2 sold annually, at market rate of $40/M

2).

Meat Standards Australia (MSA) Accreditation: For modelling purposes, and in the

absence of further analysis, this study has assumed MSA accreditation would increase

1 $350,000

2 $500,000

3 $70,000

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throughput by 1.5% per annum. This increase represents an additional 611 cattle per

annum, or 9 per sale.

European Union (EU) Accreditation: This analysis has assumed a cost of $2,000 per

annum for the facilities becoming accredited, with a resulting increase throughput of 0.5%

per annum.

2.2 Completed works

Between 2004 and 2010 Council implemented an extensive capital works program totalling

$1.66 million. The capital works program addressed a range of operational, animal welfare,

environmental and amenity issues.

Table 2 Capital works program expenditure since 2004/05

Year Works Amount ($)

Annual Total

2004/05

2004/05 Signage - saleyards 953

2004/05 Trees for saleyards 5,473

2004/05 Water supply to all yards 156

2004/05 Roofing of selling complex 1

2004/05 Plant & equipment 3,147

2004/05 Lighting improvements 834

2004/05 Weighbridge indicators 5,106

2004/05 Alteration to pens & lanes - stage 1 136,999

2004/05 NLIS equipment 51,078

2004/05 Project management 29,484

2004/05 North unloading area 19,324

2004/05 North holding pens 52,613

2004/05 South holding pens 20,973

2004/05 Saleyards - water trough 0

2004/05 Saleyards - annual capital works program 2,400

2004/05 EPA works 36,833

2004/05 Project management 4,131

2004/05 EPA works - effluent plumbing - spray lines & sprinklers 33,636

2004/05 EPA works - effluent ponds - excavation earthworks & construction

23,056

2004/05 Avdata truckwash 69

2004/05 EPA works - truck wash bay construction 53,055

2004/05 Feasibility study saleyards 18,820 498,139

2005/06

2005/06 Drafting yards 1,075

2005/06 Improvements to kiosk (saleyards) 18,716


2005/06 Pa system - saleyards 3,182


2005/06 Project management 0



2005/06 South holding pens 2,571

2005/06 OH & S alterations 1,357

2005/06 Saleyards - water trough 0

2005/06 EPA works 164

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Year Works Amount ($)

Annual Total

2005/06 EPA works - effluent plumbing - spray lines & sprinklers 108

2005/06 EPA works - effluent ponds - excavation earthworks & construction

9,800

2005/06 EPA - security fencing 16,477

2005/06 Avdata truckwash 7,150

2005/06 EPA works - truck wash bay construction 7,063

2005/06 Demolish old truck wash 3,670

2005/06 Roadworks - design (saleyards) 178 362,906

2006/07


2006/07 North holding pens 795

2006/07 Asphalt spectator area 7,050

2006/07 Roadworks - design (saleyards) 204

2006/07 Drainage & concrete yards - northern end 62,094 266,096

2007/08




2007/08 Saleyards - annual capital works program 377

2007/08 Saleyards - contract labour 60,868

2007/08 Saleyards - extra steel 18,594

2007/08 Saleyards - gate & panels 21,267

2007/08 Saleyards - materials 25,413

2007/08 Saleyards - plumbing 6,049

2007/08 Saleyards - sundries 26,089

2007/08 Saleyards - water trough 10,851

2007/08 South holding pens 13,394 253,897

2008/09


2008/09 Roof & scanner - saleyards 5,427

2008/09 Saleyards - contract labour 38,603

2008/09 Saleyards - environmental works (env. Levy funded) effluent system

19,787

2008/09 Saleyards - extra steel 70,311

2008/09 Saleyards - gate & panels 11,159

2008/09 Saleyards - materials 5,785

2008/09 Saleyards - plumbing 8,402

2008/09 Saleyards - sundries 6,763

2008/09 Saleyards - water trough 29,083

2008/09 South holding pens 69,590 277,422

2009/10

2009/10 Saleyards - environmental works (env. Levy funded) 3,362 3,362

Total 1,661,822

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2.3 Current financial position

Historically the Saleyards have typically returned an annual loss or small profit, which after

accounting for loan repayments has resulted in an annual operating deficit which is absorbed by

Council.

However in recent years the financial position of the Saleyards has been steadily improving, as

loans are repaid. Throughput and revenue has also increased since the second agent was

provided access to the facilities. 2014/15 saw an increase in revenue of over $90K, due to

increased throughput (28K to 36K head) and also an increase in yard dues.

Forward projections suggest the facility will continue to return modest annual profits. Without

additional borrowing, the facility will return its first annual operating surplus in 2017/18.

Table 3 Financial performance (historical, current budget and forecast)

Year Source Revenue Expenses Profit/Loss Loan repayments

Operating Surplus/Deficit

2004/05 Historical $190,494 $170,824 $19,670 $70,943 -$51,273

2005/06 Historical $192,059 $240,603 -$48,544 $78,820 -$127,364

2006/07 Historical $220,992 $267,835 -$46,843 $105,909 -$152,752

2007/08 Historical $254,138 $240,409 $13,729 $126,492 -$112,763

2008/09 Historical $257,983 $306,536 -$48,553 $156,331 -$204,884

2009/10 Historical $278,933 $339,550 -$60,617 $183,521 -$244,138

2010/11 Historical $276,606 $260,214 $16,392 $193,355 -$176,963

2011/12 Historical $238,787 $249,947 -$11,160 $204,557 -$215,717

2012/13 Historical $215,941 $222,628 -$6,687 $182,207 -$188,894

2013/14 Historical $208,282 $252,469 -$44,187 $174,271 -$218,458

2014/15 Historical $300,796 $258,295 $42,501 $138,557 -$96,056

2015/16 Budget $297,285 $215,693 $81,592 $122,118 -$40,526

2016/17 Forecast $307,121 $243,271 $63,850 $93,626 -$29,776

2017/18 Forecast $330,035 $241,093 $88,942 $64,379 $24,563

2018/19 Forecast $354,728 $240,996 $113,732 $31,258 $82,474

2019/20 Forecast $381,339 $243,643 $137,696 0 $137,696

2020/21 Forecast $410,019 $247,795 $162,224 0 $162,224

2.4 Limit of Council subsidisation

The above projections suggest there will be some capacity for the facility to finance future loans

from annual profits, however any substantial borrowing will likely return the facility to deficit.

GHD met with the Kempsey Shire Council Financial Manager to clarify the extent to which the

Council is prepared to incur future operating deficits, should additional borrowings be required.

Council’s position is that the facility should be independently financially viable, without ongoing

Council subsidisation through annual deficits. While Council is prepared to cover occasional

deficits, ideally the facility would return a net surplus over the coming years. Council is

committed to continuing to provide staffing support for the facility, which does not appear in the

financial analysis.

2.5 Potential sources of capital

2.5.1 Reserve fund

Council has suggested the Saleyards could establish a reserve fund in which annual operating

cash surpluses can be held over and used to fund future capital works. Cash surpluses will

exclude non cash depreciation costs.

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2.5.2 Internal borrowings

Council has suggested that capital improvements not able to be funded via the reserve fund

could draw on internal borrowings for a short period. Internal borrowings would be repaid via the

reserve fund.

2.5.3 Environmental Levy

Some capital improvements to the Saleyards may qualify for funding under the Kempsey Shire

Council’s Environmental Levy. The levy has previously been used to fund capital improvements

at the Saleyards, including $400,000 to upgrade the WWTS. The levy is a flat annual fee of $50

per rate assessment. In 2016/17 the levy is expected to collect $731K. The current levy will

expire in 2018/19, after which time Council can reapply.

Given the WWTS remains ill-equipped to handle current and future water and nutrient loads,

capital improvements addressing this issue are likely to qualify for environmental levy funding.

Currently the WWTS is difficult to operate and results in regular occurrences of effluent runoff

into the nearby Christmas Creek, during heavy rain and flood events.

The construction of a roof over the delivery pens was recommended in the 2011 ERM

Wastewater Treatment Report (Section 2.1.1) as an effective long-term solution to wastewater

issues.

2.5.4 Sale of warehoused steel piping

Council is in the possession of a large stock of steel piping remaining from recent capital works,

which has a market value of $8,085 inc. GST (105 (8m) lengths @ $77 per length)

The steel piping could be sold or used in capital improvements to reduce costs.

2.5.5 National Stronger Regions Fund (NSRF)4

The NSRF commenced in 2015 and provides funding of $1 billion over 5 years to fund priority

infrastructure in regional communities, with grants between $20,000 and $10 million.

Round Three of the NSRF is currently open for application, and will close on Tuesday 15 March

2016.

Conditions include:

Grant funding must be matched in cash on at least a dollar for dollar basis. NSRF

funding will be provided for capital projects which involve the construction of new

infrastructure, or the upgrade or an extension of existing infrastructure.

The project must deliver an economic benefit to the region beyond the period of

construction. Projects should support disadvantaged regions or areas of disadvantage

within a region.

The NSRF funded component of the project must be completed on or before 31

December 2019.

2.5.6 Increase in fees

Council recently significantly increased yard dues, which had remained unchanged for many

years. Consultation suggests further increasing yard dues (beyond CPI) would likely result in

reduced throughput, with more local producers choosing to sell livestock at other saleyards,

direct to slaughter or via other selling options (e.g. AuctionsPlus).

4 http://investment.infrastructure.gov.au/funding/NSRF/

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http://investment.infrastructure.gov.au/funding/NSRF/


3. Identified improvements

The following list of potential improvements were identified in previous reports (see Section 2.1)

and/or raised during the site visit and stakeholder consultation.

Potential improvements were prioritised according to the following criteria.

Table 4 Prioritisation rating system

Priority rating Criteria

High (short-term) Capital improvements which are:

Required in the short-term to improve operations and/or meet

regulatory standards for animal welfare, OH&S or environmental

management; and

Easily funded

High (long-term) Capital improvements which are:

Required in the long-term to improve operations and/or meet


management; and

More difficult to fund.

Medium Capital improvements which;

May be required in the long-term to improve operations and/or meet


management;

Low Capital improvements which are:

Not required in the long-term to improve operations and/or meet


management; or

Are not the preferred solution

3.1 Roofing over delivery yards

Constructing a roof over the delivery yards would address a number of issues facing the

facilities, by:

Reducing the amount of wastewater entering the WWTS, by allowing clean captured

rainwater to be diverted either to tank storage or nearby drains;

Eliminating the need for town water top-up during warmer months (assuming additional

tank storage is installed to manage increased water capture;

Reducing animal welfare issues by allowing the use of soft flooring (sawdust);

Reducing animal welfare issues associated with excessive heat, including water trough

overheating; and

Addressing OH&S and amenity issues associated with heat and rain.

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In addition to the above benefits, the construction of a roof over the delivery yards would help

enable the use of soft flooring and pen selling (discussed below).

Soft flooring

Saleyards across Australia are increasingly using sawdust over concrete flooring to reduce the

risk of lameness or stress on livestock. The use of sawdust is only appropriate if roofing is

provided.

Pen selling

Roofing would reduce exposure to heat and rain, thereby making pen selling more feasible

(following the construction of raised walkways, see section 3.5).

Table 5 Improvement summary: Roofing over delivery yards

Improvement Roofing over delivery yards

Requirement 80m x 37m gabled roof

3 X water holding tanks

Cost estimate $920,000 based on an indicative rate of $312 per m2

Source of cost

estimate

Estimate based on analysis of costs for similar saleyard roof design and

construction projects.

Estimated benefit Reduced water loading in WWTS

Improved animal welfare

Improved amenity and OH&S

Reduced cleaning costs

Priority High (long-term)

Figure 2 Delivery pens

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3.3 Roofing over holding pens

The construction of roofing over holding pens would provide shade for livestock after being sold.

Depending on the time of loading, livestock can remain in the holding pens for more than 24

hours after being sold. The holding yards have soft flooring (gravel) which somewhat reduces

the risk of lameness or stress on livestock.

It is not likely to be necessary to cover the entire holding pen area, instead coverage of half the

area would most likely provide sufficient coverage for livestock which are held for extended

periods.

Coverage over the holding pens is considered a lower priority than the delivery pens, as there

are minimal benefits from cleaning costs and reduced water loading into the WWTS.

Table 6 Improvement summary: Roofing over holding pens

Improvement Roofing over holding pens

Requirement 35m x 43m gabled roof (half holding pen area)

2 X water holding tanks

Cost estimate $470,000 based on an indicative rate of $312 per m2 (as above)

Source of cost

estimate

Estimate based on analysis of costs for similar saleyard roof design and

construction projects.

Estimated benefit Improved animal welfare

Priority Medium

Figure 3 holding yards

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3.4 Shade membrane

A potentially cheaper alternative to roof construction would be to install a shade membrane

structure which could be provided to both the delivery and loading pens. This would provide

shade for livestock and people, however would not provide additional benefits of a solid roof

including reduced WWTS water loads, reduced need for town water top-up and ability to install

soft flooring. While being a cheaper option, shade membranes will have a reduced effective life

(25 years) compared to a solid roof (50+ years). Some shade options and indicative prices are

provided below.

Table 7 Shade membrane options5

Shade

membrane

options

Description Unit

cost6

Example concept design

Permeable

shadecloth

“hypar”

design

Requires columns at approx.

15m distances and is typically

used for large open spaces

like shopping centre carparks

$140 M2

Permeable

shadecloth

supported

structure

Typically used to cover pools

or sporting complexes

$250 M2

Waterproof

tensile

membrane

supported

structure

Typically used to cover pools

or sporting complexes.

Reflect 80% of the sun’s heat,

whilst also allowing light

through (ie no lighting

needed), deadens the noise

and offers 100% UV protection

$420 M2

Table 8 Improvement summary: Shade membrane

Improvement Shade membrane structure

Requirement 80m x 37m shade membrane over delivery yards

Cost estimate From $140/m2 ($414,400)

Source of cost

estimate

Shade and Membrane Structures Australia

Estimated benefit Improved animal welfare

Improved amenity and OH&S

Priority Low (solid roof is preferable)

5 Provided by Shade and Membrane Structures Australia

6 Including design, engineering, fabrication, supply and complete installation

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3.5 Raised walkway

The establishment of a raised walkways along the delivery yards would allow pen selling to be

conducted at the facility, in addition to the current ring selling arrangements. Pen selling is

generally preferred to ring selling for its increased speed and improved labour efficiency. Under

current ring selling arrangements, sales can finish as late as 8pm, and up to 12 casual staff are

required to manage livestock movement. Pen selling would improve the efficiency of the

Saleyards, which would be particularly important should the facility begin operating multi-agent

sales after the conclusion of the current contract.

Despite its disadvantages, ring selling is supported by many local saleyard users who prefer the

convenience of having cattle presented along with the pre-sale weighing information.

Ideally, pen selling would be conducted undercover to avoid exposure to weather (rain and

sun). However many facilities operate open air pen selling.

Table 9 Improvement summary: Raised walkways

Improvement Raised walkways

Requirement 3 X 78m catwalks installed along delivery yards.

Cost estimate 2.75M long section 0.6m wide = $595 for materials comprising of

galvanised stanchions, expanded mesh, pipe handrails and angle for

support/kick-rail plus $130 per section to install = $725 per section.

Total cost for 3 X 78m catwalks = $62K

Source of cost

estimate

Proway Livestock Equipment

Estimated benefit Improved labour efficiency

Reduced sale time

Ability to facilitate multi-agent sales


3.6 New office building

The current office building is a solid brick construction and in good condition, however is proving

inefficient due to its size and location.

The office and the callers shed are situated on either side of the scales, requiring a PA system

to communicate during sales. This arrangement is proving inefficient. Furthermore the current

office building is considered too small to accommodate multiple agents at the same time.

Consultation suggests the room could be increased by 150% to accommodate multiple agents

(required for multi-agent sales).

A preferred solution would be to install a new portable office building in the central area

between the callers shed and the scales. Ideally the office building would be elevated by about

1 mitre to allow cattle in the scales to be viewed and counted. The office building would need to

be lockable and fitted out with additional furniture.

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Table 10 Improvement summary: New office building

Improvement New portable office building

Requirement Instillation and fitout of a new portable office building, on skid beams.

Approximately 18-20M2 with bench space and kitchenette.

Cost estimate 6mX3m portable office building delivered $15,0007

Foundations, connections and fitout: $5,000

Source of cost

estimate

ATCO structure and logistics, GHD estimate for foundations, connections

and fitout.

Estimated benefit Improved operating efficiency

Required to facilitate multiple agent sales


Figure 4 Proposed location for new office

3.7 New scales and pneumatic gates

The current scales are an older design with an underground pit which may pose an OH&S risk

for staff cleaning (confined space). Consultation also found the pneumatic gates on the scales

are not functioning well, and may also pose an OH&S risk. Council has previously been quoted

$14,000 to increase air tank capacity to address issues.

A preferred solution would be to install new raised platform, above ground scales, and to install

new pneumatic gates or increase air tank capacity to improve functionality of existing gates.

7 Indicative price for 12m X 3m office is $25K + GST

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Table 11 Improvement summary: New scales and pneumatic gates

Improvement New scales and pneumatic gates

Requirement Instillation of new raised platform pneumatic gates

Instillation of new pneumatic gates or increase air tank capacity to

improve functionality of existing gates.

Cost estimate New scales: $16,500

Instillation of two pneumatic guillotine gates for weigh bridge: $10,000

Source of cost

estimate

Proway Livestock Equipment and GHD estimate based on previous

saleyard project

Estimated benefit Improved operating efficiency

Improve OH&S

Priority High (short-term)

Figure 5 Scale and gates

3.8 Secondary effluent treatment system

One option for reducing WWTS loadings would be to install a secondary treatment system,

which are being used by other saleyards and truck washes to address similar issues.

These systems are typically installed following primary treatment (removal of solids) Screened

effluent water passes through three poly tanks in series which contain aeration and bacteria

dosing systems that treat the water and remove nutrients.

For Earth Pty Ltd has installed secondary treatment systems for the Roma Livestock Exchange,

Ballarat Saleyards, Harden Truchwash and Braidwood Livestock Truck Wash (Figure 6).

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Figure 6 A Secondary effluent treatment system installed at the Braidwood

Livestock Truck Wash (For Earth Pty Ltd)

GHD has not evaluated the suitability or effectiveness of the secondary treatment system,

however consider it may present a relatively low cost solution for the Kempsey saleyard WWTS.

Council would need to speak with suppliers and saleyards who have installed similar systems to

further investigate suitability.

Table 12 Improvement summary: Secondary Treatment System

Improvement Secondary Treatment System

Requirement Installation of a 3 tank secondary treatment system provided by For Earth

Pty Ltd or other similar provider.

Cost estimate $140,000

Source of cost

estimate

Commercial supplier, based on other installed systems.

Estimated benefit Reduced water loan on WWTS

Priority High

3.9 Scour cleaning system

Council has recently encountered difficulty keeping the delivery yards clean, within the available

budget. At present Council uses a bobcat to clean solid waste from the yards as required

(usually every 6 weeks), this costs approximately $1,600 each time.

One potential solution is to install a network of high pressure pipes and spray outlets, to scour

solid waste away from the yards. They system would use recycled wastewater from the WWTS,

providing increased opportunity for evaporation to reduce water loading. A similar system of

scour cleaning is currently being used at the Casino Saleyards.

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If the facilities were to install a roof over the delivery yards and move to soft flooring, a scouring

system would probably not be required.

Table 13 Improvement summary: Scour cleaning system

Improvement Scour cleaning system

Requirement Installation of a pumping station and sub-surface pipeline from the WWTS

to the delivery yards.

Installation of pipelines and spray outlets along each row of delivery yards

(7 x 40m).

Cost estimate Pump $50,000

Pipes, valves and outlets $60,000

Main pipe instillation $15,000

Chlorination dosing system $15,000

Pump shed $5,000

Power connection $5,000

Total $150,000

Source of cost

estimate

Commercial supplier

Estimated benefit Reduced cleaning costs (saving $1,600 every 6 weeks)

Reduced water loan on WWTS

Improved animal welfare and amenity

Priority Medium

Figure 7 Delivery yards with solid waste build-up

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3.10 Replace water troughs and cover copper piping

Many of the current metal stock water troughs are small in size leading to water overheating in

hot weather. To avoid overheating operators have been allowing troughs to overflow at a trickle

with the added benefit of cooling the concrete flooring below. Many troughs are possibly also

too high for very young calves to reach.

It is estimated that up to 70 troughs could be replaced, however in many cases increasing the

size of the troughs is difficult due to the need for troughs to fit between gate rails.

Overheating also occurs to the copper piping which runs along the delivery yards. This piping

could be covered or lined with plastic to avoid overheating.

Replacing water troughs and covering coper piping may not be necessary if a roof were to be

constructed over delivery yards, as shade would avoid overheating.

Table 14 Improvement summary: Replace water troughs and cover copper

piping

Improvement Replace water troughs and cover copper piping

Requirement Replacement of 70 water troughs with larger PVC troughs

Covering or lining of coper pipe with PVC

Cost estimate Replacement of water troughs: $14,000 ($200 each installed)

Cover coper pipe: $3,000

Source of cost

estimate

Commercial suppliers/GHD estimate

Estimated benefit Improved animal welfare and amenity


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3.12 WWTS maintenance works

$50,000 has been requested from the 2016/17 budget to implement a range of minor

improvements to the current WWTS and irrigated areas to improve efficiency. Improvements are

consistent with the recommendations of the Wastewater Treatment Report (ERM 2011),

discussed in 2.1.1 and Appendix A.

Table 15 Improvement summary: WWTS efficiency works

Improvement WWTS efficiency works

Requirement Improvements to bunding, irrigation systems and solid management

Cost estimate $50,000 requested in 2016/17 budget

Source of cost

estimate

Council

Estimated benefit Improved WWTS efficiency


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3.14 Minor upgrades and general maintenance

Consultation identified a range of opportunities for minor upgrades and improved general

maintenance, listed below.

Table 16 Improvement summary: Minor upgrades and general maintenance

Improvement Details Estimated

Cost

Source of cost

estimate

Estimated

Benefit

Priority

CCTV CCTV would

prevent stock theft,

vandalism or

unauthorised use

of the yards.

4 camera unit with

monitor

8,000

including

labour

(price estimate

from supplier)

Commercial

supplier and

Council estimate

Improved

security,

safety and

revenue

collection

High

(short-

term)

Additional

signage and

address

other safety

issues

identified in

Appendix A

The Council Safety

Officer has

developed a list of

safety non-

conformance

items, which

should be

addressed, in

particular the need

for improved

signage and other

capital

improvements.

$2,000

(GHD

estimate)

GHD estimate Improved

OH&S

High

(short-

term)

Fix/replace

bent gates

Small number of

gates are bent and

are difficult to close

$2,000

(GHD

estimate)


efficiency

High

(short-

term)

Additional

lighting

Additional lighting

required at certain

points of delivery

and loading yards

$1,500

(GHD

estimate)


OH&S and

efficiency

Medium

More

frequent

cleaning

Agents requesting

more frequent

cleaning with

bobcat (every 4

weeks).

$6,400 per

annum

(4 additional

cleans @

$1,600 each)

Council estimate

based on

current costs

Improved

animal

welfare,

OH&S and

amenity

High

(short-

term)

Add more

gravel to

loading yards

Loading yards

require additional

gravel from time to

time to avoid mud

forming

$1,000 per

year


animal

welfare,

OH&S and

amenity

High

(short-

term)

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3.15 Summary of priority investments

The table below summarises the high, medium and low priority improvements.

Table 17 Summary of capital improvements by priority

Priority Capital improvement Estimated cost

High (short term)

CCTV $8,000

Additional signage and other safety issues $2,000

Fix/replace bent gates $2,000

New scales and pneumatic gates $26,000

Replace water troughs and cover copper

piping

$17,000

WWTS maintenance works $50,000

More frequent cleaning (x 6 per year) $6,400 per annum

Add more gravel to loading yards $1,000 per annum

High (longer term)

New office building (scalers shed) $20,000

Raised walkway $150,000

Secondary effluent treatment system $140,000

Roofing over delivery yards $920,000

Medium

Scour cleaning system $100,000

Additional lighting $1,500

Roofing over holding pens $470,000

Low Shade membrane structure $414,400

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5. Proposed capital works program

The central investment decision for the Saleyards is whether to construct a roof over the

delivery pens and raised walkway to allow pen selling, which would require funds to be drawn

from the environmental levy or other sources (e.g. the National Stronger Regions Fund).

GHD consider the construction of a roof is a long term high priority for the Saleyards, however

there a number of short-term and less expensive improvements which could be made sooner to

help improve the operation of the facilities. The proposed capital works program outlined below,

seeks to address these short-term priority improvements, before committing to roof construction

in 2018/19.

This approach will allow the facility to continue to build throughput and address operational

issues, strengthening the case for roof construction. The construction of raised walkways and a

new office building in 2017/18 will enable pen selling to be introduced improving saleyard

efficiency and throughput.

Overall this proposed capital works program will prepare the facilities for a future beyond the

current lease agreement, which is likely to involve non-exclusive access and multi-agent sales.

Table 18 Proposed capital works program

Improvement Description Price estimate (excl. GST)

2016/17

CCTV 4 camera unit with monitor installed $8,000 installed

Additional signage and other safety issues

The Council Safety Officer has developed a list of safety non-conformance items, which should be addressed, in particular the need for improved signage and other capital improvements.

$2,000

Fix/replace bent gates

Small number of gates are bent and are difficult to close

$2,000

More frequent cleaning

Agents requesting more frequent cleaning with bobcat (every 4 weeks).

$6,400 per annum

(4 additional cleans @ $1,600 each)

Add more gravel to loading yards

Loading yards require additional gravel from time to time to avoid mud forming

$1,000 per annum

New scales and pneumatic gates

Instillation of new raised platform pneumatic gates

Instillation of new pneumatic gates or increase air tank capacity to improve functionality of existing gates.

New scales: $16,500

Instillation of two pneumatic guillotine gates for weigh bridge: $10,000

Replace water troughs and cover copper piping

Replacement of 70 water troughs with larger PVC troughs

Covering or lining of coper pipe with PVC

$17,000

Replacement of water troughs: $14,000 ($200 each installed)

Cover coper pipe: $3,000


Improvements to bunding, irrigation systems and solid management

$50,000 requested in 2016/17 budget

2017/18

New office building

Instillation and fitout of a new portable office building, on skid beams.

Approximately 18-20M2 with bench space and kitchenette.

Office building: $15,000 (indicative price provided by ATCO structure and logistics for a 6mX3m portable office delivered)

Foundations, connections and fitout:

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Improvement Description Price estimate (excl. GST)

$5,000

Raised walkway

3 X 78m catwalks installed along delivery yards.

2.75M long section 0.6m wide = $595 for materials comprising of galvanised stanchions, expanded mesh, pipe handrails and angle for support/kick-rail plus $130 per section to install = $725 per section.

Total cost for 3 X 78m catwalks = $62,000

2018/19

Secondary effluent treatment system

3 poly tank secondary treatment system installed

$140,000

2019/20

Roof over delivery yards

80m x 37m gabled roof

3 X water holding tanks and connections

$920,000 based on an indicative rate of $312 per m

2 (arrived at following

analysis of costs for similar saleyard roof design and construction projects)

A $400,000 contribution from the Environmental levy would reduce the outlay to $520,000

50% completed in 2018/19 = $460,000

2020/21

Roof completed Remaining 50% completed in 2018/19 = $460,000

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5.2 Capital improvements excluded from the program

The following capital improvements investigated in Section 2.3 above, were excluded from the

proposed capital works program.

Table 19 Excluded capital improvements

Excluded capital

improvement

Reason for exclusion

Roofing over the

holding yards

Roofing costs prohibit covering the both the delivery and holding yards.

Roofing over the delivery yards is a higher priority due to potential benefits

in waste water load reduction, animal welfare (ability to facilitate soft

flooring), and human amenity

Shade membrane Compared to a solid roof, a shade membrane structure will not facilitate

water collection to reduce waste water loadings, and will have a reduced

lifespan.

Costs for constructing shade cloth structure are not significantly lower than

constructing a solid roof

Scour cleaning

system

Construction of a roof over delivery yards would negate the need for scour

cleaning system.

If in the future a roof does not receive funding, a scour cleaning system

could be reconsidered.

Additional lighting Additional lighting would be installed with the construction of a roof over the

delivery yards (factored into price)

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6. Financial plan

Table 20 presents the proposed capital works schedule for the Saleyards. Capital improvements

have been spaced out, in order to reduce the need for additional borrowing.

Table 20 Capital works schedule

2016/17 2017/18 2018/19 2019/20 2020/21

CCTV $8,000

Signage and safety $2,000

Fix bent gates $2,000

Scales and gates $26,500

Replace water trough and cover copper pipe

$17,000


$50,000

New office $20,000

Raised walkways $62,000

Secondary effluent treatment system

$140,000

Roofing over delivery yards (initial)

$460,000

Roofing over delivery yards (final)

$460,000

Total capital cost $105,500 $82,000 $140,000 $460,000 $460,000

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Table 21 below presents the financial projections for the Saleyards. Annual operating cash surpluses (excluding depreciation) will be held in a reserve fund

and used for future capital improvements. The funding shortfall (i.e. when the balance of the reserve fund falls below zero in 2019/20 and 2010/21) will be

obtained from internal borrowings and rapidly repaid in the following year.

Modelling has been conducted using the following assumptions:

Improvements lead to an increase in annual saleyard throughput of 3% per annum until 2020/21 after which throughput plateaus.

Annual costs and fees increase with CPI.

Table 21 Financial projections

Projections 2015/2016 2016/2017 2017/2018 2018/2019 2019/2020 2020/2021 2021/2022 2022/2023 2023/2024

Throughput

(assuming 3% annual increase)

36,255 37,343 38,463 39,617 40,805 42,029 42,029 42,029 42,029

Revenue $297,285 $307,121 $330,035 $354,728 $381,339 $410,019 $421,499 $433,301 $445,434

Operating expenses (including interest)

$215,693 $243,271 $241,093 $240,996 $243,643 $247,795 $252,097 $256,556 $261,177

Annual operating profit (loss) $81,592 $63,850 $88,942 $113,732 $137,696 $162,224 $169,402 $176,745 $184,257

Existing loan repayments $122,118 $93,626 $64,379 $31,258 $- $- $- $- $-

Annual operating surplus (deficit) -$40,526 -$29,776 $24,563 $82,474 $137,696 $162,224 $169,402 $176,745 $184,257

Reserve Fund

Input

(Annual operating surplus excluding depreciation costs)

$68,149 $99,124 $147,737 $199,130 $246,960 $263,132 $269,527 $276,064 $282,747

Withdrawal

(Proposed capital works)

$- $105,500 $82,000 $140,000 $460,000 $460,000 $- $- $-

Balance $68,149 $61,773 $127,510 $186,640 -$26,400 -$223,268 $46,259 $322,323 $605,070

Internal borrowings $- $- $- $- $26,400 $223,268 $- $- $-

The full financial projection analysis, including all line items and assumptions is provided in Appendix B,

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6.1 Sensitivity analysis

Table 22 below shows how the total funding required from internal borrowings (i.e. the funding

shortfall) would vary, under changes to key assumptions around annual throughput growth.

Table 22 Sensitivity analysis: impact on net funding shortfall from changes

in annual throughput

Annual increase in annual throughput

(20/21 throughput level)

Total funding required from internal borrowings (funding shortfall)

0% (36K) $486,313

1% (38K) $393,233

2% (40K) $299,930

3% (42K) $249,666

4% (44K) $198,515

5% (46K) $146,465

6.2 Low investment option

If sufficient funding cannot be obtained to construct a roof structure, a lower investment option

would need to be considered. This option would include the establishment of shade cloth,

walkways and a scour cleaning system as well as other improvements.

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7. Summary of findings and

recommendations

Having undergone previous capital works and repaid debt, the Kempsey Regional Saleyards

are expected to return operating surpluses in coming years, allowing Council to undertake

additional targeted capital improvements.

The capital works schedule proposed in this report aims to prepare the facility for servicing

multiple agents following the expiration of the current lease, without burdening Council with

unsustainable debt levels.

Failure to reinvest in the facility will most likely lead to a steady decline in operational efficiency

and increased scrutiny on animal welfare, environmental management and OH&S.

A summary of recommendation from this report is provided below.

7.1 Summary of recommendations

1. Implement the capital works program as outlined in this report, while monitoring annual

changes to throughput, revenue and expenses against projections.

2. Investigate opportunities to draw on the Environmental Levy or the National Stronger

Regions Fund to help fund the construction of a roof over delivery yards.

3. Ensure all usage fees are regularly adjusted for CPI.

4. Revisit the business development actions outlined in the Saleyard Business Plan

including activities aimed at improving promotion, broaden the Saleyards supply area and

improving security/revenue collection.

5. Begin planning and preparations for beyond the current lease agreement. If Council is to

hold multi-agent sales, how will sales be managed? Will additional resources be

required?

6. If the Council is not fully committed to managing the facility to its full potential, including

the management of multi-agent sales, the Council should seek to outsource management

or sell the facility.

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8. References

ERM (2008) Kempsey Saleyard Wastewater Treatment System Design Upgrade, ERM May

2008.

ERM (2006) Kempsey Saleyard Effluent Treatment System Operation and Maintenance

Manual, ERM January 2006.

ERM (2011) Kempsey Saleyard Wastewater Treatment System Improvement Options, ERM

October 2011.

Kempsey Shire Council (2014) Kempsey Regional Saleyards Business Plan, Kempsey Shire

Council May 2014.

Kempsey Shire Council (2015) Annual Report 2014/15, Kempsey Shire Council 2015.

GHD (2013), Kempsey Regional Saleyards, Analysis and Financial Modelling, GHD May 2013.

Huefner & Associates (2005) Kempsey Regional Saleyards Infrastructure Review and

Feasibility Study, Huefner & Associates January 2005.

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GHD | Report for Kempsey Shire Council - Kempsey Regional Saleyards, 22/18154

Appendices

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Appendix A – Summary of recommended management options for WWTS (ERM 2011)

Management Area Recommended Management Options Effectiveness Estimated Cost

1 - Saleyard

Roof entire saleyard area and direct clean water into holding tanks for reuse in truck-wash

1 $500,000 - $600,000

Remove current tank overflow from WWTS and divert clean water to nearest stormwater outlet or wetland

1 $3,000 - $5,000

2 – Truck-wash and Sludge Dewatering and Disposal Area

Improve maintenance program for Truck-wash

1 $500 - $1000 per sale event

Provide roofed dewatering bay 1 $20,000 - $40,000

3- WWTS Install baffle weirs 1 $1000 - $2000

Wetland treatment of Ponds 1 and 2 1 $3,000

Water quality monitoring program N/A $4,000 per year

4– Irrigation Areas Actively manage irrigation area (i.e. rotational resting, or tilling soils and plant improved pasture ect)

3 $500 - $1,000 per event

Fill in contour drains and create contour banks (not required if using for improved pasture)

2 $2,000 - $4,000

Re-alignment of existing and installation of additional sprinkler heads in southern holding paddock.

1 $3,000 - $5,000

Divert upstream catchment on-flow run-on.

1 $3,000 - $6,000

Investigate options for relocation / removal of headwall and pipe structure the Southern Irrigation Area

1 N/A

Undertake feasibility study for transfer to treated wastewater to sewer network

1 N/A

5 – Revegetation Areas

Further revegetate strip of vegetation along bund on western boundary of property

3 $3,000 plus planting and maintenance costs

Consider raising height of bund to retain more water for uptake by planted vegetation

3 $1,000

Initiate broader revegetation project for 1 ha parcel of land in the north western corner of the site.

3 $9,000 plus planting and maintenance costs

Effectiveness Ranking in Achieving Improved Water Quality:

1- Considered most effective based on minimising load and nutrient levels within wastewater 2- Considered 2

nd most effective based on reducing nutrient levels in wastewater

3- Considered 3rd

most effective based on final polishing of water quality.

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Appendix B Financial modelling

Year 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25 2025/26 2026/27 2027/28 2028/29

Estimate Actual Actual Actual Actual Budget Modelled Modelled Modelled Modelled Modelled Modelled Modelled Modelled Modelled Modelled Modelled Modelled Modelled

1 Throughput 30,179 25,304 27,725 36,255 36,255 38,068 39,971 41,970 44,068 46,272 46,272 46,272 46,272 46,272 46,272 46,272 46,272 46,272

Revenue

2 Agents Fees 273$ 13,636$ 409$ 714$ 1,000$ 300$ 308$ 317$ 326$ 335$ 344$ 354$ 364$ 374$ 385$ 395$ 406$ 418$

3 Yard Dues - Owners 172,783$ 160,174$ 148,539$ 219,626$ 208,953$ 229,000$ 247,183$ 266,809$ 287,994$ 310,860$ 319,564$ 328,512$ 337,710$ 347,166$ 356,887$ 366,880$ 377,152$ 387,713$

4 Selling Fees - Agents 34,841$ 28,222$ 23,919$ 42,994$ 46,540$ 41,400$ 44,687$ 48,235$ 52,065$ 56,199$ 57,773$ 59,390$ 61,053$ 62,763$ 64,520$ 66,327$ 68,184$ 70,093$

5 Agents Fees - Complex Hire 13,636$ - 19,346$ 26,885$ 20,000$ 23,000$ 23,644$ 24,306$ 24,987$ 25,686$ 26,405$ 27,145$ 27,905$ 28,686$ 29,489$ 30,315$ 31,164$ 32,037$

6 Rental - Kiosk 4,602$ 2,654$ 2,716$ 2,005$ 5,585$ 3,000$ 3,084$ 3,170$ 3,259$ 3,350$ 3,444$ 3,541$ 3,640$ 3,742$ 3,846$ 3,954$ 4,065$ 4,179$

7 Rental - Holding Paddocks 3,055$ - 4,623$ 2,285-$ 1,689$ 1,721$ 1,769$ 1,819$ 1,870$ 1,922$ 1,976$ 2,031$ 2,088$ 2,146$ 2,207$ 2,268$ 2,332$ 2,397$

8 Sponsorship Signage 2,273$ 591$ 2,955-$ 2,773$ 2,216$ 600$ 617$ 634$ 652$ 670$ 689$ 708$ 728$ 748$ 769$ 791$ 813$ 836$

9 Truck Wash Income 7,442$ 8,436$ 7,134$ 7,924$ 11,081$ 8,000$ 8,635$ 9,321$ 10,061$ 10,860$ 11,164$ 11,476$ 11,798$ 12,128$ 12,468$ 12,817$ 13,176$ 13,545$

10 Sundries 118-$ 2,228$ 4,551$ 160$ 221$ 100$ 108$ 117$ 126$ 136$ 140$ 143$ 147$ 152$ 156$ 160$ 165$ 169$

11 Total Operating Revenue 238,787$ 215,941$ 208,282$ 300,796$ 297,285$ 307,121$ 330,035$ 354,728$ 381,339$ 410,019$ 421,499$ 433,301$ 445,434$ 457,906$ 470,727$ 483,907$ 497,457$ 511,386$

Expenses

12 Operating Expenses 92,680$ 85,070$ 99,975$ 119,360$ 92,342$ 95,740$ 99,263$ 102,916$ 106,704$ 110,630$ 114,702$ 118,923$ 123,299$ 127,836$ 132,541$ 137,418$ 142,475$ 147,718$

13 Yard Cleaning -$ -$ -$ -$ -$ 6,400$ 6,579$ 6,763$ 6,953$ 7,147$ 7,348$ 7,553$ 7,765$ 7,982$ 8,206$ 8,436$ 8,672$ 8,915$

14 Gravel -$ -$ -$ -$ -$ 1,000$ 1,028$ 1,057$ 1,086$ 1,117$ 1,148$ 1,180$ 1,213$ 1,247$ 1,282$ 1,318$ 1,355$ 1,393$

15 Depreciation 98,073$ 90,939$ 117,505$ 115,900$ 108,675$ 128,900$ 128,900$ 128,900$ 128,900$ 128,900$ 128,900$ 128,900$ 128,900$ 128,900$ 128,900$ 128,900$ 128,900$ 128,900$

16 Interest on existing loan 59,194$ 46,619$ 34,989$ 23,035$ 14,676$ 11,231$ 5,322$ 1,360$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$

17 Total Operating Expenses 249,947$ 222,628$ 252,469$ 258,295$ 215,693$ 243,271$ 241,093$ 240,996$ 243,643$ 247,795$ 252,097$ 256,556$ 261,177$ 265,966$ 270,929$ 276,072$ 281,402$ 286,926$

18 Operating Profit 11,160-$ 6,687-$ 44,187-$ 42,501$ 81,592$ 63,850$ 88,942$ 113,732$ 137,696$ 162,224$ 169,402$ 176,745$ 184,257$ 191,940$ 199,798$ 207,836$ 216,055$ 224,460$

19 Existing loan repayments 204,557$ 182,207$ 174,271$ 138,557$ 122,118$ 93,626$ 64,379$ 31,258$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$

20 Operating surplus/(deficit) 215,717-$ 188,894-$ 218,458-$ 96,056-$ 40,526-$ 29,776-$ 24,563$ 82,473$ 137,696$ 162,224$ 169,402$ 176,745$ 184,257$ 191,940$ 199,798$ 207,836$ 216,055$ 224,460$

21 Reserve fund (input) 68,149$ 99,124$ 153,463$ 211,373$ 266,596$ 291,124$ 298,302$ 305,645$ 313,157$ 320,840$ 328,698$ -$ -$ -$

22 Reserve fund (withdrawal) -$ 105,500$ 82,000$ 140,000$ 460,000$ 460,000$ -$ -$ -$ -$ -$ -$ -$ -$

23 Reserve fund (balance) 68,149$ 61,773$ 133,237$ 204,610$ 11,205$ 157,671-$ 140,631$ 446,276$ 759,433$ 1,080,273$ -$ -$ -$ -$

24 Internal borrowings -$ -$ -$ -$ 26,399$ 223,267$ -$ -$ -$ -$ -$ -$ -$ -$

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Table 23 Description and assumptions for financial modelling items

Line Title Description and modelling assumptions

1 Throughput Annual cattle sold, 3% increase per annum following improvements, plateauing from 2020/21

2 Agents Fees Fees for service, Linked to CPI

3 Yard Dues - Owners Per head selling fees collected, Linked to CPI

4 Selling Fees - Agents Per head weighing fees collected, Linked to CPI

5 Agents Fees - Complex Hire Expected income linked to CPI

6 Rental - Kiosk Expected income linked to CPI

7 Rental - Holding Paddocks Expected income linked to CPI

8 Sponsorship Signage Expected income linked to CPI

9 Truck Wash Income Expected income linked to CPI

10 Sundries Expected income linked to CPI

11 Total Operating Revenue Total revenue collected

12 Operating expenses Expected operating expenses

13 Yard Cleaning Regular cleaning costs, linked to CPI

14 Gravel Additional gravel added to receival yards, $1000 per annum

15 Depreciation As per Council estimate

16 Interest on existing loan As per current loans

17 Total Operating Expenses Total operational costs (including interest)

18 Operating Profit Total Operating Revenue minus Expenses

19 Existing loan repayments Principal repayments from existing loans

20 Operating surplus/(deficit) Operating profit minus loan repayments

21 Reserve fund (input) Operating cash surplus (excluding non cash depreciation costs)

22 Reserve fund (withdrawal) Withdrawals to fund capital works

23 Reserve fund (balance) Remaining balance in reserve fund

24 Internal borrowings Funding shortfall (when capital works exceeds amount in reserve fund).

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© GHD 2016

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Document Status

Rev No.

Author Reviewer Approved for Issue

Name Signature Name Signature Date

1 S Hoban W Van Lindt S Keevil-Jones 29/01/2016

2 S Hoban W Van Lindt S Keevil-Jones 29/02/2016

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