Assessment of the economic benefits of construction projects

Let us show a specific example: the assessment of the financialburden of the operation of a "Swimming Pool Facility". Two possible solutions were prepared for the contracting authorities.

The first solution analysed the operations assuming the construction of an indoor swimming pool facility with a 50 m-long pool and accessories. The second evaluated the operations assuming the construction of an indoor swimming pool facility with a 50 m-long pool and accessories supplemented by a water park. The objective of the assessment was to capture and evaluate the main factors that significantly influence the operating costs of the Swimming Pool Facility.

•         Abstract from the land registry

•         Contract for Work for development of the "Swimming Pool Facility"

•         Conclusion of the feasibility study on the assessment of environmental influences in connection with the development of the "Swimming Pool"

•         Copy of the picture of the land survey map for the assessed land,

•         Price map of the building plots

•         Information acquired from the local investigation

•         Project documentation for the building permit

•         Certificate of the energy intensity of the buildings

•         Report on the energy audit of the "Swimming Pool" development project

 

We first did an economic analysis of the sports facility owned by the municipality in order to identify the best method for operations according to the submitted solutions from the economic viewpoint.

Sport is a major component of life for the majority of the population. The share of sport in overall consumer expenses in different countries ranges from 1.1% to 3.6%, the "sports" GDP ranges from 1.5–2% of the total GDP; it is thus only a negligible part of it. Sport is conducted in various types of sports facilities or outdoors. Outdoor sports are currently free-of-charge to a great extent, compared to access to sports facilities that mostly costs a fee.

The costs of sports facilities are rising every year, mainly due to rising energy prices, which make up a large share of the total costs. Compared to this, rental prices are rising much more slowly because a sharp increase in prices could result in loss of customers. The sports clubs must therefore search for other ways of financing the operations of sports facilities.

Reduction of municipal grants toward operation of the facilities requires a higher frequency of visitors to the facility and a related broader offer of services. In Western Europe, this indicator is converted to the water area as a ratio of the population in the surrounding area. Since there are no open swimming pools nearby, not even natural swimming areas, we assumed that by opening this facility we shall attract an adequate number of visitors to the newly built premises. The economic results and financial estimates could be set based on a business model. The structuring of the national economy according to the principle of financing differentiates the profit-making (market) sector and the not-for-profit (non-market) sector. The not-for-profit sector is further broken down into the public, private and household sectors. The facility operating costs shall be based on the classification among the sectors stated above. Entities financed under the civil association regime are in essence defined differently in terms of income tax and value added tax.

We assessed the situation in swimming pools and water parks by comparison of selected visitor rate indicators and the entrance charges.

 

swimming pool average	100	48	–	66
water park average	184	114	353	140

For evaluation of both solutions for the swimming facility, we did a detailed analysis of the cost and revenue items related to the operations of the water park. This concerned the cost of energy, water, and wages; costs related to standard maintenance and miscellaneous costs related to marketing, guarding, revisions, checks, insurance, small equipment, audits (technical and economic) and external accounting. On the revenue side, the receipts from entrance charges were analysed; additional revenues, e.g. from lease of automatic vending machines, advertising spaces or sponsorships were neglected due to their small ratio to total revenues, uncertainty and also the principle of caution.

At the same time, an estimate was done of the potential number of customers in the individual months as well as modelling of the visitors’ frequency in the season and off-season. When determining the total assumed number of visitors to the premises, we based our judgement on the average daily number of visitors to similar premises in comparable localities. The numbers of visitors reflect the seasonal character; in the case of indoor swimming pools, there is a clear decline in demand in the summer. The information was obtained from Internet presentations of the individual operators of similar facilities and from our own marketing research.

The result for the client was an evaluation of both solutions in such a way that the client to be able to opt for one of them. In our case, the option to complete the Swimming Pool Facility with Water Park was a better bargain solution, whereby the resultant grant was lower than in the case of operation of a swimming pool facility only.

The APOGEO Esteem Expert Institute has rich experience with the solution of such problems, which may afflict municipality representatives.

Expert Institute Manager