Introduction

                                                              Item 6.3

North Somerset Council

 

 

 

REPORT                                    Strategic Planning and Economic Development Policy and Scrutiny Panel

 

Date of Meeting:                 6 October 2008

 

Subject of Report:                  REVIEW PANEL REPORT ON POrtishead open air pool

 

Town or parish:                   PORTISHEAD

 

Officer/Member:                  Deputy Leader, Cllr AP Rees

PRESENTING

 

Key Decision:                        YES

 

RECOMMENDATION

 

Members are asked to consider the report and its recommendations and that the views and comments of the Strategic Planning and Economic Development Policy and Scrutiny Panel be considered by the Executive when it meets to consider the report on 28 October.

 

1.                Summary of Report

 

This report presents the findings of the Review Panel set up to examine and evaluate the options to reduce the Council’s net expenditure on Portishead Outdoor Pool. 

 

Having examined in detail the operation of the pool; interviewed contractors, the ‘Friends of the Pool’, visited other similar facilities, the Review Panel concluded the pool is being operated effectively but that the weather is the major factor in determining its financial viability.  As a result, whoever takes responsibility for its operations, the pool will always require an operational subsidy.  The Panel concluded that in order to meet and achieve the review aim of significantly reducing the cost to the Council, the best option is to close the pool and support the investment of improved facilities at Parish Wharf.

 

2.                Policy

 

The Council encourages the production of healthy and active lifestyles, in part, through the support of sports and leisure facilities throughout North Somerset.  In addition to private sector, school and volunteer-run facilities, the Council also provides both direct (in house) dual-use sports centres and through contracted leisure management operators for the majority of the Council-owned facilities. 

 

There are two leisure management contracts, each held by different companies.  Portishead Pool forms part of the North and West contract which is operated by DC Leisure Ltd and also includes Parish Wharf Leisure Centre in Portishead and Strode Leisure Centre in Clevedon.  The total cost to the Council of providing these particular sports and leisure facilities is £1.74 m (2007/8)

 

3.                Details

 

Introduction

 

On 30 October 2007, the Executive received a report, ‘Executive Priorities and Financial Planning principles 2008/11’, in which the Leader set out the Council’s future priorities; its financial strategy principles and proposals for meeting the anticipated ‘affordability gap’.

 

The Executive has agreed that ‘Cultural Services’ are relatively low priority for Council spending, given that, with the exception of Libraries, they are discretionary services that the Council is not obliged to provide.

 

A service area identified for early examination was Portishead Pool, where the initial assessments reviewed by the Scrutiny Panel identified its removal from the Leisure Management Contract could produce annual savings of £75,000.

 

The purpose of the review, therefore, was to examine and evaluate the options to reduce the net expenditure on Portishead Pool by removing or substantially cutting the subsidy level.

 

Background

 

Portishead Pool is a seasonal outdoor pool, managed by DC Leisure, which is generally open to the public for 18 weeks from the Spring Bank Holiday to mid September.

 

The ‘actual’ net cost of operating the pool varies significantly each year (with the weather), although the structure of the contract is such that the cost to the Council is ‘annualised’ at approximately £75,000.  The additional costs of NNDR (rates); building maintenance; client and central costs increase the average total annual cost to the Council to approximately £99,000.

 

Table 1 below sets out the breakdown of costs to the Council, net expenditure, the total visits and net cost per visit.

 

 

 

2005/06

 

2006/07

 

2007/08

 

2008/09

 

 

 

Actuals

 

Actuals

 

Actuals

 

Revised

 

 

 

 

 

 

 

 

 

 

 

Contractor Payment

 

60,684

 

72,785

 

76,423

 

78,909

 

Premises Costs

 

16,588

 

16,727

 

18,180

 

46,206

 

Central Support Costs

 

5,035

 

5,375

 

5,772

 

5,890

 

 

 

 

 

 

 

 

 

 

 

Total Expenditure

 

82,307

 

94,887

 

100,375

 

131,005

 

 

 

 

 

 

 

 

 

 

 

Income Share (10%)

 

3,127

 

3,878

 

2,058

 

1,339

 

 

 

 

 

 

 

 

 

 

 

Total Income

 

3,127

 

3,878

 

2,058

 

1,471

(1)

 

 

 

 

 

 

 

 

 

 

Net Expenditure

 

79,180

 

91,009

 

98,317

 

129,533

 

 

 

 

 

 

 

 

 

 

 

Number of Visits

 

14,069

 

17,802

 

7,841

 

7,838

(1)

 

 

 

 

 

 

 

 

 

 

Subsidy per visit

 

£5.63

 

£5.11

 

£12.54

 

£16.53

 

 

 

 

 

 

 

 

 

 

 

(1) These are actual figures up to 14/09/08

 

 

 

 

 

 

 

 

It can be seen from these figures that each person using the Pool just once per week during the open season in 2008 was subsidised by the Council to the approximate sum of £298.00.

 

The Review Process

 

The review was undertaken by an Independent Review Panel led by the Deputy Leader, Cllr Elfan Ap Rees assisted by Cllrs Clive Webb and Tim Marter.  This review group met monthly from March 2008.

 

During the course of its work the group met with DC Leisure staff and legal officers, it visited the pool on several occasions, visited a community run pool at Wiveliscombe and met with key members of the ‘Friends of the Portishead Open Air Pool’ group.

 

Preamble to the Review discussion and findings

 

In common with all other swimming pool complexes in North Somerset and elsewhere, Portishead Outdoor Pool will always require operational financial support (a subsidy).  Put simply, this is the difference between the necessary expenditure to operate the pool and it’s ability to generate income to offset this expenditure.  In any conventional operational situation this pool will require annual financial support.

 

As an outdoor pool, the evidence shows that attendance levels are totally weather dependent, which means that during a poor summer this operating subsidy will rise, falling if the summer consists of long periods of hot weather.  An average operating subsidy for this pool is in the region of £70,000, although net expenditure by the Council averages £99,000 per annum.  The relatively poor condition of the site overall and the requirement for capital investment can only add to the operating subsidy required in future.

 

The Review, therefore, noted that the debate is not about whether Portishead Outdoor Pool requires an operating subsidy in the future (although there might be disagreement about how much it should be).  Neither is it about the value of the facility in North Somerset; as a component in the social infrastructure of Portishead or as a contributor to assist the population to become more active and healthy.

 

The central debate therefore focussed on an assessment of value for money, the Council’s priorities, the willingness to provide financial support (the subsidy) to the pool , and to a certain extent, ‘how’ and ‘who’ should provide it.

 

The fundamental question for the Review Panel to answer therefore, was that, given the financial pressures and priorities facing the Council, can it afford to continue to fund the Outdoor Pool.  If not, what should become of it and was there a better option for investing in leisure facilities for Portishead?

 

The Leisure Management Contract

 

Portishead Pool is a part of a contract with DC Leisure Ltd which has a further 2 years left to run.  The Council’s obligation under this contract is to make the facility available and to pay the contractor the ‘contract sum’ (which comprises of 2 elements, the operating deficit and a management fee).  In return the contractor is obliged to provide the specified service.

 

Given that under the contract the contractor is responsible for the majority of costs and receiving the majority income, there is no benefit to the Council from reducing costs and only a marginal benefit (10% of additional admissions income) from increased income.  The only potential for extra income to the Council within the current contractual framework would be for the Council to allow a large increase in admission fee levels (these are retained under Council control within the contract which assumes price increases only in line with inflation) and then to negotiate a ‘split’ with the Contractor in relation to this additional income.  However, even if we assume a massive 100% increase in entrance fees (from £3.40 adult to £6.80) and a 50/50 split with the contractor (and no consumer resistance!), this arrangement would only generate a maximum of £30,000 in an average year, only a proportion of which would return to the Council.

 

The potential, therefore, to bring about a reduction in net cost to the Council through the existing contract, is very limited.  In relation to the contract there are two further options:-

 

1)     To terminate the contract.  This could be done unilaterally by the Council but would be best achieved by agreement with the contractor to jointly invest in Parish Wharf to improve the facilities at that leisure centre.  In the worst case scenario contract termination could require the payment of compensation from the Council in the region of £30,000 per year – ie £60,000 for the remaining two years.  Clearly, if the contract was terminated, this would leave the Council free to pursue any course it wished in relation to the future of the pool.

 

2)     Allow the contract to run its full term (2 years) after which the Council would be free to pursue any course it wished in relation to the future of the pool. 

 

‘Friends of Portishead Outdoor Pool’

 

This group formed in response to the perceived ‘threat’ to the pool by the announcement of a review into is future.

 

It consisted of a number of dedicated local people who organised themselves into an organisation to lobby decision-makers in support of the continued provision of the pool by North Somerset Council.

 

The ‘Friends’ produced and submitted to the Review Panel a report ‘Portishead Open Air Pool:  Outline Report 1.  Safeguarding the Future’.  This report not only presents a case for the retention of the pool, but also queries and challenges a number of issues relating to the management of the site.  These issues have been investigated by the Review Panel and are mostly discussed under the various headings below.

 

Operating and other Costs

 

For the reasons set out under the ‘Leisure Management Contract’ section above, attempting to reduce the operating costs under the current contractual framework would be of no financial benefit to the Council.  In any case these are assessed to be at minimal levels and not capable of being significantly reduced.

 

However, whilst the Review Panel did research potential cost savings through the introduction of Pool Covers and the use of volunteers as lifeguards and to undertake routine maintenance and other tasks, it concluded that such savings could probably only be realised under a form of ‘Community Trust’ , as opposed to the current Management Contract or direct Council Management Options.  The Working Party also concluded that the Pool was operating at the lowest net cost to the Council (given the operating model and demonstrated by the open competitive process) and that pressures exist to increase future spending eg with utilities/fuel prices increasing rapidly and capital investment in repairs/improvements needed, with the accompanying annual revenue financing costs.

 

The Weather

           

The Review Panel interviewed past and present management of the pool; examined attendance and financial historical data and concluded that the weather is the overriding factor when determining the viability of the site.  It has been argued that other factors are equally as important – such as the physical condition of the buildings; the catering offer; the opening hours and the marketing.  Whilst these factors may have a marginal impact, the facts demonstrate that weather drives attendance levels which in turn determine income and overall viability.  When the weather is hot and sunny, the Pool is full to capacity  - when it is raining and cool, the pool is largely empty.

 

The graph below shows the relationship between attendance levels and hours of sunshine (for July).

 

 

Appendix 1 illustrates the correlation between both average temperatures and average hours of sunshine with attendance.

 


Income Generation

 

The earlier ‘Leisure Management Contract’ section explains that the current contractual arrangement presents little opportunity for the Council to reduce its net expenditure through increased income.  Under differing operating models (eg A Trust or direct NSC management) various income strands could have a beneficial impact on levels of subsidy required.

 

The current contract makes the café facility available to the contractor, but the income derived is not shared with the Council.  The contract requires the contractor to provide a service, but this is done at the contractor’s discretion.  There is a clear incentive, therefore, for the contractor to maximise income from this source.

 

However, the contractor is significantly disadvantaged by the customary practice of allowing ‘picnics’ and generally allowing customers to bring in and consume their own refreshments. 

 

The current contractor and previous contractors have, through trial and error, reached a catering ‘offer’ that represents the most commercial balance between customer needs and staff costs, investment and waste.  Extending the opening hours (and season) of the café, increasing the range on offer, special promotions etc have all been tried before and have proved uncommercial.  Again, the weather is the determining factor exacerbated by the pool’s off centre location and low footfall.

 

Whilst under contract management catering is unlikely to make any further significant ‘contribution’, there is the potential to let the catering as a separate franchise or concession which would in all probability be more flexible, responsive and carry a lower level of overhead, thereby increasing the possibility of improved service and profit levels.  However the out-of-centre location of the Pool makes this a high risk proposition unless the franchisee can offer a unique experience.

 

It has been suggested that additional revenue could be generated from more ‘Private Hire’ or ‘events’ at the pool.  Again, under contract management the costs and level of overhead associated with evening opening, the limited facilities and appeal of the venue make this option of marginal significance.

 

Perhaps under Trust management, with the use of volunteer staff and with active local community engagement and promotion, evening hires/events could possibly become a useful source of additional income.

 

The Review Panel also investigated the potential for the pool to attract other forms of external funding eg Lottery and other Grants; Sponsorship, donations etc.  Unfortunately, there are no new Lottery of other funding streams to which the Council could bid to support the pool either for capital funding for physical improvements or ongoing revenue funds to support the operational deficit.

 

In this context the facility is at a distinct disadvantage being in Council ownership since few sources of funding are open to Councils to bid for.  On the other hand, ‘Trust’ operated facilities are able to bid to a number of funds for support and are much more likely to attract sponsorship and private donations than a Council-operated venue.  This is borne out at Wiveliscombe where a substantial proportion of their income comes from grants/donations which balance the books.

 

Marketing

 

In the report prepared by the ‘Friends’, it is claimed that the spend on marketing is ‘insufficient to publicise it well’.  The level of spend appears low but, in fact, the spend has traditionally been included within the marketing budget for the whole contract including Parish Wharf and Strode Road.  The report also acknowledges that on hot days the pool is ‘at maximum occupancy levels’.  This suggests that the pool is ‘well known’ in the area.  It would be easy to spend a large amount of extra money on marketing and publicity, but the evidence is that this spending would not be worthwhile.  Assuming the pool will generally be ‘full’ on hot days, any additional marketing spend could only be used to attract those people who might be persuaded to come to the pool on ‘warm’ but not ‘hot’ days.  This reactive, short notice type of publicity/promotion is best delivered and is most effective where there is an enthusiastic and dedicated resource, preferably at no cost.  Again, this could probably only be achieved in a Trust situation where local enthusiasts act as ‘Champions’ for the facility.  However, even the additional publicity engendered by the friends this year, failed to make even a marginal difference.

 

This supports past experience which has shown that in the contract environment even limited additional marketing spend has failed to translate into additional business.

 

Opening Hours and Other Service Improvements

 

The claim has been made that the pool season is not long enough and that if it were longer it would ‘make more money’.  The same criticism and logic has been applied to the daily opening hours.

 

Increasing the opening hours of the pool, whether by extending the ‘day’ or the ‘season’ will increase the net cost of operating the pool.

 

Since by definition those extensions would be early in the day or season, or late in the day or season, and given the general fact that these times/dates are cooler and/or wetter than the peak summer weeks, the conclusion is that any extensions will result in a higher net cost.

 

If ‘money were no obstacle’ there are many ‘improvements’ that could be made to the pool and its operation, whether ‘physical’ (eg changing room/refurbishment or new children’s facilities) ‘ service’, (eg café menu, opening hours) or ‘promotional’, (eg Marketing and advertising) but without consistently good weather this ‘investment’ will not generate the financial return necessary to pay for itself and make a contribution to other costs.

 

The lunchtime closure has also been quoted as a barrier to income generation.  This closure period is only imposed when the bathing load is highest ie on hot days when the pool water becomes contaminated and requires a short period to ‘recover’. This period does have the positive effect (for the viability of the site) of creating, in effect, two sessions which ensure a turnover of customers and maximises income.  It also ensures an element of ‘fairness’ in that on those hot days more people are able to access the facility and fewer are turned away on capacity grounds.

 

            Trust Option

 

The Review Panel has carefully considered the option of transferring the Pool to a Trust but believes this is a high risk scenario and is unlikely to meet the brief laid down by the Executive for the following reasons:

 

·              No appropriate body is in place to take on the responsibility, and indications are that the Town Council would not want the financial burden either.

·              Forming a Trust would take at least two years with no guarantee of success and incur new costs of at least £50,000 including legal charges etc.  In addition a Trust would require assurances of an endowment and a continued subsidy of at least until such time as alternative sponsorship could be guaranteed.

·              The council would also likely be required to spend substantial sums of money bringing the facilities up to an acceptable health and safety and maintenance standard before any hand over.

·              If the Trust failed the Council would come under pressure to take back the Pool.

 

Conclusions

 

1.         The pool requires ongoing operational subsidy

 

2.         Under Local Authority control (either directly managed or through private management contractor) inherent inflexibility and the lack of appeal to potential funds means that any operational shortfall in funding could only be met from local taxation.

 

3.         Weather is the main factor influencing the viability of the pool and the major risk in terms of financial predictability and suitability.

 

4.         Under Local Authority Control operational charges will only have a marginal impact on either reducing expenditure or incurring income.

 

5.         Trust management could potentially provide an environment to stimulate volunteering, innovation, sponsorship opportunities and charitable donations which, together could make up the operational shortfall to achieve a ‘break-even’ position, or even surplus, but is a high risk option with no near-term savings and would likely require pump-priming costs.

 

The Way Forward

 

There are a number of options for the future of the pool:-

 

1.         Status Quo – assumes continuing operation of the facility, broadly in line with current arrangements, either managed directly by the Council or Third Party management.  Given the conclusion that under Local Authority control the pool is unlikely to be able to operate at significantly lower net cost, this option would fail to meet the objectives of this review.

 

2.         Trust Option could present an opportunity to reduce the cost to the Council in the medium/long term.  Given that ‘Trust’ organisations, and in particular their ability to establish sustainable alternative funding sources, typically take 2 to 3 years to create and would require additional expenditure in the near term, any cost savings to the Council are unlikely to be realised until at least 2010/11, and would therefore fail to meet the objectives of this review.

 

3.         Closure of the Pool and re-use of the site -There is strong evidence that investment in improving the leisure facilities at Parish Wharf to meet local demand would be a better use of DC Leisure and Council resources in the current economic climate.  It is also believed that the Pool site could provide better benefits for residents and the tax payer if it were offered for redevelopment.  This would also make a worthwhile net saving of approximately £100,000 in 2009/10 and subsequent fiscal years as well as providing an estimated capital sum in excess of £600,000 for the Council to use in priority services.

 

 

 

 

Recommendation

 

It is the unanimous recommendation of the Review Panel that:

 

1.      The Pool should be closed at the end of this season and negotiations carried out with the Contractor to invest in upgrading or offering new facilities at Parish Wharf, in lieu of a contract cancellation charge.

 

2.      The panel also recommends that the Council seeks planning permission for redevelopment options of the site and its immediate environs in order to maximise interest and value prior to disposal.

 

 

Acknowledgements

 

The Review Panel would like to thank the officers, in particular David Lawrence and Karlie Phillips, Nick Moran of DC Leisure, Representatives of the Friends of Portishead Open Air Pool, Representatives of Wiveliscombe Open Air Pool and others who patiently answered our many questions and contributed evidence to support our findings.

 

 

Author

 

 

Councillor Elfan Ap Rees

 

 

Background Papers

 

A full list of background papers is attached.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Background Papers

 

 

Initial Project Brief

 

Minutes of Review Panel Meetings

 

Extract on Leisure Trusts from Culture & Leisure Services Review Board

 

Wiveliscombe Community Pool Income/Expenditure 2006

 

Poolside Health & Safety Observations

 

Planning Policy Statement

 

Safeguarding the Future Report (FOPOAP)

 

Initial Response to Safeguarding the Future Report

 

Feedback to FOPOAP Report

 

Attendance Record 2008

 

Weather Information 7/08 and 8/08

 

Report to Community Services Policy and Scrutiny Panel

 

Press Release from FOPOAP of 23/8/08

 

Questions raised by Cllr Pasley

 

Feedback on Questions raised by Cllr Pasley

 

DC Leisure Contract Review

 

DC Leisure Report

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Appendix 1