Special Report  86     Development of Limerick Greyhound Racing Stadium

The Comptroller and Auditor General has produced a report about Bord na gCon’s development of Limerick greyhound racing stadium. The report has been presented to Dáil Éireann today, xx month 2014.
Bord na gCon is a statutory body established under the Greyhound Industry Act 1958, with the objective of improving and developing the greyhound industry. 
Main Findings
Meelick site
Bord na gCon purchased a site for the new stadium at Meelick in April 2005, at a cost of €1.02 million. Further expenditure of €935,000 was incurred on site development and project planning and design for the site.
A consultant’s report prepared in relation to the site before it was bought identified specific risks in relation to access to the national road network. There is no record that that report was presented to or discussed by the Board before the site was bought. 
It subsequently became clear that direct access to the adjacent national road would not be allowed, and that alternative access routes would require additional costs. As a result, Bord na gCon decided not to proceed with a planning application for the site. The site is still held by Bord na gCon and is currently valued at €150,000. 
Greenpark site
Bord na gCon purchased an alternative site at Greenpark in June 2008, at a cost of €3.4 million (or €304,900 per acre). An-up-to date valuation report was not obtained in advance of the site purchase. A previous valuation report in 2003 had concluded that a price of €160,000 per acre was reasonable at that time, given the nature and location of the site. Many factors relevant to the value of the site had changed between 2003 and 2008, in a context where land prices were very volatile. An up to date independent valuation report should be obtained in all instances where land is being purchased.
Bord na gCon incurred additional costs and risks as a result of issues that arose in relation to the filling of the Greenpark site and the use of an adjoining car park. It is not possible to ascertain whether Bord na gCon got good value in the purchase of the site at Greenpark in the absence of a contemporaneous valuation report.
Business case for the development
The Board approved a budget of €17.8 million (excluding VAT) for the design and construction of the stadium in April 2008. That approval was given without the benefit of a capital project appraisal, comparing the costs of the project with the expected benefits.
An evaluation presented to the Board in April 2009 projected an excess of net project revenues of €1.4 million (in net present value terms), based on capital investment of €19.8 million. 
The examination found that there was a lack of thoroughness in the manner in which the capital appraisal of the Limerick project was undertaken, and that the capital investment appraisal was inadequate in the context of a proposed investment of the order of €20 million. In particular
·      The projected net revenues from the operation of the Limerick stadium were overstated by an estimated €2.9 million (in net present value terms).
·         Although projected cash flows from property disposals accounted for over one third of the total projected revenues, they were not backed up by current valuations of the relevant properties.
·         Bord na gCon’s profit from racing had declined significantly in 2008 – the year before the decision to proceed with the Limerick development. The capital investment appraisal did not take account of this or consider the potential effect of a potential further decline in profits. In contrast, the fall in construction prices in 2008/2009 was reflected in the appraisal analysis.
Had better analysis and more soundly based assumptions been used, it is likely that the analysis would have indicated that the development of the Limerick stadium was, at best, a marginal commercial proposition. While there might have been strategic arguments for the potential impact of the development on the greyhound industry, the Board should have recognised that in proceeding with the project (or a less costly version), it might adversely affect its financial position.
Financial Impact
Bord na gCon incurred total expenditure of €21 million in relation to the Limerick stadium project. This contributed to a doubling of Bord na gCon’s borrowing, compared to the average borrowing level in  2006-2008.
Forecasted profits from the track operation and the tote at Limerick have been well below the levels projected and are forecast to remain so in the period to 2015. This, combined with decreasing profits in other stadia, means that Bord na gCon faces significant challenges in reducing its debt to more sustainable levels.
Notes for Editors
Enquiries: contact Mark Brady at (01) 603 1071 or email mark_brady@audgen.irlgov.ie
The Comptroller and Auditor General is an independent constitutional officer with responsibility for the audit of public funds. He reports to Dáil Éireann.