The analyzed undertaking called Improvement of the sport infrastructure by way of reconstruction of the Stadium in RZESZOW consists in the realization of the first stage of reconstruction of the Stadium situated in Rzeszow at Hetmanska 69 street, at present loaned by the Commune City of Rzeszow to the Institutional Sports Club Stal Rzeszow. As part of the investment, nine segments of stadium (stands) are foreseen to be built on the present facility on the eastern side of the stadium along with the access roads. The realization of only nine segments (not the whole stadium) is conditioned by the financial possibilities of the City as well as the accessible allocation of means as part of the Regional Operation Programme of the Sub-Carpathian Voivodeship (RPO WP). The new stands will make it possible to enlarge the capacity of the stadium about 4 711 sitting places for spectators of sport contests. After the realization of the investment the capacity of the stadium will increase up to 14 211. The realization of the project will also make it possible to increase the level of safety and comfort of leading as well as participation in games and sport competitions, adapt the facility to the needs of handicapped people, improve the image of the city, rationalize operating costs of the facility. Improvement of the sport infrastructure of the Stadium in Rzeszow is strictly connected with the conception of swimming pool reconstruction at the Cracovian South “Karpik” housing estate which is to be enriched with a competitive trough to go in for diving in the Olympic class along with a ten-meter diving platform. A common part of both tasks is the perspective of creating in Rzeszow an over-regional centre of various sports disciplines, especially in branches which require intensification and assumption with a sport patronage of the sections in its charge, demonstrating the best results in competitions both on national and foreign stages. The speedway racing section in Rzeszow, the diving section of the ZKS Club, as well as the ” Sokol ” swimming club proved many times that investing in young talents results in an effective promotion of the City as an important centre of professional and qualified sport. The Institutional Sports Club STAL Rzeszow will be responsible for exploitation of the established as part of the project fixed assets.
2. Methodology and used methods
Investment expenditures on the realization of the project were received on basis of the estimated cost calculations in the range of investment tasks (initial pricing of the speedway-football stadium in Rzeszow on the basis of the headwork green friendly project), beneficiary’s calculations and contract with the executors of the feasibility study. Total gross investment expenses comprise in the sum of 30.000.000 polish money.
Based on the presented below assumptions the financial plan of the operator of the Stadium for the activity connected directly with its usage was worked out. The plan includes the operator’s balance, especially his positions indispensable to elaborate the demand on the net circulating capital, the profit-and-loss account and the account of money flows. Below, the most important assumptions of the forecast are presented.
The incomes acquired by the operator of the project come from three sources: incomes from tickets sale on sport events and remaining events organized on the Stadium; incomes from the advertisements placed on the buildings of the Stadium and incomes from organizing various events on the Stadium. On account of the small sizes of incomes from organizing events, these incomes were aggregated along with the incomes from the sale of advertisements. The incomes generated by the operator on account of managing the Stadium in the years 2005-2007.
Constructing of any model of demand on tickets authorizing to participation in events organized on the facilities of the Stadium would be burdened with risk achieving the level submitting the practical usefulness of such models for doubt. The price elasticity of demand on tickets is minimum. The elaborated projections of incomes are therefore based on the assumption of proportional growth of incomes from the sale of tickets due to the increase of number of places on the stands. The number of places will increase about 50 %. The average level of ticket prices, according to the forecast will be not changed, this is why the annual incomes from the sale of tickets in the period of reference will increase about 150 %. The forecast includes also proportional growth of incomes from advertisements. Due to the fact that the incomes from the sale of tickets within the last several years were characterized by significant fluctuations, the weighed average of incomes in particular years was accepted as the input data in order to the forecast objective. However, the arithmetical average from the years 2005-2007 was accepted for the incomes from the sale of advertisements.
Both the analysis of the historical data and the projections of costs are based on distinguishing costs referring to the activity led with the use of the facilities of the Stadium from among all costs incurred by the operator. Indirect costs were allocated on the basis of their estimated part in incomes in particular years.
The forecast of particular types of costs were worked out on the basis of division on constant and variable. Costs recognized as variable (or predominantly variable) were forecast in a determined proportion to the planned change of the number of places on the stands. Moreover, the instructions of technical experts concerning the scale of growth of particular costs as a result of putting the new objects into operation.
The realization of the undertaking will not directly cause significant changes in the generic structure of the functioning costs of the Stadium. The essential abrupt growth of costs will occur in the year 2011 in result of putting new objects into use. Below, detailed assumptions of costs forecast are presented.
In the years 2005-2007 materials and energy costs constituted on average 14,5 % of the total costs of the Stadium exploitation excluding amortization. Both the costs of materials and the costs of energy were recognized as variable positions of costs, though the degree of their reaction to the increase of number of places on the stands is small.
In the years 2005-2007, foreign services constituted on average 18 % of the total costs of exploitation of the Stadium excluding amortization. These costs include the costs of current repairs, protection services, telecommunication services, transportation of impurities. Foreign services were included to variable costs. It was assumed that the coefficient of increase of foreign services costs constitutes % of the rate of increase of the places number on the stands.
The facilities constituting the composition of the Stadium used by the operator in the year 2007 became entirely remitted. However, the property is still used in the operator’s activity and it never became formally closed down. This is why, the basis of making amortization copies is the value of investment expenditures increased with the gross value of the existing, entirely remitted buildings. On the basis of the records kept by the operator and in accordance with the regulations of the law on profitable tax from legal persons, the amortization rate in the amount of 2,5 % was accepted for the buildings of the Stadium.
The average-year participation of remuneration and derivatives in the costs of exploitation without amortization came in years 2005-2007 56%. The project assumed maintaining the present state of employment and the level of remuneration. The derivatives having the character of “mark-ups” on remunerations were directly connected with the plurality of remuneration budget. Owing to this fact, both positions of costs were integrated in the analysis.
Due to the insignificant amount of taxes and payments, they were aggregated in the position of remaining generic costs. In the years 2005-2007, taxes and payments constituted on average 11,9 % of the total costs of the Company. The remaining costs include costs of trainings, business trips, representations and advertisement, insurances. Their average-year participation in costs without amortization in the years 2005-2007 carried out 10%.
The forecast operator’s financial results on the activity connected with the exploitation of Stadium were included in the profit-and-loss account. Both in the variant before the realization of the project and in the variant after the realization of the project, Stadium achieves a positive result on sale. Essential increase of costs in effect of making amortization copies from the accomplished investment of a green friendly modernization character is balanced by a significant increase of incomes from tickets sale.
Distinguishing incomes and costs connected with the exploitation of Stadium from among all economic transactions of the operator and the analysis of profitability of so distinguished activity substantiates correction of the result on the operating activity of the project about the sum of profitable tax. In accordance with the regulations of article no. 17 of 5a law on profitable tax from legal persons, earnings of tax payers being sport clubs, as defined by law dated on 29 July 2005 on qualified sport in the part oriented on training and sport competition of children and youth, are free of tax. Based on the analysis of historical data it was assumed in the forecast to allot 75 % of earnings on training and children’s competition. In the whole period of forecast the assumed rate of profitable tax from legal persons carries out 19 %.
Within the last several years the operator showed relatively small states of stores, dues and short-term obligations. It is also proper to emphasis their gradual decrease in the analyzed period reflecting on the rationality of managing the circulatory capital. The projection is based on calculation of the average circulatory coefficient for the years 2005-2007 and it intends to maintain this coefficient in the next years.
In the variant “with the project” it was assumed that the reconstructed expenditures will be incurred each year, starting on the year in which making amortization copies of the realized investment will begin. It was accepted that reconstructed expenditures in the variant “without the project” grow about 3% annually which means that it will be necessary to enlarge the annual reconstructed expenditures as the facility wears out. The reconstructed expenditures rate of increase in the variant “with the project” is also 3% annually. The reconstructed expenditures amount in the base year for the variant “without the project” was set on the basis of the historical data analysis. The reconstructed expenditures amount according to the instructions of the technical expert and allotting on reconstructed investments 10% of the amortization copy already in the first year of the economic utilization of the realized investment. Such an assumption suits the practice of activity of subjects controlled by public bodies or acting in the public sector which usually make the amount of investment expenses conditional on amortization copies.