A quantity surveyor's report completed for City of Newcastle last year shows the council's office move could be costing ratepayers more than $16 million.
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The Newcastle Herald has obtained extracts from the October 2018 report which show a "fitout total", including furniture, audio-visual services and IT equipment, of $14.078 million.
The report (see below) lists 31 potential exclusions not accounted for in this total, including design consultants and GST.
The council awarded a $601,000 "principle design consultant" contract to Incorp Property Solutions in November 2018 and a $253,000 contract to CKDS Architecture in May this year for design modifications on the building's new top floor.
Adding these two exclusions alone and GST lifts the cost to $16.3 million, close to the $16.5 million the council received for the sale of its former administrative headquarters, the City Administration Centre "Roundhouse", early this year.
The council has repeatedly refused to make public the total bill for the move but confirmed last week that it would pay at least $35 million in rent over the next 15 years at its new Stewart Avenue building, a figure which rises to $40 million after taking into account inflation.
Councillors approved the shift in 2017 based on a business case which said the fit-out would cost $7 million and that the council would make more than $1.5 million in rent from the CAC and Fred Ash buildings, the latter of which is now for sale through property agents CBRE.
The council said on Friday that the quantity survey report was "outdated".
"[The report] has been updated several times since to arrive at an accurate number," a spokesperson said.
"This outdated report needed to be updated because it included unnecessary costs such as a desktop PC for each employee.
"The reality is our staff work from laptops which they brought with them when they relocated to the new building.
"As previously explained to the Herald, by running a competitive tender process we were able to include the cost of furniture in the fit-out contract of the building for no additional cost.
"Lastly, the outdated QS report referenced by the Herald includes costs for a digital library.
"The design of this library is still being finalised and will be brought to the November council meeting.
"It is ultimately a decision of the elected council whether the new digital library is located at Stewart Avenue or elsewhere."
A confidential report to councillors in 2017 (see below) said there would be a "refurbishment cost associated with the new premises and the cost of relocating".
"These costs have been estimated at $7m," the report said.
Council chief executive officer Jeremy Bath referred publicly in late 2017 to the "one-off $7 million cost of the relocation".
Deputy lord mayor Declan Clausen wrote in an opinion piece for the Newcastle Herald on Wednesday that the fit-out would cost $7.8 million, including the estimated $800,000 bill for moving the council's meeting chamber.
He said on Friday that the quantity survey was "outdated and inaccurate".
The council has already let a $9.055 million contract to Graphite Projects for the main part of the fit-out.
The council said in April that a business case prepared by CBRE had shown the move would benefit ratepayers by $13.1 million compared with the cost of upgrading its existing buildings.
This report, which the council has not made public, said the city would reap $22 million in interest over 20 years from the proceeds of the Roundhouse sale.
However, if the quantity survey is an accurate reflection of the move's costs, this lump sum and the interest it would generate have been absorbed by the outlay on shifting offices.
READ MORE
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The council said in March that a "portion of the funds from the Roundhouse sale will go to fitting out the City's new administration building on the corner of Stewart Avenue and Hunter Street".
Questions over the cost of the council's office move come against the backdrop of a political stoush between the council's Labor majority and four Independents over whether the city is spending the windfall from its five-year, 46.9 per cent rates hike the way it said it would.
The council's annual financial statements, approved this week, show the council is in a far healthier position than it was before the special rate variation was granted in 2015.
The council has $376 million in the bank, including cash and investments, compared with $274 million four years ago. It returned a surplus of $9.4 million in 2018-19, its sixth in a row.
The council's rates and annual charges revenue has grown from $128 million to $171 million in that time, but its backlog of maintenance and asset renewal work, one of the justifications it gave the Independent Pricing and Regulatory Tribunal for the rate rise, is growing rather than falling.
The council agreed to spend more each year on addressing this backlog than the assets were depreciating.
In its IPART submission, the council said its spend on renewing assets would exceed their deterioration by 130 per cent in 2018-19 (see below), but it spent just 52.73 per cent of the money required last year to stop the backlog growing.
Its submission said the rate hike, which will amount to an average rise of more than $500 this year compared with 2015, would allow it to make "substantial reductions in our infrastructure backlog".
"This means our facilities, roads, footpaths, sportsgrounds, parks and playgrounds will be in better condition," it said.
When arguing at length for the most expensive of three rate-rise options on the table, the council said one of its budget principles was to reduce its infrastructure backlog to 2 per cent by 2023.
OLG data shows Newcastle's residential rates are slightly above average for comparable local government areas in NSW and its business rates, at $11,000, are double the average.
Councillors approved in June a 2019-20 budget which includes spending $14 million less than this year on existing infrastructure such as footpaths, pools and roads.
Mr Bath told the June meeting that the council's "hands are tied because this council has unanimously agreed to support a number, or award a number, of contracts for new infrastructure, which means ... something has to be deferred".
The council referred in its IPART submission (see below) to "budget principles" which included reining in its infrastructure backlog ratio, the value of outstanding maintenance work against the total value of its assets, to the Office of Local Government benchmark of 2 per cent.
The ratio rose this year in Newcastle from 10.95 to 11.6 per cent.
Mr Bath told councillors at Tuesday's meeting that no council in NSW had achieved the benchmark.
"I don't believe any local government in NSW has gone even remotely close to the 2 per cent target, including the NSW government itself," he said.
But OLG figures for 2017-18 show 60 of the state's 131 councils were at or below the 2 per cent mark. Eleven councils, including Newcastle, had infrastructure backlog ratios in double figures.
Port Stephens Council had a ratio of 1.8 per cent and Lake Macquarie 2.4.
Mr Bath also said the council had never had an "agreement" with IPART in regard to the rate rise but had made a submission which had been approved.
IPART granted the council an instrument of approval in 2015 (see below) which it said "effectively requires Council to utilise its funds consistently with the Long Term Financial Plan adopted by Council and provided with the application".
The council has also started referring to its infrastructure backlog as standing at $86 million, but this sets a comparatively low bar for the acceptable state of its assets.
The OLG ratio of 2 per cent is based on restoring assets to a "satisfactory" level. By this measure, the council's backlog is $126 million.
The council's financial statements refer to this number but also to the lower figure of $86 million to bring assets to an "agreed level of service set by Council".
The level "set by Council" includes restoring the city's public swimming pools to a two-star rating out of five.
The financial statements show the council spent $803,000 on pools last year, half a million dollars less than its targeted maintenance spend.
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