CITY of Newcastle has finally revealed that it has spent $17.6 million on its new leased administration premises at Stewart Avenue, Newcastle West.
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After repeatedly refusing for the past two years to make public the total spend on the leased six-level office space, council issued a media release on Thursday detailing the cost.
The moving costs have been the source of conjecture since councillors approved the shift in 2017 based on a business case which included a $7 million fit-out, a price tag that has grown considerably.
According to the council, it has spent $8,389,994 on office space for 450 staff, $2,173,982 on establishing a Local Emergency Operations Centre, $3,267,465 on a new digital library and $1,041,824 on the new roll in, roll out council chamber.
This does not include a bill for $2,749,827 paid to fit-out contractor Graphite Projects for managing the works.
In revealing the spend, council split the bill into four projects and presented the $2.7 million paid to Graphite separately, making it impossible to determine exactly how much has been spent on each project.
City of Newcastle chief executive Jeremy Bath referred publicly in late 2017 to the "one-off $7 million cost of the relocation", and councillors approved the move based on a business case that has not been made public, which included that figure.
Mr Bath told ABC radio at the start of last year: "Seven million dollars has been allocated in the budget for the relocation of council staff to the new building, and there's not been an additional cent requested for the project."
The $17.6 million spend revealed this week does not include GST, if it was included it would take the cost to $19.3 million. A council spokesman said the GST exclusive price represented the "final cost" to ratepayers as local government organisations receive a GST rebate.
Mr Bath said on Thursday that the relocation was the first modernisation of the council in more than 40 years and had resulted in a better work environment, more efficient systems, greater flexibility and improved staff culture. He said council had taken a "frugal approach" to the move.
"Relocating our City Administration Centre to Newcastle West has provided our staff with a new fit-for-purpose office featuring modern amenities, a flexible design, community areas and meeting rooms to encourage better communication and collaborative decision-making," he said.
Lord mayor Nuatali Nelmes said the move was designed to provide the "best value" to residents.
"This area is rapidly transforming into Newcastle's new CBD. We're pleased to be part of this strategic shift, which is not only revitalising a long dormant part of the city but is also allowing new life to be injected into our civic cultural precinct and some of our most treasured community facilities," she said.
The council confirmed in October last year that it would pay at least $35 million in rent over the next 15 years at the Stewart Ave building, a figure which rises to $40 million after taking into account inflation.
Independent councillor Kath Elliott, who voted against the move, said she was "staggered" that the cost was more than what council sold its former administration headquarters for in late 2018.
The 'Roundhouse' sold for $16.5 million to Syrian billionaire Ghassan Aboud, who is turning it into a luxury hotel.
Cr Elliott said each project at Stewart Avenue had experienced a cost blow out from approved budgets.
"Using ratepayers money to move from a building we owned outright, to a building we don't, never made good financial sense to me," Cr Elliott said.
"At the time of making the decision to move, councillors were assured that costs would not exceed $7 million. To find out the magnitude of the move costs now, I am only more of the view that this has been a poor financial decision for ratepayers."
Mr Bath said Newcastle was the first of four local councils to revamp administration centres, and the project "compares favourably".
"Lake Macquarie City Council is spending $17.8m on their fit-out, Mid Coast Council has budgeted $20m and Maitland's project is budgeted at $28m," he said.
Of those, Newcastle will be the only council that does not own the building it has fitted out.
In September, council announced the opening of the digital library on the ground floor of the new administration building and said its "total cost" was $2.8 million.
According to the figures issued by council on Thursday, the cost of the library increased since it opened by $467,465, or 15 per cent, to $3.26 million, including project management and design fees. This does not include the fee paid to the builder Graphite.
More than $2.1 million of the funding came from the sale of the former Newcastle School of Arts in 2015.
In December last year, council estimated the emergency centre, on the top floor along with executive suites for Mr Bath and Cr Nelmes, would cost $1.8 million "to deliver".
The cost was $2.17 million, an increase of $373,982, or more than 20 per cent, including design and project management fees. This does not include a fee paid to builder Graphite.
Council's new meeting chamber, estimated in an opinion piece written by deputy lord mayor Declan Clausen last year at $800,000, cost $1,041,824, up 30 per cent including project management and design fees, not including the builder's fee.
In April last year, council awarded a construction tender to Graphite for $8.3 million for the fit-out of the building and it cost $8.4 million, without Graphite's fee on top.
Spread across the four projects is an additional $2.74 million for Graphite to carry out the work, which increases the overall cost by about 15 per cent.
According to the figures, council paid APP Corporation $273,840 to project manage the $8.4 million relocation and almost the same amount, or $248,483, to manage the significantly smaller $3.26 million digital library project.
Council says it cost $363,306 for the design of the office space across six floors, compared to $261,215 for the design of the digital library situated on the ground floor and $167,924 for the design of the emergency centre on the top floor.
Cr Elliott said the additional $2.74 million paid to Graphite, was not approved by councillors, and "kept secret despite numerous requests for information from Independent councillors".
"Ratepayers deserve to know how these cost increases occurred," she said.
"Unlike the other councils mentioned in council's media release, who are investing in buildings they own, we have invested in an expensive fit out of rented premises, which typically depreciates in value at a rapid rate."
Mr Bath said the relocation paved the way for the revitalisation of the civic cultural precinct and the sale of properties including the Roundhouse and the Frederick Ash Building.
"The sale of these buildings has allowed us to direct significantly more funds into projects that benefit the community, with the $16.5 million proceeds from the Roundhouse going directly towards our record $116 million program of upgrading and improving key community assets," he said.
"Another $9.5 million from the sale of three properties including the Frederick Ash building is being used to part fund the much-needed restoration of the Newcastle Ocean Baths, with the first stage upgrade to the pools and lower promenade starting next year."
Since February, the Newcastle Herald has lodged six requests under freedom of information laws in an attempt to uncover detailed information about expenditure on the project and to access the business case used to justify the move, with limited success.
Only one of six GIPA requests lodged in the past eight months has resulted in council producing information that wasn't already publicly available.
Councillors approved the shift to Newcastle West in 2017 based on a business case by real estate services firm CBRE that showed it would benefit ratepayers by $13.1 million over 25 years and the fit-out would cost $7 million.
In deciding to keep the report secret, council used a range of reasons including that because the report was labelled confidential, CBRE was able to "frankly disclose" aspects of the business case which "included incomplete assessments".
Council also claimed releasing the report could expose it to "potential litigation" from CBRE. An appeal of council's decision was lodged with the Information and Privacy Commission NSW. An outcome is pending.
Know more? Donna.page@newcastleherald.com.au
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