Council land sale recommended for proposed GovHub in Bendigo

Seven options will come before councillors at Wednesday’s meeting. 

The city’s staffers have assessed selling the site of the Lyttleton Terrace offices and handing responsibility for the project’s development, construction and management over to the government to be the most feasible course of action.

It is, therefore, their recommended option.

The council estimated its upfront costs to amount to $7.285 million, after accounting for the sale of the land.

Those costs included office fit out and temporary office accommodation while the 1000-desk GovHub is being built.

Construction and costs associated with the project would be the responsibility of the government, under the recommended course of action.

The project cost is estimated at $90 million. The government has already committed $16 million.

The build is expected to take three years, with the government expecting the GovHub to be completed by 2022.

City of Greater Bendigo chief executive Craig Niemann did not shy away from the fact the project could take some time, speaking with media today.

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The city would be one of the GovHub’s tenants and would be seeking up to 400 desks in the new building.

Other proposed tenants include the Department of Environment, Land, Water and Planning; the Department of Jobs, Regions and Precincts; and Parks Victoria. 

The government has committed to deliver 100 new public sector jobs as part of the project.

A further 25 jobs are expected to be created as a result of providing those roles in Bendigo, equating to 125 new jobs and an additional $28.8 million a year for the city’s economy.

Only about 20 positions to be based in the proposed GovHub have been announced this far – all of which come from the Labour Hire Licensing Authority.

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Ballarat is home to a GovHub, and there is one planned in Morwell. 

But Bendigo would be the first council to shift its offices into a GovHub if the council adopts the recommendation.

The city believes shifting its offices to the GovHub would be beneficial for a variety of reasons. Among them, the opportunity to consolidate its offices into a single site.

Seven buildings house the city’s staffers at the moment.

Four of the buildings are council-owned. Three are leased.

Productivity gains, technology improvements and a more sustainable building are expected to amount to $16.1 million in savings for the city over 30 years, if it goes ahead with the GovHub.

Mr Niemann said there would also be efficiencies gained from reducing duplication of roles across sites. 

The Victorian Valuer-General would be involved in the sale of the Lyttleton Terrace site, if the council chooses to proceed with the recommendation.

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The city has estimated income from the sale of the land and Victorian Government contribution at $8.7 million.

Should it support the recommendation, the council will be committing to higher long-term rental costs than it is paying today. 

But the city believes the project has the potential to shape Bendigo’s future, bringing 600 workers into the CBD, increasing rental property value, and freeing up buildings leased by council.

There could be opportunities to develop the existing DELWP site at Epsom.

People seeking to access local or state government services would also have a single point of customer service.

The GovHub construction phase is expected to create 90 jobs and contribute $131 million to the city’s economy.

RELATED: State budget 2018-19: What’s in it for Bendigo, central Victoria

Council staffers consider the recommended option to be the most financially responsible way to partner in the proposed Gov-Hub because it does not commit the council to high financial risk or jeopardise future capital works programs – concerns arising from other options.

Consultants PricewaterhouseCoopers favour an option that would see the city retain ownership of the land and enter into an agreement with the private sector.

After 40 years, the asset would revert to the council.

However, city staffers found an assumption on which the modelling was based to be flawed.

“The council would need to pay a significantly inflated economic rent over and above that initially modelled by PricewaterhouseCoopers or make a payment at the expiration of the agreement in excess of $50 million,” a report to the councillors, included in the meeting agenda, states. 

City staff wrote that they did not support the option as feasible, ‘as the combination of inflated economic rent and high termination payment would impact on council’s financial sustainability.’

The option second ranked by PricewaterhouseCoopers is for the city to retain ownership of the land and to fund the entire cost of the building’s purchase price when completed. 

“This option involves embarking on significant additional borrowing and would result in a level of debt far exceeding other comparable councils,” the report states.

“This would reduce council’s ability to commit to future capital investment.”

Another option is a shared ownership structure, where the city would have the majority stake.

"While overall control and ownership would be retained...there would still be a requirement to significantly increase borrowings," the city's staffers wrote.

"The modelling demonstrates this option would still result in a high risk to financial sustainability.

"Initial advice has also indicated there is likely to be limited market appetite for this arrangement."

The city is appealing to the government for funding to reduce or cover the upfront costs associated with the recommended option.

Otherwise, the costs would be spread over two or three financial years.

REFURBISHING the City of Greater Bendigo's main building at Lyttleton Terrace to accommodate as many desks as it would be allocated in the GovHub would cost more than building anew, an analysis has found.

In addition to exploring its options to become involved in the state government's proposed GovHub, the City of Greater Bendigo commissioned an analysis of the costs and feasibility of either improving or building new offices.

Building a new, 440-desk office on the Lyttleton Terrace site would cost an estimated $36.78 million.

Refurbishing the existing office to house the same number of city staffers would cost $41.09 million, leading consultants Urbis to preference a new building out of the two options.

LETTERS TO THE EDITOR: 

A new or improved building for the council's staffers would address one of the council's priorities, going into the project: that employees be based at a single site, rather than seven.

But, according to the city, building a new office solely for its staff would be more expensive and fraught with risk than its recommended strategy to become involved in the GovHub.

"Council would be exposed to construction risks and potential budget overruns associated with the project and may not receive contributions and project management support from the Victorian Government," the city stated in a report to councillors, included in the agenda for Wednesday's meeting. 

"Borrowings required to fund this construction are also likely to increase council's financial sustainability risk."

The future of the proposed GovHub could be in doubt if the council decides against partnering on the project, Mr Niemann said.

The majority of the options available to councillors on Wednesday night would formally commit the city to $90 million project.

If selected, a building about the scale of the Bendigo Bank headquarters would subsequently be constructed on the Lyttleton Terrace site, housing about 600 government employees and with capacity for about 400 council staffers.

Initial modelling for the GovHub project included 440 desks for the council.

But the city's staffers have identified savings to be made by reducing the number of allocated desks to 400.

"A review of work practices and technology would support this reduced number of desks and still cater for a growth component," the city wrote.

What the new building would look like and how much of the preferred site it would occupy, if the council votes in support of the GovHub, is not yet known. 

Mr Niemann expected the council would have a say in the design.

'Heritage and environmental sustainability' was identified as one of five guiding principles when considering the project. 

"It must be designed to align with the streetscape and heritage of its surrounds," the report to councillors states.

Mr Niemann said that included consideration of the building's height.

The city does not wish for any new building under consideration for the Lyttleton Terrace site to overshadow the neighbouring Bendigo Town Hall.

"The building would be a significant part of Bendigo's landscape for many years," the report to councillors states.

In addition to looking the part, council staffers stipulated that a proposed GovHub ought to be designed to be environmentally sustainable - no less than a Green Star rating of five will be deemed acceptable.

Other guiding principles included securing economic and efficiency benefits for Bendigo, and 'affordability and financial sustainability'.

"Committing to the GovHub project should not result in council's future financial sustainability indicators moving to 'high risk'," the city's staffers wrote.

Of all the seven options presented to the councillors, the recommendation to sell the Lyttleton Terrace site and become a tenant in the GovHub was the only course of action the city's staffers did not associate with 'high risk'.

"This is assessed as having significantly smaller upfront costs for the council, minimal constraints on future borrowings and this option would not result in an immediate 'high' debt financial sustainability risk indicator," the report to councillors states.

"However, this option also results in council no longer owning the site, one of the guiding principles established to assess the available options."

The City of Greater Bendigo has already come under fire for considering selling council-owned land to pave the way for the project.

Former Bendigo mayor and property investment advisor Alec Sandner said to do so would be 'crazy', in a letter to the editor published by the Bendigo Advertiser in August.

"Property is a long term investment where you buy, renovate and never sell," he wrote.

In a media briefing today, Mr Niemann said selling land to facilitate the GovHub project had always been on the table.

"It's been pretty open in the public and it's only been recently, I would suggest, that it's started escalating in terms of a few people saying why would you sell our asset, our community land," he said.

"A lot of our facilities and services - the services we provide as a city - are not on council land. The whole Rosalind Park / QEO isn't council land, it's Crown land… Our depot out at Adam Street is on Crown land... 

"I don't think that it necessarily means we have to own our own buildings to be able to provide great service to the community, and that's what we're trying to do."

The state government's GovHub proposal dates back to May 2017.

In its report to councillors, the city's staffers reference public consultation associated with an independent review into co-location of the city's offices back in 2013.

"The GovHub project is Victorian Government initiative," they wrote of further consultation.

"Should council commit to the project, the community will have an opportunity to contribute to the heritage and sustainability components of the building.

"However, the Victorian Government would be responsible for this consultation and council, like the community, would become a stakeholder in these discussions."

Wednesday's council meeting starts at 6pm in the Bendigo Town Hall.

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