Newcastle City Council has dodged questions over the cost of moving staff to Newcastle West amid speculation the bill has blown out by $10 million.
Chief executive officer Jeremy Bath said a year ago that the move would cost ratepayers a “one-off $7 million”, but sources have told the Newcastle Herald that figure is now close to $17 million.
In response to questions this week about whether the cost of the move and fitting out the new building had grown to $17 million, a council spokesperson said: “Council last month completed the September quarterly review of its 2018/19 budget and has not allocated any additional funding to the ‘City Change’ project.”
Mr Bath said last year that the “$7 million cost of the relocation compares favourably to a poor $6 million investment should we choose to stay and update inefficient buildings with a combined age of over 140 years”.
The council spokesperson would not elaborate this week on whether there was a report on the cost breakdown and necessity of that $6 million work.
The council voted in confidential session on Tuesday night to sell its “roundhouse” City Administration Centre to Syrian billionaire Ghassan Aboud, who plans to turn it into a luxury hotel.
The sale price remains confidential, but the revenue will help offset the cost of the council’s move west. However, the council will start paying rent when it shifts to the new offices in about 12 months.
The council voted in October last year to enter into a 15-year lease for the Gateway 2 building in Stewart Avenue in a deal the Herald has been told will cost it more than $2 million a year and possibly as much as $3 million.
The council did not call for tenders before signing the lease, and several property developers have told the Herald they would have welcomed the opportunity to bid for the project.
The Office of Local Government said councils were not obliged to call for tenders when entering into leases.
“However, the Office of Local Government expects councils to make decisions that are in the best interests of their community and that deliver best value for money,” an OLG spokesman said.
High-profile Newcastle developer and former lord mayor Jeff McCloy described the move as “an incredibly poor business decision”.
“Would I have done that move? Not in your wildest dreams would I have put the ratepayers to that expense. It’s madness,” he said.
“Everyone who knows anything about real estate, or business, will tell you it’s a rip-up of ratepayers’ money.”
Mr Bath said last year that the move into a single, modern building would save the council $14,000 per staff member every year through “improved sustainability, reduced absenteeism, greater employee retention and increased productivity”.
The council spokesperson said the council had started looking for new offices in Newcastle West early last year before concluding that “the Gateway’s proximity to the Newcastle Interchange, its location in the heart of the future CBD, its abundance of visitor parking, and the chance to consolidate staff from four sites into one made it a compelling site”.
“Council does not own land in Newcastle West and therefore the suggestion that we should have gone to tender for construction of a building on land that we don’t own makes no sense,” the spokesperson said.
The terms of the Gateway lease were “extremely favourable” to the council, which had followed the “same process” as the Newcastle Herald, which moved from Bolton Street to Honeysuckle in 2015.
“When Fairfax concluded that its building on Bolton Street was unsuitable, it identified a suitable location and several floors of a building to lease,” the spokesperson said.
“We assume the Herald is not suggesting its owner short-changed shareholders by not going to tender for the construction of a building it intended to lease.”
Independent councillor John Church said on Tuesday that councillors had been given a “rock-solid guarantee” that the move would cost $7 million and he expected the chief executive to hold to that commitment.
He said he had received no further advice about the cost of the move since councillors had voted last year to authorise Mr Bath to enter into the lease.
Soon after signing the lease, Mr Bath asked the developer of the Gateway building, Spartohori Pty Ltd, to add an extra floor for more office space, an under-cover area and roof-top terraces.
The council’s Labor bloc used its majority in July to vote to move the council meeting chamber from City Hall to the new building.
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