MARTIN LEE has been a Fremantle ratepayer for 15 years, and loves the Freo inner-city lifestyle and windsurfing at South Beach. A veteran commercial advisor consulting to the energy sector, with degrees in civil engineering and economics, Martin happened to be looking over council documents early this year when he came across the Kings Square business plan. He wrote about his concerns in a March 27 THINKING ALLOWED article. This week, he says his concerns have not been allayed.
THREE months have passed since the Herald published my Thinking Allowed article on the Kings Square business plan.
Since then we have seen plenty of smokescreens and spin from the City of Fremantle but very little effort to answer legitimate questions.
Let’s start by getting some “perspective”.
Recently the council cut its support for the Warrawee women’s refuge. Deputy mayor Josh Wilson has also bemoaned the state government’s $100,000 cuts for financial counselling and Legal Aid in Fremantle.
With belt-tightening all around, is our council also prioritising its spending on facilities and services? Are ratepayers getting the best value from their rates and assets? How do these cuts sit with council’s spending priorities on Kings Square?
Here are a few facts that have recently been established.
Our council has confirmed how it has dressed up the $30 million project loss on the Kings Square development as a $4m profit.
To achieve this, our mayor and CEO want us to believe the $48m building, excluding land, will be worth $97m in 20 years’ time. Surprisingly, you will not find this discussed anywhere in the business plan. The city depreciates its buildings over 40 years, meaning this building should halve in value, not double. The business plan also assumes the current civic building and the Queensgate building both have zero residual value.
Our CEO now states the $44m building costs in the business plan should actually have been $48m. Meanwhile, the only additional facilities ratepayers will get from the $48m Kings Square project are additional baby change facilities!
If the project can only support $8.8m of debt financing, the project funding shortfall is $39m, not the $6m to $7m stated in the business plan. The city plans to sell $29m of its income-generating properties to help fund the development, but this still leaves its project funding short by $10m to $11m—to be funded by selling more property.
Queensgate is to be sold to Sirona for $6.35m, yet based on rental yield the business plan assumptions value this property at about $15m. When fully tenanted in 2010 the property was worth closer to $25m, based on rental data recently released by the council. Where can I buy Sirona shares?
The $44m project development cost was only ever a “rough guess” as to the cost of a building that had yet to be designed. We now have a finalised design, but no updated cost estimate for its construction has been published. Why not? What if it now costs $60m?
The Herald recently revealed mayor Brad Pettitt and deputy mayor Josh Wilson sought comment from former mayor Peter Tagliaferri on the business plan while it was being prepared. Mr Tagliaferri reportedly described it as “crazy, seriously” and “a disaster waiting to happen”.
Mr Tagliaferri, an experienced businessman, is correct in stating the risk to the City of Fremantle is too high. The project burns a $30m hole in the city’s finances, excluding cost over-runs, and excluding the generous gift to Sirona. The project is not even fully funded.
I wonder how the Warrawee women’s refuge feels about our council’s funding priorities?
The business plan claims the new council buildings will transform Fremantle, but contains absolutely nothing to support our mayor and CEO’s “vision”, nor their claims this project will be a catalyst for economic development. It’s looking more like a “thought bubble” than a “vision”.
The council states experts have reviewed its business plan. Other than Mr Tagliaferri, the only other experts known to have been used are Leedwell Strategic, but their advice is “confidential”. It’s not surprising the council won’t let ratepayers see Leedwell’s advice—our former mayor has already set the tone.
Fremantle council should first have worked out why shops are closing, why people are not visiting, and why they are not spending money. Why do people bypass Fremantle and go straight to Garden City? This analysis has clearly not been done by the City of Fremantle. Why not? Perhaps there was a risk of introducing that dreaded “parking” word? The mayor now admits he did not see the retail decline coming.
Succeed or fail
Sell Queensgate to Sirona if needed, and let it redevelop it, as well as the old Myer. This will either succeed or fail to revitalise Kings Square. Success does not hinge on whether a new civic centre is built.
Kings Square is an asset because of its fantastic open spaces—our city centre. Our council could spend a small fraction of the $48m making Kings Square a visually attractive place to visit, safer, improving the streetscape and access, properly refurbish our town hall, refocus on existing heritage architecture, and draw people and businesses to Kings Square’s underlying attractions.
Does anyone actually believe a new library will revitalise Fremantle’s retail trading?
The Kings Square business plan simply does not stack up. This council lacks transparency and must be held accountable for its decisions.
Clearly, what is needed now is an external audit of the Kings Square project’s finances and its contractual commitments. I also recommend an external audit of all property transactions and major financial commitments since Brad Pettitt became mayor, as I suspect Kings Square is just the tip of the iceberg.