capital expenditure review proposed acquisition of · community services; to consolidate...
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KU-RING-GAI COUNCIL
CAPITAL EXPENDITURE REVIEW
Proposed Acquisition of
828 Pacific Highway Gordon
September 2012
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24388 83512 DC dc KMC CER 26102012 i
CONTENTS
EXECUTIVE SUMMARY ..............................................................................................1
INTRODUCTION .........................................................................................................4
Purpose of CER 4 Project Objectives 4 Methodology 5 Notification of the Division of Local Government 5 Information Relied on and Referenced 5
OUTLINE OF PROPOSED PROJECT ...........................................................................7
Ku-ring-gai Council 7 Council’s Existing Administration Buildings 7 The Project 8 The Need for the Project 9 Project Options 9 Preferred Option 10 Council’s Space Demands 10
THE NEED FOR THE PROJECT ..................................................................................12
Capital Expenditure Guidelines 12 Community Strategic Plan 12 Delivery Program and Operational Plan 12 Business Case/Feasibility Study 12 Community Needs 13 Asset Strategy Considerations 13
ALTERNATIVES .........................................................................................................16
ECONOMIC IMPLICATIONS ...................................................................................18
Capital Costs 18 Base Case (818 Pacific Highway) Capital Costs 18 Option 1 (828 Pacific Highway) Capital Costs 19 Recurrent Costs 20 Base Case (818 Pacific Highway) Recurrent Costs 20 Option 1 (828 Pacific Highway) Recurrent Costs 21 Benefits 23 Base Case (818 Pacific Highway) Benefits 23 Option 1 (828 Pacific Highway) Benefits 23 Economic Appraisal Results 24 Net Present Value Results 24 Sensitivity Analysis - Discount Rates 24 Sensitivity Analysis - Capital Costs 25 Financial Impact 26 Funding the project 28
PUBLIC CONSULTATION .........................................................................................29
BUSINESS PLAN .......................................................................................................30
Objectives 30 Project Governance 30
RISK MANAGEMENT ...............................................................................................32
Introduction 32 Statement of Commitment 32 Scope 33 Strategy Principles 33 Risk Management Requirements and Procedures 34
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Responsibilities 34 Risk Management Procedure 34 Performance Review 34 Risk Assessment 35
PROBITY ...................................................................................................................36
Objectives 36 Execution of the Probity Plan 37
TENDER EVALUATION AND VALUE FOR MONEY ..................................................40
Tendering 40 Acquisition of 828 Pacific Highway 40 Agreed Commercial Terms 40 Assessment of Price 41
REPORTING ..............................................................................................................43
DISCLAIMER ............................................................................................................44
APPENDIX 1 – COUNCIL’S SPACE DEMAND ANALYSIS .......................................45
APPENDIX 2 – DIAGRAMS FOR OCCUPATION OF 828 PACIFIC
HIGHWAY ................................................................................................................46
APPENDIX 3 – INCREMENTAL COSTS OF OPTIONS ..............................................47
APPENDIX 4 - COMMUNITY CONSULTATION STRATEGY .....................................48
APPENDIX 5 - RISK MANAGEMENT – PRINCIPLES AND GUIDELINES ...................49
APPENDIX 6 – RISK ASSESSMENT ...........................................................................50
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EXECUTIVE SUMMARY
Background
This Capital Expenditure Review (CER) has been prepared in response to Ku-
ring-gai Council’s (Council) proposal to acquire new premises. The proposal
includes the surrender of the ground lease and acquisition of the
improvements at 828 Pacific Highway Gordon and the relocation of
Council’s administration functions from 818 Pacific Highway Gordon.
Council owns the freehold in the land at 828 Pacific Highway. However, the
land is encumbered by a ground lease with an expiry date of 25 August
2090. The proposal outlined by this CER is to acquire the building and
therefore extinguish the ground lease and obtain a 100% interest in the
entire property.
This CER has been prepared in accordance with the Division of Local
Government’s (Division) Capital Expenditure Guidelines, December 2010
(Guidelines).
In preparing this CER, the following has been undertaken:
an inspection of Council’s current administration and operation
accommodation;
space demand analysis of Council’s current and future
administration and operation functions;
technical and valuation due diligence of 828 Pacific Highway;
indicative stack layouts of 828 Pacific Highway for Council’s future
administration and operation functions; and
assessment of economic comparisons and financial impact.
Project Need
Council is required to relocate from the existing Administration Centre for
the following reasons:
to provide a modern office building that will be fit for Council’s
administrative and operational purposes as opposed to the
inadequacies of the current facility described in the Department of
Local Government Best Practice Review Report 2010;
to ensure efficient and effective allocation of future capital and
recurrent costs related to its accommodation facility;
to allow consolidation of its administration functions and other
community services;
to consolidate Council’s control of its land by purchasing the
adjacent property rights and assuming control of a larger
contiguous parcel of land; and
to facilitate the future masterplan and redevelopment of Council’s
land in Gordon, thereby contributing to the revitalisation of the ‘civic
heart’ of the Ku-ring-gai Local Government Area.
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Alternatives
Four alternatives to relocating have been considered. Options 2 to 4 did not
proceed for various reasons outlined below and are in any case considered
inferior to the current proposal.
Option Name Details
Base Case
Option
Remain in Existing
Building
This option would require various items of
expenditure to provide for the upgrade and
maintenance of the existing inferior
accommodation. Option 1 Purchase, relocate
and consolidate at
828 Pacific Highway
Gordon
Purchase, relocate and consolidate at 828
Pacific Highway, Gordon. This is the
preferred option. The proposed building
requires a capital works to bring it up to an
acceptable standard. Fit out will also be
required on Council’s component of the
office space.
Option 2 Purchase 9-11 Bridge
St Pymble
(March 2010)
The proposed purchase was intended to
provide overflow accommodation to relieve
the pressures being experienced at 818
Pacific Highway. The property eventually
was sold to another purchaser. Option 3 Purchase 15-17 Bridge
St Pymble and
construct a new
administration
complex.
(September 2010)
The proposed purchase of this site and its
amalgamation with 9-11 Bridge (above) was
intended to provide a new administration
and chambers accommodation for Council
through a completely new development.
Development costs including land of $27m
were considered excessive by Council and
the purchase was not pursued. Option 4 Purchase of 3 Bridge St
Pymble
(March 2011)
The proposed purchase was intended to
provide overflow accommodation. Noting
that Council’s administrative functions could
become increasingly fragmented through
ongoing property acquisition, the primary
Council facility would remain at 818 Pacific
Highway. An offer was made to purchase
this property but was not accepted and the
property was never sold.
Economic Comparisons
The base case and option 1 have been assessed using discounted cashflow
analysis. Both options represent a Net Present Cost which is not unexpected.
There is a significant cost associated with remaining at the existing site, and
the economic evaluation assesses whether an alternative option has a
lower cost or further benefits for Council and the broader community than
the base case.
Option 1 with a NPV of -$7.56m has an incremental benefit over the base
case (NPV of -$20.95m) by a value of approximately $13.39m using a
standard discount rate of 7%. Option 1 therefore represents a superior
economic solution and is the preferred alternative.
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Financial Impact
Capital Costs to effect the relocation are estimated at a net cost of $27.0m.
This does not include capital costs associated with lifetime capital
refurbishment which commence in the first year of operation of the new
building.
The capital costs include:
acquisition of the land; and
cost for consultants, relocation, building works and office fitout.
Capital and recurrent costs have been assessed and Council has advised it
has the financial capacity to fund the Project through internal loans which
are to be repaid by proceeds from a program of surplus asset sales.
Probity and Tendering
The proposed acquisition has been conducted pursuant to Council’s
Acquisition and Divestment of Land Policy, 2009, Council’s Code of
Conduct, I.C.A.C - Guidelines for Managing Risks in Direct Negotiations,
and NSW Government requirements.
Value for money for the proposed acquisition has been assessed using an
independent valuer’s opinion, which advises that the purchase price can
be justified.
Business Plan and Risk Management
A risk management strategy and plan are in place to ensure that the
project risks are identified and that appropriate actions to mitigate risks are
implemented. A business plan structure and key points for consideration has
been developed to guide project governance appropriately, and create a
framework within which time, cost, quality and value are appropriately
managed. The business plan will be detailed as the project moves into its
inception and subsequent phases.
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INTRODUCTION
This Capital Expenditure Review (CER) has been prepared in response to Ku-
ring-gai Council’s (Council) proposal to acquire new premises. The proposal
includes the acquisition of the ground lease and improvements of 828
Pacific Highway Gordon and the relocation of Council’s administration
functions from 818 Pacific Highway Gordon.
Council owns the freehold of 828 Pacific Highway and has granted a 99
year ground lease over the property which is currently held by GE Real
Estate Investments Australia Pty Ltd, which is the vendor.
The chance to purchase a purpose built office building adjacent to Council
Chambers site is unique and provides a range of opportunities and benefits
including:
site amalgamation;
incorporation into any future Civic Masterplan;
provision of immediate and much needed administration space;
and
supplying a revenue stream from the existing tenancies with access
to additional accommodation space for lease over the medium
term.
Through the new town centres planning process, Council also has an
opportunity to retrieve the certainty of Gordon’s Civic redevelopment and
the development potential to provide a range of community, commercial
and retail facilities. For these reasons, Council is mindful that the proposed
acquisition of 828 Pacific Highway contributes to both short and long term
solutions, along with an opportunity to regain ownership of a strategic land
holding.
PURPOSE OF CER
The purpose of this CER is to:
assist Council’s evaluation of the Project; and
accord with the requirements of the Division of Local Government.
This CER:
outlines the proposed Project;
details the need for the Project;
identifies the options for Project and undertakes a qualitative and
financial evaluation of the options; and
outlines the Project’s implementation and the resources required.
PROJECT OBJECTIVES
Council has the responsibility to its community for the prudent management
of community assets. Therefore the objectives of this Project are to:
identify the issues influencing the Council’s future administration and
operations functions;
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analyse options and determine a preferred option that addresses
Council’s future administration and operations functions; and
facilitate opportunities for Council to pursue other development
opportunities on its own land that may be under-utilised or proposed
for alternative community and civic uses.
METHODOLOGY
This CER has been prepared in accordance with the Division of Local
Government’s Capital Expenditure Guidelines December 2010. In
preparing this CER the following has been undertaken:
an inspection of Council’s current administration and operation
accommodation;
preparation of capital expenditure, repairs and maintenance
estimates for the existing administration building at 818 Pacific
Highway Gordon by SGA Property Consultancy;
space demand analysis of Council’s current and future
administration and operation functions prepared by Woodhead
International;
due diligence of 828 Pacific Highway including:
review of the vendor supplied due diligence documents and
inspection of 828 Pacific Highway;
preparation of valuations of 828 Pacific Highway by BEM Property
Consultants and Valuers; and
preparation of capital expenditure, repairs and maintenance
estimates for 828 Pacific Highway by SGA Property Consultancy;
indicative office space stacking diagram of 828 Pacific Highway for
Council’s administration functions; and
economic comparisons and financial impact are assessment.
This CER has been prepared by Council and Capital Insight Pty Ltd.
NOTIFICATION OF THE DIVISION OF LOCAL GOVERNMENT
Council notified the Division in September 2011 of its intention to undertake
the Project. The following correspondence has been exchanged with the
Division:
letter from Council dated 7 September 2011, outlining the proposed
acquisition; and
letter from the Division dated 16 January 2012, outlining the Capital
Expenditure Review requirements.
This CER will be submitted to the Division of Local Government for its review.
INFORMATION RELIED ON AND REFERENCED
In preparing this CER, Capital Insight has relied on detailed information,
discussions and reports issued by Council and various other enquiries. The
documents listed below are the key documents that have been referred to
or referenced in the production of this report.
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Author Title Date
BEM Property Consultants
and Valuers
Valuation Report 22 July 2011
Vendors Due Diligence
Documents KMC Supplied
Various Files June 2012
SGA Property Consultancy Capex Forecast 828 Pacific
Highway Gordon August 2012
SGA Property Consultancy Capex Forecast 818 Pacific
Highway Gordon August 2012
Woodhead Schedule of Accommodation –
Organisational Summary
3 Sept 2012
Woodhead Stacking Diagram – 828 Pacific
Highway
3 Sept 2012
DesignInc Workspace Upgrade 4 June 2012
Background Information
Supplied by Council
Various files, extracts, letters,
Council minutes.
Various dating
from 1985
Table 1 - Documents Relied On and Referenced
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OUTLINE OF PROPOSED PROJECT
KU-RING-GAI COUNCIL
The Ku-ring-gai Council area is located in Sydney's northern suburbs – about
16 kilometres from the Sydney GPO. The Ku-ring-gai Council area includes
the suburbs of East Killara, East Lindfield, Gordon, Killara, Lindfield, North
Turramurra, North Wahroonga, Pymble, Roseville (part), Roseville Chase,
South Turramurra, St Ives, St Ives Chase, Turramurra, Wahroonga (part),
Warrawee and West Pymble. In 2011, the area had a population of just over
114,000 people.
The Ku-ring-gai Council area is predominantly residential, with significant
areas of parkland and bushland. The Council area encompasses a total
land area of 84 square kilometres, of which a large proportion is National
Park, public park, bushland or reserves. There is very little commercial or
industrial land use.
COUNCIL’S EXISTING ADMINISTRATION BUILDINGS
Council’s current administrative and chambers facility, at 818 Pacific
Highway, Gordon, is located to the west of the Pacific Highway,
approximately 50 metres to the north of Dumaresq Street and the Gordon
Centre. There is a frontage of approximately 40 metres to the Pacific
Highway. Vehicular access to the property is via a lane way leading to the
rear of the building from Dumaresq Street. The site has an approximate land
area of 5,122 sqm.
The eastern part of the building facing the Pacific Highway was originally
constructed in 1928, and subsequently extended to the rear in 1962 and
again in 1983. The building comprises four levels of office accommodation
with a small basement (Level 1) containing archives, electrical plant and
storage rooms. The building has a nett lettable area of approximately 3,600
sqm.
Figure 1 - Council's existing landholding for administration building –defined by red edging
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THE PROJECT
Council intends to purchase the adjacent building at 828 Pacific Highway
and relocate into the new premises:
the administration functions;
the Council chambers; and
other community service functions such as Immunisation and
Citizenship.
Figure 2 – 828 Pacific Highway, Gordon
The property is known as the ‘Sun’ building, and occupies a corner site
having frontages to both the Pacific Highway and McIntyre Street, Gordon.
The land comprises a large allotment which slopes substantially from the
Pacific Highway frontage, to the rear boundary. The property is zoned “B4 –
Local Centre” under Draft Ku-ring-gai Local Environmental Plan (Local
Centres) 2012.
Erected upon the land which has an area of 4,182 sqm, is a commercial
office building comprising five (5) levels of office accommodation that
provides 7,436.4 sqm of net lettable area and four (4) levels of basement
car parking containing a total of 252 car spaces. On a fully leased basis,
BEM Property Consultants note the property is estimated to generate a nett
income of approximately $2.3 million per annum.
The property at 828 Pacific Highway is subject to a ground lease between
Council (landowner) and GE Real Estate Investments Australia Pty Ltd (GE)
as lessee. GE owns the improvements and pays an annual ground rental to
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Council which equates to 17.5% of the property’s annual net profit (revenue
less expenses). The ground lease expires in 2090.
This proposed acquisition represents the surrender of the ground lease and
purchase of the improvements and allows Council to regain control of the
building and consolidate its landholdings into a contiguous area of 12,866
sqm.
THE NEED FOR THE PROJECT
The reasons as to why the Project is being undertaken are discussed in the
section “The Need for the Project”. In summary, Council wishes to
undertake the Project for the following reasons:
to initiate the revitalisation of the Gordon Town Centre of which
Council is a major landholder, and to encourage other landowners
to invest in and improve the town centre;
provide a functional and modern office building that will be fit for
Council’s administrative and operational purposes and provide for
future needs;
to ensure efficient and effective allocation of future capital and
recurrent costs related to its accommodation facility noting its
current accommodation is aged and failing; and
allow consolidation of its land holdings and enable strategic
planning, management and development of its portfolio.
PROJECT OPTIONS
Council has considered and analysed the following options for the Project.
Option Name Details
Base Case
Option
Remain in
existing
building
Council would remain in its current
accommodation. This would require various items of
expenditure to provide for the upgrade and
maintenance of the existing inferior
accommodation and the requirement to deal with
a dysfunctional workplace.
Option 1 Purchase,
relocate and
consolidate at
828 Pacific
Highway
Purchase, relocate and consolidate at 828 Pacific
Highway Gordon all functions, except in the interim,
Customer Service. Consolidate a range of other
community service providers such as Citizenship and
Immunisation. 828 Pacific Highway is a 7,4361 sqm
office premises that requires fit out and minor
capital expenditure prior to relocation.
Option 2 Lease a
premises to
meet Council’s
needs
Lease a modern office building that allows Council
to relocate and consolidate the services. This
scenario has been considered by Council on a
number of occasions, including when Council was
considering the 9-17 Bridge Street acquisitions (see
row below).
Option 3 Purchase
and/or
develop one
A number of potential properties have been
considered for purchase. These alternatives are
▪ 9-11 Bridge St Pymble;
1 Valuation Report, BEM Property Consultants and Valuers, 22 July 2011
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Option Name Details
of a selection
of different
alternative
properties
▪ 15-17 Bridge St Pymble; and
▪ 3 Bridge St Pymble.
Table 2 - Options
PREFERRED OPTION
This CER has considered the Base Case and the three options. Option 1 –
purchase and relocate to 828 Pacific Highway is preferred. A financial
analysis of Option 1 and the Base Case has been presented in the
Economic Comparisons section. A comparison of the Net Present Value
(NPV) of Option 1 and the Base Case is detailed in that section. The analysis
indicates that Option 1 provides the more favourable economic return than
the Base Case.
828 Pacific Highway would provide premises that are suitable for Council’s
new administration function as it will:
provide a modern office building that will be fit for Council’s
administrative purposes;
see Council remain at the geographical heart of its local
government area;
ensure services (administrative and community) remain in the
Gordon Town Centre;
avoid Council spending significant costs on upgrading its current
accommodation;
allow Council to relocate from the existing administrative building.
This land could then be utilised for other strategic or development
purposes; and
allow for the consolidation of Council’s adjacent land assets in
Gordon.
Council’s Space Demands
Spatial needs analysis of Council’s administration and operation functions to
be relocated to 828 Pacific Highway has been undertaken2. The space
analysis is detailed in Appendix 1 – Council’s space demand analysis’, and
is summarised below.
Component Approximate Size Demand
Business Line Areas
Community, corporate, development and
regulation, operations, strategy and environment,
civic, forecast growth, councillors, including
circulation space.
2,623sqm
Support Spaces
Quiet rooms, meeting rooms, training room,
kitchen/breakout rooms, utility/storage, computer
room, comm’s, chambers.
1,011sqm
2 Schedule of Accommodation, Woodhead, 3 September 2012
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Total 3,634sqm
Table 3 - Summary Space Analysis
The analysis is based on the space demands of staff and functional area
needs, for example, Council Chambers and the customer service/public
meeting rooms. The space demands are based on forecast growth to 2030
anticipating an annual growth in staff numbers consistent with forecast
population growth for the Ku-ring-gai LGA of 0.8% per annum.
Appendix 2 – Diagrams for Occupation of 828 Pacific Highway’, provides
diagrams that detail the proposed location of Council’s business groups
and the support functions (for example, meetings rooms and break out
areas) within 828 Pacific Highway.
The space demand analysis and diagrams indicate that:
Council’s administrative functions will fit within 828 Pacific Highway
and that particular functions can be accommodated in
appropriate locations with required adjacencies; and
there would be approximately 3,800 sqm space in the overall
building not initially required by Council of which 2,500 sqm is leased
and 1,300 sqm is available for lease to additional tenants.
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THE NEED FOR THE PROJECT
CAPITAL EXPENDITURE GUIDELINES
The Capital Expenditure Guidelines require the consideration of the
following to demonstrate the need for the project:
relationship between this proposal and Council’s community strategic
plan, delivery program and operational plan:
completion of a business case/feasibility study; and
analysis of community needs/expectations based on community
consultation – show how the proposal addresses specific community
needs and any issues of public access and equity.
Community Strategic Plan
The community strategic plan3 ‘details the aspirations of the community,
elected representatives, and staff within strategies which are guided by
government policy and legislation’. The plan details a number of principle
activities including Civic Leadership and Corporate Services, and Financial
Management.
The vision and objectives for these sections include (paraphrased extracts):
Council is a safe, equitable and appropriately equipped workplace;
Council values its staff, workforce culture, and is conducive to high levels
of innovation, empowerment, motivation and productivity;
95% satisfaction amongst staff;
quality customer service; and
Council is financially sustainable;
This CER demonstrates that the proposed acquisition supports the vision and
objectives by addressing each of the above points. The key needs for the
relocation relate to the efficiency and performance of the existing building
and the risks inherent in remaining in that building, along with the
opportunity presented to consolidate Council’s landholding and provide
future support to the Gordon town centre vision.
Delivery Program and Operational Plan
The Delivery Program and Operational Plan4 provide forward financial
estimates of $23,600,000 for the ‘Council Services Relocation Project’, which
this CER is addressing.
Business Case/Feasibility Study
From a financial feasibility perspective, and using NSW Treasury Guideline
business case principles, the economic comparison between the options,
which is detailed in following sections, demonstrates that the proposal offers
the best long term solution for Council’s required office accommodation.
3 Ku-ring-gai Council, Community Strategic Plan 2030 4 Ku-ring-gai Council, Delivery Program and Operational Plan 2012-2013
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Community Needs
Community consultation regarding the specifics of the proposed acquisition
is discussed under Public Consultation below. The strategic plans referenced
above contain visions and objectives that require Council to provide safe
and equitable access for the community. This proposal enhances those
goals by providing a long-term, stable administration accommodation
solution for Council, and by providing a modern and safe means of
accessing the Council chambers.
ASSET STRATEGY CONSIDERATIONS
For Council to provide the services in the appropriate manner to enable it
to meet its service delivery objectives, the issues associated with the current
office accommodation and their impact on service delivery need to be
considered.
Building Performance and Functionality
Council’s last major office accommodation enhancement was in 1986.
Since this time, Council’s services to the community have changed and
developed. In addition, significant advances in the understanding of office
work behaviour and the design of the office environment have been made.
The current accommodation, when compared to other modern office
environments, is not meeting the needs of the Council and allowing
efficient delivery of its services. Some examples of the Administration
Centre’s deficiencies are described in the table below.
Issues Description
Organisational (Vision /
Values / Profile)
▪ The current physical workspace does not fully support
the Council’s objectives to provide a ‘safe, equitable
and appropriately equipped workplace’.
▪ The current workspace does not offer an environment
that is comparable to the private sector.
▪ In the Workspace Planning report5, staff were quoted
as saying ‘it is in an embarrassing workplace and does
not relate to the demographics the Council
represents’.
Typical Working Floors/
Business Groups
▪ The existing workspace planning and facilities do not
effectively and efficiently support growth.
▪ There is no clear, defined point of entry to the working
areas.
▪ There is no clear, defined circulation through the
working areas. It is difficult to navigate.
▪ There is a variety of workstation systems, task chairs and
meeting room furniture throughout the business groups.
▪ There is a variety of storage systems throughout the
business groups.
▪ There is a variety of work settings, meeting room types
and sizes and support facilities resulting in a diverse
range of workspace densities.
▪ Workspace churn is inefficient.
▪ There are a high proportion of single offices as opposed
to the more modern workspace layouts proven to be
5 DesignInc, Workplace Planning, June 2012
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Issues Description
more effective and productive.
▪ Workspace does not support a future workforce that
seeks more flexible working conditions.
Storage ▪ Storage rooms and areas throughout the building are
not utilised efficiently. Some are underutilised whereas
in other parts of the building there is a lack of storage.
Access ▪ Disabled access to the chambers and the customer
service area is poor.
ESD ▪ 818 Pacific Highway is extremely inefficient in terms of
energy use and air conditioning. Where possible, the
building has been retrofitted, however, due to the
construction of the building, most areas contain old
technology. Energy costs to run the property were
$154,041 in the 2010/2011 financial year with a further
26% increase expected by June 2013. Plans to improve
the functionality of the property’s air conditioning unit/s
will cost in the vicinity of $300,000 and this work will not
improve the life expectancy of the system. Annual
programmed and reactive maintenance of the
Chambers often exceeds $250,000, for the building to
continue in its current state.
Lifecycle Costs ▪ SGA Property has forecast capital expenditure/repairs
maintenance required for 818 Pacific Highway over the
next ten years to be in the order of $4.5million. In
comparison, the same forecast for 828 Pacific Highway
is in the order of $2million.
Table 4 - Existing Building Performance and Functionality
Asset Location
The existing Council facilities are considered to be in an ideal location in the
geographical heart of Council’s area and are efficiently accessible from
the perspective of the community and other stakeholders. The current
location provides high levels of amenity in the form of public transport,
parking and retail. The main road frontage provides community awareness.
By relocating to 828 Pacific Highway these positive locational attributes will
be maintained.
818 Pacific Highway is located on land that is proposed for alternative civic,
community or possibly higher and better commercial/residential uses in
accordance with Council’s masterplan and redevelopment strategy (Draft
LEP Local Centres 2012) for town centre land in Gordon. Relocating and
freeing up land at 818 Pacific Highway will contribute to the revitalisation of
the ‘civic heart’ of the Ku-ring-gai Local Government Area.
Asset Capacity and Utilisation
Issues Description
Amenities and
Facilities / Space
Planning
▪ The public function room at ground floor is tired and
outdated. There appears to be an unrealised
opportunity to utilise the area as a multi-function space
for staff and public.
▪ Dedicated tea-point facilities are small and cramped.
They are insufficient in size/function and quantity.
▪ There is an unrealised opportunity to activate the
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Issues Description
customer and public interface areas adjacent the
main entry point.
▪ The building’s design, a cross like shape, is inefficient in
terms of land use.
▪ There is no space for future growth within the existing
accommodation;
▪ The Division of Local Government reported6 in 2010 that
the ‘quality of the working environment in the Ku-ring-
gai Chambers and Customer Service Centre needs to
be considered by Council in its strategic planning’.
Meeting/Training
Spaces
▪ Typical working floor meeting spaces appear to be
inconsistent in location and insufficient in quantity.
▪ Meeting zones are not quickly locatable. Table 5 - Asset Capacity and Utilisation
6 Promoting Better Practice Program Review Report Ku-ring-gai Council, Division of Local
Government, Jan 2010
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ALTERNATIVES
As previously detailed, there are four alternative strategies for Council.
These are assessed qualitatively in the table below. The base case and
option 1 strategies have been assessed in an economic appraisal in
following sections.
Option Name Assessment
Base Case
Option
Remain in
Existing Building
The previous section, ‘The Need for The Project’,
discusses a number of issues with the existing
administration centre that require attention and
support the case for change. Notwithstanding the
qualitative drivers, it is necessary to consider the ‘do
nothing’ base case in the economic comparison to
provide a baseline for comparing the proposed
option. The base case has been considered in the
detailed economic appraisal.
Option 1 Purchase,
relocate and
consolidate at
828 Pacific
Highway
This option has been considered in “The Need for
the Project’ section of this report in context with its
relationship to and alignment with Council’s
Community Strategic Plan and Delivery Program
and Operational Plan. Further analysis of this option
indicates good support of community needs and
positive attributes in terms of potential building
functionality and performance, maintenance of
positive locational attributes (by being next door to
the existing location) and the capacity to
accommodate long term growth of Council’s
operations and reduce lifecycle expenditure on its
accommodation. This option provides long term
certainty of tenure. Option 1 has been considered
in the detailed economic appraisal.
Option 2 Lease a
premises to
meet Council’s
needs
The considerations for assessing the alternative of
leasing a premises compared to purchase include:
▪ the short term capital cost would be reduced
however, Council would be required to fund a
lease indefinitely without having the property as
an investment asset, which would be an
ongoing liability;
▪ recurrent lease expenditure for a 3,600 sqm
requirement would be significant (in the order of
$1.5m plus per annum) and require funding
every year;
▪ Council has the ability to purchase and relocate
without incurring a long term debt;
▪ Council is a stable organisation with a strong
balance sheet and a high demand for space;
▪ leasing would introduce unnecessary risks of
tenure and flexibility; for example it would be
difficult for Council to incorporate flexible uses
for operational vehicles if the building was
controlled by a landlord;
▪ goodwill may accrue to Council in stability of
tenure and the uncertainty of relocation after
lease expiry could be detrimental;
▪ the ability to secure a large and contiguous
space with the presence of this building in a
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24388 Capital Expenditure Review 17
Option Name Assessment
central location of the Local Government Area
is limited ; and
▪ as property owner, Council can retain control
over tenancies and leasing, with flexibility to
change its floor space demands as needs
evolve over time.
Option 2 has been discounted qualitatively and not
modelled economically.
Option 3 Purchase and
develop a
property at
one of a
selection of
sites.
A number of potential properties have been
considered over the last two years for purchase
including:
▪ 9-11 Bridge St Pymble; the proposed purchase
was intended to provide overflow
accommodation to relieve the pressures being
experienced at 818 Pacific Highway. The
property eventually was sold to another
purchaser.
▪ 15-17 Bridge St Pymble; the proposed purchase
of this site and its amalgamation with 9-11 Bridge
(above) was intended to provide a new
administration and chambers accommodation
for Council through a completely new
development. Development costs including land
acquisition of $27m were considered excessive
by Council and the purchase was not pursued.
▪ 3 Bridge St Pymble; the proposed purchase was
intended to provide overflow accommodation.
Noting that Council’s administrative functions
could become increasingly fragmented through
ongoing property acquisition, the primary
Council facility would remain at 818 Pacific
Highway. An offer was made to purchase this
property but was not accepted and the
property was never sold.
Table 6 - Evaluation of Alternatives
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ECONOMIC IMPLICATIONS
The base case and option 1 have been assessed using NSW Government
economic appraisal methodology. The appraisal considers:
capital costs: the costs associated with acquisition, construction works,
external management, design and relocation costs;
recurrent costs: the ongoing recurrent costs associated with each option
including items such as temporary leasing, building maintenance,
utilities, and operational costs; and
revenues: potential revenues from leases and other sources of income,
and residual asset values at the end of the appraisal period.
The economic appraisal uses cost benefit analysis to model each of the
options (base case and option 1) over a 20 year period. Using appropriate
discount rates to make allowances for cost of funds and risk, the two
options are able to be compared and the most favourable outcome from
an economic perspective can be determined.
The direct financial implications for Council are then extracted and
included in a financial impact assessment to provide a concise depiction of
the costs and funding required for the project.
The economic appraisal is presented at Appendix 3.
CAPITAL COSTS
The capital costs for each option were developed in conjunction with
Council and SGA Property Consultancy to estimate refurbishment, fit out,
project management and relocation costs.
The capital costs are presented in real 2012/13 dollars in a simplified cash
flow table below.
$’000 Base Case Option 1
2012/13 13,349.0 27,168.1
2013/14 542.6 101.6
2014/15 35.5 17.4
2015/16 234.8 858.6
2016/17 1,241.5 388.1
2017/18 to 2021/22 2,093.4 895.0
2022/23 to 2026/27 910.7 605.2
2027/28 to 2031/32 1,059.6 605.2
Capital Costs 15,403.3 28,533.8
Table 7 – Capital cost estimates by option
Base Case (818 Pacific Highway) Capital Costs
Base case capital costs amount to $15.4m over the full appraisal period. The
costs are based on necessary expenditure associated with refurbishing the
existing offices at 818 Pacific Highway, and an opportunity cost as a result
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24388 Capital Expenditure Review 19
of the property remaining underutilised. The itemised costs are detailed
below.
Forecast Capital Refurbishment and Replacement Costs
Based on the identification of existing building concerns, the necessary
refurbishment costs have been forecast for the next decade by SGA
Property Consulting. The level of expenditure changes from year to year,
based on what upgrades are planned. A further 50 percent of the annual
average of the forecast capital costs has been included for the remaining
years in the appraisal period, amounting to $211,918 per annum.
Opportunity Cost
Council offices remaining at their current location is considered a significant
economic opportunity cost as the land can be better utilised serving
alternative functions. The Council has identified the land as the preferred
site for a civic hub, earmarking it for community and cultural spaces,
commercial residential developments and retail outlets in a bid to revamp
the area.
An estimate of $12.9m has been included as a cost for the 5,159 square
metre lot, recognising that current use is not the best use of the land. The
estimate was based on a HillPDA Generic Land Valuations 2009 report citing
a rate for unimproved land value zoned Commercial/Mixed Use of $2,500
per square metre (assuming a rezoning by Council).
Option 1 (828 Pacific Highway) Capital Costs
Capital costs of $26.1m associated with the relocation to 828 Pacific
Highway were included for option 1 relating to acquisition costs,
construction related costs to refurbish the building, fitout and relocation
expenses, project management and contingency costs. The itemised
expenses are detailed below.
Acquisition Costs
An estimated purchase price of $22.2m, being the negotiated cost of
acquisition as disclosed by Council, is included in addition to $100,000 for
consultancy and legal costs. Settlement is scheduled for 1 December 2012,
with essential refurbishment and fitout to begin shortly thereafter. It is
presumed that Council would begin relocating staff to the new premises
early in 2013.
Forecast Capital Refurbishment and Replacement Costs
Based on the identification of essential and desirable building works, the
refurbishment costs have been forecast for the next decade by SGA
Property Consulting. The level of expenditure changes from year to year,
based on what upgrades are planned. A further 50 percent of the annual
average of the forecast capital costs has been included for the remaining
years in the appraisal period, amounting to $121,040 per annum.
Fitout Costs
Estimated fitout costs for the new building were computed using Rider
Levett Bucknall’s 2011 industry standard rate or $1,100 per square metre. The
total cost for fitout is close to $4.0m.
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Contingency
With a relocation and capital expenditure such as this, it is prudent to
include some contingency within the budget to ensure Council is
adequately prepared for potential cost increases. A contingency of 5
percent was included to provide such a buffer, amounting to $206,000.
Relocation Costs
The NSW TAM Guidelines estimate that in 2007 the rate for office
accommodation relocation was $85 per square metre. Using an annual CPI
of 3 percent, the 2012 adjusted rate was computed to be $98.5 per square
metre. This equates to $354,738 for relocation expenses of Council offices.
An overall 3 month fitout and relocation program is assumed, allowing
complete relocation of Council’s offices in 2012/13.
Council PM Costs
An estimated $187,236 is included for Council to manage the project. This
was based on 4 percent of the anticipated refurbishment, fitout,
contingency and relocation costs estimated for 2012/13.
RECURRENT COSTS
The recurrent costs under each option include maintenance, utility, and
lease associated costs. The annual cash flow implications for each option
are as provided in the table below.
$’000 Base Case Option 1
2012/13 829.7 688.1
2013/14 888.3 982.6
2014/15 443.4 992.9
2015/16 753.6 1,021.1
2016/17 1,235.5 1,042.6
2017/18 to 2021/22 3,478.6 5,787.5
2022/23 to 2026/27 3,074.9 6,847.3
2027/28 to 2031/32 3,417.1 8,181.4
Total Recurrent Costs 14,121.1 25,543.6
Table 8 - Recurrent cost estimates by option
Base Case (818 Pacific Highway) Recurrent Costs
The recurrent costs associated with the base case include repairs,
maintenance, operating and utility costs associated with the existing offices
and Council Chambers, as well as temporary lease costs while major
refurbishment is completed.
Temporary Lease Costs
The Council will need to relocate to temporary premises while major capital
refurbishments are undertaken in the existing building. Lease costs were
included for a five year staged program, aligned with the SGA Property
Consulting report’s refurbishment cash-flow timings. The cost was based on
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24388 Capital Expenditure Review 21
$325 per square metre and outgoings of $93.40 per square metre (as per CB
Richard Ellis 2011 estimates).
Major Repairs and Maintenance Costs
Major repairs and maintenance (R&M) costs for the first decade were
estimated by SGA Property Consulting after a review of the existing
premises and essential and desirable costs identified. The level of
expenditure changes from year to year, based on the remaining useful life
of the plant, equipment and building fabric. An annual average was
included for the remaining years of the appraisal, amounting to $94,014 per
annum.
The building is past its economic useful life and incurs significantly higher
costs to ensure it functions at a standard expected by both staff and public
users.
Maintenance, Utility and Other Operating Costs
The existing Council office’s maintenance, utility and other operating costs
were based on actual expenditure levels for the 2011/12 financial year. This
included $164,315 on water and electricity costs, $46,072 on maintenance,
and $167,295 for general operating expenses. The expenditure was
escalated at an assumed CPI of 2.5 percent.
Option 1 (828 Pacific Highway) Recurrent Costs
The recurrent costs associated with option 1 include maintenance and
utility costs associated with the new offices and Council Chambers, and
landlord and lease incentive costs incurred by the Council in relation to the
part leasing of unused space at 828 Pacific Highway. The costs are detailed
below.
Major Repairs and Maintenance Costs
Major repairs and maintenance (R&M) costs for the first decade were
estimated by SGA Property Consulting after a review of the property at 828
Pacific Highway, and essential and desirable costs identified. The level of
expenditure changes from year to year, based on the condition of the
plant, equipment and building fabric. An annual average was included for
the remaining years of the appraisal, amounting to $5,726 per annum.
The existing vacant space, surplus to Council’s requirement at 828 Pacific
Highway, will be leased to third parties, and it is reasonable to assume that
the repairs and maintenance would be covered by the landlord outgoings
discussed below.
Loss of Council Rates
With the proposed purchase of the property at 828 Pacific Highway,
Council will forfeit rates collected from the previous owners and payable to
Council. The value of the loss is estimated at $14,621 in 2013/14, growing to
$26,427 by the end of the appraisal period, assuming valuation growth in
line with the CPI.
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24388 Capital Expenditure Review 22
Maintenance, Utility and Other Operating Costs
The maintenance, utility and other operating costs for 828 Pacific Highway
were as provided by Council, totalling $697,522 for 2012/13. Council would
only be responsible for the proportion of the cost following settlement for
the first year, i.e. seven months.
Council would also be responsible for the operating costs of the existing
Chambers building, however the costs would be significantly lower given
the lessened demand on services and the mothballing of a large proportion
of the offices. The impact is estimated at $285,367 by 2014/15 and is on
average $295,000 per annum for the full appraisal period as there is no
definitive answer on the building’s future.
The full cost in 2014/15 is estimated at $982,889, however this was
proportionately reduced to $636,466 based on potential outgoings charged
to tenants for leased spaces at a rate of $93.40 per square metre, assuming
the building is fully occupied.
Loss of Ground Lease Rental
With the proposed purchase of the building at 828 Pacific Highway, Council
will forfeit the ground lease rental arrangement collected from the previous
owners. The value of the lease is computed at $133,134 per annum based
on an average of the last four years, and is included as a cost for the full
appraisal period. A nil cost is included for the 2012-13 year as the parties
agreed that no rental was payable given the capital work undertaken by
the current building owners.
Rent Abatement
Once relocated, Council will occupy 3,600 square metres of office floor
space. A further 1,330 square metres will remain vacant and presents an
opportunity for Council to lease for future revenue. To ensure that the
Council can locate a tenant, it was considered reasonable that an
incentive such as the rent abatement currently offered to Sara Lee and
North Shore Associates may need to be offered to lock-in longer term lease
agreements.
The Sara Lee annual agreed rent abatement is $78,086, while the North
Shore Associates per annum abatement is $32,422. An equivalent
abatement was estimated for the vacant floors to be leased based on a
median rate, amounting to a further $95,016 per annum. At the end of
each five year rental period, the abatement is conservatively reinstated to
ensure tenancy. The rental on which the abatement is based is increased at
a rate of 2.5 percent per annum and applied annually to the next five year
term.
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24388 Capital Expenditure Review 23
BENEFITS
The benefits under each option include residual values of properties and
lease revenue of the office accommodation and car park. The benefits
associated with each option are summarised in Table 9.
$’000 Base Case Option 1
2012/13 0.0 649.8
2013/14 0.0 714.8
2014/15 0.0 1,570.0
2015/16 0.0 1,745.4
2016/17 0.0 2,700.6
2017/18 to 2021/22 0.0 15,063.6
2022/23 to 2026/27 0.0 18,101.0
2027/28 to 2031/32 9,802.1 36,443.1
Total Benefits 9,802.1 76,988.4
Table 9 - Benefits by option
Base Case (818 Pacific Highway) Benefits
The only benefit associated with the base case is a residual value for the
existing property land value. The building itself will be past its 60 year useful
life at the end of the appraisal period and thus has no remaining assumed
value. Land value does not depreciate and is carried forward to the last
year of the appraisal period. Based on the estimated rates for the current
zoning (as provided by HillPDA 2009), the land is valued at 1,900 per square
metre, which equates to $9.8m.
Option 1 (828 Pacific Highway) Benefits
The benefits identified under Option 1 include lease revenue for office
accommodation and car park spaces, and a residual value at the end of
the appraisal period for the purchased property, as outlined below.
Office Lease Revenue – Part 828 Pacific Highway
The potential revenue from the leasing of unused space at the new offices
should generate $1.3m by 2014/15, allowing some lag time until the space is
fully leased. Based on agreed rates with existing tenants, and estimated
rates for unlet spaces, this revenue is set to increase over the term of the
appraisal period.
Car Park Lease Revenue/Other Income
Similarly, leasing of car park spaces and other potential income associated
with the new premises is estimated to generate $309,629 by 2014/15. Based
on agreed rates with existing tenants, this revenue is set to increase over the
term of the appraisal period.
Residual Value
A residual value for Option 1 was applied to the final year of the appraisal
at a value of $14.6m. The residual was based on a remaining 17 years of
useful life at the end of the appraisal period for the building itself, in addition
to the full estimated current value of the land (at $1,900 per square metre
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24388 Capital Expenditure Review 24
as per HillPDA 2009). The value of the building was calculated on the
purchase price less the estimated value of the land to determine the
current value of the asset constructed in 1989.
ECONOMIC APPRAISAL RESULTS
Net Present Value Results
The economic appraisal of alternative Council office locations reveals that
option 1, relocation to the 828 Pacific Highway property, achieves the
highest and most favourable NPV at negative $7.6m using a 7 percent
discount rate. Although the result represents a net present cost, incremental
to the base case, the result is positive $13.4m, demonstrating significant
longer term value in the relocation of Council offices.
The NPV per dollar invested incremental to the base case is reasonable at
$0.49, as is the benefit to cost ratio which returns a result of 0.81. The overall
results support the relocation of Council offices to 828 Pacific Highway. The
project is estimated to have a 17.7 year payback period.
The table below provides a summary of the economic appraisal results.
Summary Results ($’000) Base Case Option 1
NPV at 7% discount rate -20,953.1 -7,561.8
Rank 2 1
Incremental NPV to Base Case 0.0 13,391.3
NPV per dollar invested -1.32 -0.28
Incremental NPV per dollar
invested N/A 0.49
Benefit-cost ratio 0.11 0.81
Internal Rate of Return N/A 4.2%
Sensitivity to discount rate:
NPV at 4% discount rate -22,346.3 526.5
Rank 2 1
NPV at 10% discount rate -19,594.7 -12,387.6
Rank 2 1
Table 10 – Hills Shire economic appraisal results summary
Sensitivity Analysis - Discount Rates
Testing the results at the recommended discount rates of 4 and 10 percent
demonstrates there was no apparent sensitivity to changes in discount
rates. At the lower 4 percent range, the gap between the options widens
significantly, with the relocation to 828 Pacific Highway remaining preferred
and a positive NPV achieved.
At the higher rate of 10 percent, the rankings remain unchanged, although
the result is closer. The results across a wider range of discount rates are
provided graphically in Figure for each option, illustrating that the two
options do not converge until very high and unrealistic discount rates are
applied.
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Figure 3 – NPV by Option and Discount Rate
Sensitivity Analysis - Capital Costs
The capital costs for option 1 represent a significant investment within this
appraisal. However, the acquisition price has been finalised with a
contractual agreement and is not subject to change. In the interest of a
comprehensive sensitivity analysis, an evaluation has been conducted
based on potential increases or decreases in capital refurbishment and
fitout costs. The overall results indicate no sensitivities as illustrated in the
table below.
Scenario $’000 Base Case Option 1
Plus 20% NPV at 7% discount rate -20,953.1 -8,798.5
Rank 2 1
Plus 10% NPV at 7% discount rate -20,953.1 -8,180.2
Rank 2 1
Minus
10%
NPV at 7% discount rate -20,953.1 -6,943.4
Rank 2 1
Minus
20%
NPV at 7% discount rate -20,953.1 -6,325.0
Rank 2 1
Table 11 – Impact of changes to capital cost estimates
The result of the base case was also tested based on the value used for the
opportunity cost. The test was conducted at 50 percent of the unimproved
land value. Option 1 remains preferred with no sensitivity observed as
illustrated in the table below.
Scenario $’000 Base Case Option 1
Minus
50%
NPV at 7% discount rate -14,926.2 -7,561.8
Rank 2 1
Table 12 – Impact of changes to opportunity cost estimates
-30,000
-25,000
-20,000
-15,000
-10,000
-5,000
0
5,000
10,000
15,000
20,000
25,000
0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% 14%
NP
V (
$0
00
's)
discount rate
Base Case Option 1
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24388 Capital Expenditure Review 26
FINANCIAL IMPACT
Capital Insight has prepared a financial impact statement using the
supporting information provided by external consultants and the economic
appraisal as a basis. This analysis considers actual cash-flows and direct
financial implications for Council.
The financial impact includes estimated interest payable on the line of
credit loan facility which will initially fund the purchase. The interest will
capitalise, such that the amount owing will increase and this amount will be
repaid by sale of indentified surplus properties as these occur, as well as
surplus funds generated by rental income. The interest impact has been
excluded from the economic appraisal in accordance with NSW Treasury
Guidelines for Economic Appraisals tpp07-5.
The financial impact includes proposed sales of Council owned properties
as a funding source for the project. These sales were excluded from the
economic analysis as they are not directly associated with the acquisition of
828 Pacific Highway.
The financial impact also includes an estimated annual depreciation
expense for the new acquired property. This expense is offset once the
proposed Council owned properties are disposed of. Depreciation expense
has not been included in the economic appraisal in accordance with
Government Guidelines.
The financial impact statement reflects a project payback period of just
over six years following the anticipated proceeds of the Council property
disposals and operating surpluses generated by rental income.
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24388 Capital Expenditure Review 27
Table 13 – Financial Impact
FINANCIAL IMPACT STATEMENT
Schedule 1: Financial Impact of Proposal
Kuringai Municipal Council Office Accommodation Relocation
Budget
Year 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19
($’000) ($’000) ($’000) ($’000) ($’000)
RECURRENT
Expenses:
Employee related
1 Other operating costs $301 $586 $586 $604 $615 $649 $678
6 Depreciation expense acquired building $198 $397 $397 $397 $397 $397 $397
Total Expenses (only changes to current
budget reported)$499 $983 $983 $1,001 $1,012 $1,046 $1,075
7 less agency offset depreciation savings $0 $0 $232 $506 $506 $506 $506
Net Expenses $499 $983 $751 $494 $506 $539 $568
2 less Agency revenue $650 $715 $1,570 $1,745 $2,701 $2,799 $2,901
Agency Net Cost Of Services -$150 $268 -$819 -$1,251 -$2,195 -$2,260 -$2,333
Net on-costs to other budget sector
agencies (as per schedule 3)
Total Net Cost of Services (NCS) -$150 $268 -$819 -$1,251 -$2,195 -$2,260 -$2,333
CONSOLIDATED FUND REVENUES
Taxes
Commonwealth Funding
Other (please specify)
Total Consolidated Fund Revenues $0 $0 $0 $0 $0 $0 $0
CAPITAL
3 Capital Expenditure $28,040 $1,749 $1,331 $1,323 $388 $105 $257
4 less Agency offset sav ings (incl. asset sales) $0 $0 $12,274 $13,699 $0 $0 $0
Net Capital Expenditure $28,040 $1,749 -$10,943 -$12,376 $388 $105 $257
Net on-costs to other budget sector
agencies (as per schedule 3)$0 $0 $0 $0 $0 $0 $0
Total Net Capital Expenditure $28,040 $1,749 -$10,943 -$12,376 $388 $105 $257
TOTAL FINANCIAL IMPACT
(NCS + Net Capital expenditure less
Consolidated Fund Revenues)
Funded by:
5 Existing Cash Balances/Loans/Advances $27,889 $2,017 -$11,762 -$13,627 -$1,807 -$2,155 -$2,077
Consolidated Fund
Other (please specify)
Total $27,889 $2,017 -$11,762 -$13,627 -$1,807 -$2,155 -$2,077
Notes
1 Operating costs for the proposed relocation incremental to Council's existing recurrent operational expenditure
2 Potential agency rev enue computed based on office lease, carpark and other income associated with the new property
3
4
5 First year capital to be funded by Council loan drawdown
6 Depreciation expense for the acquired building
7 Depreciation expense sav ed once properties are disposed
$27,889 $2,017 -$11,762 -$13,627 -$1,807
FORWARD ESTIMATES
Other Council owned properties (excluded from the economic appraisal) to be disposed in years 2014/15 and
2015/16 to fund the project
Inclusiv e of estimated interest payable on the loan (excluded from the economic appraisal) which will capitalise such that the amount owing
will increase and this amount will be repaid by sale of the indentified surplus properties as these occur, as well as the operting surplus
generated by rental income. The payback period is 6.27 years
-$2,155 -$2,077
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FUNDING THE PROJECT
Council has resolved to fund the project through the sale of surplus assets
and rental revenue derived for existing and future tenancies. The assets
which have been identified as surplus to Council’s and the community's
needs are minor assets, or were specifically acquired many years ago for
the development of a new administration centre e.g. Culworth Avenue Car
Park. The surplus assets identified for sale are listed below:
2-4 Moree Street, Gordon
2A Park Avenue, Gordon
4 Park Avenue, Gordon
9 Havilah Lane, Lindfield
19 Hughes Place, Lindfield
62 Pacific Highway, Roseville
27 Garrick Road, St Ives
9 Eric Street, Wahroonga
56-58 Koola Avenue, East Killara
97 Babbage Road, Roseville
136A Morris Avenue/Junction Lane, Wahroonga
Edith Street, Pymble (Between 74/76 Bannockburn Road)
57 Merrivale Road, Pymble
6A Peace Avenue, Pymble
Kulgoa Road, Pymble (Adjoining No. 1)
77A Bradfield Road, West Lindfield
Culworth Avenue Car Park, Killara
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PUBLIC CONSULTATION
Council wrote to the Division of Local Government on 7 September 20117 to
provide an overview of the background to the proposed acquisition, the
need for the project and the costs of proceeding. The letter concludes with
a request for advice with respect to the public consultation process
required by the Capital Expenditure Guidelines, which is in conflict with the
requirement to keep the acquisition process confidential.
The Division replied on 16 January 20128 advising that:
if Council had consulted with the community on the need for the
relocation and included the proposal in its Integrated Planning and
Reporting that this goes towards community consultation and detailed
consultation is not required;
the Division recognises the need for confidentiality and therefore the
impediment to providing detail publicly;
Council noted an amount of $10.5m in its Delivery Program and
Operational Plan (DPOP) dated 20 October 2011 but did not discuss the
community consultation undertaken. It was also noted that the $10.5m
amount had now been exceeded; and
Council should ensure that further consultation occurs as subsequent
stages in the project progress, as was intended by the report to Council
dated 27 July 2011.
Given that the property contract settlement is proposed in the 2012/2013
financial year, the project has been included in the DPOP 2012/2013. The
most recent DPOP supersedes the plan available at the time of writing to
the Division and the $10.5m amount has been increased to $23.6m in the
2012/2013 DPOP. This received media publicity when the DPOP was placed
on public exhibition. Council did not receive any submissions on the project
identified in the 2012/2013 DPOP. On several occasions, Council has
resolved to commit to open and transparent community consultation post
acquisition, especially as partial funding of the acquisition is proposed
through asset sales, extensive community consultation would be
undertaken at the LEP (s) for the rezoning and reclassification of identified
lands to Operational status and 818 Pacific Highway’s civic master planning
process. A Community Consultation Strategy has been developed for this
purpose and is attached as Appendix 4.
7 Ku-ring-gai Council, Letter to Division of Local Government Ref S08130/2011/19300, 7 Sept
2011 8 Division of Local Government, Letter to Ku-ring-gai Council Ref A258740, 10 Jan 2012
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BUSINESS PLAN
OBJECTIVES
The Project is to be executed in several parts (as listed below) with separate
objectives for each:
acquisition of property;
management of capital works to 828 Pacific Highway;
relocation of Council administration staff; and
implementing a management plan for the existing administration
building and customer service area.
The objectives will be developed in detail during the project inception
period and will include the following themes:
risk management;
time management;
budget control;
occupational health and safety standards; and
community needs and objectives.
PROJECT GOVERNANCE
Council has in place a Project Control Group (PCG) that meets monthly or
as required on all major projects. The PCG reports to the General Manager
and is comprised of Directors, Section Managers, Project Managers,
technical staff and consultants. The role of the PCG is to provide further
assurance that Council projects are delivered to the high standards
expected by the community and stakeholder groups and are managed in
conformance with best practice, legislation and policy applying to Council.
The table below indicates the entities and relationships that exist between
the entities. The structure is put in place to ensure that the key objectives of
the Project are executed
Entity Responsibility Description
Council Responsible to the
community
Councillors
Control Group Reports to the General
Manager
Responsible for the
management of each
phase of the project
and to meet the stated
objectives.
chaired by the General
Manager;
membership to consist of
Directors and Manager,
Strategic Assets & Property;
external consultants and
internal managers are
invited as and if required.
External Consultants
and Contractors
External consultants and
contractors will be
procured as required to
provide required expertise
and personnel.
Table 14 - Project Governance
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The following systems, processes and plans have been implemented for the
management of the Project:
risk management plan pursuant to AS/NZS ISO 31000 Risk Management –
Principles and Guidelines;
quality management system pursuant to ISO 9001; and
a regular internal systems audit will be conducted as required.
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RISK MANAGEMENT
INTRODUCTION
Risk Management is critical to Ku-ring-gai Council’s ability to achieve the
Strategic Objectives contained in its Community Strategic Plan and Delivery
Program and Operational Plan. The Council has limited human, financial
and material resources. Prudent decision making in relation to their use is
critical to the Council’s achievement of its endorsed vision of ‘Ku-ring-gai
will be a creative, healthy and liveable place where people respect each
other, conserve the magnificent environment and society for the children
and grandchildren of the future’.
To this end, not only must Council staff and consultants identify and
minimise threats to the safe and effective employment of Council
resources, they also have an obligation to identify and exploit opportunities
to make that employment more efficient. Fostering an active Risk
Management culture, that seeks to encourage all staff/consultants to
systematically apply the principles and procedures outlined in this strategy,
will assist the Council to:
minimise resource waste;
protect the long term value of its assets; and
ensure that all Council events, activities and projects are undertaken
with minimal risk to staff and the general public.
STATEMENT OF COMMITMENT
In recent years, Council has adopted a risk management strategy and
policy and procedures which demonstrate the Council’s commitment to
proactive risk management. Ku-ring-gai Council is committed to managing
this risk by putting in place robust systems, procedures, tools and training to
assist personnel to logically and systematically implement risk management
principles & practices.
The major risk for most organisations is that they fail (or are perceived to
have failed) to achieve their strategic, business or project objectives by
their stakeholders. The objective of the risk management system is to
actively identify, analyse, evaluate, treat, monitor and communicate all risks
that directly or indirectly impact on the Council’s ability to achieve the
vision and strategic objectives outlined in the Community Strategic Plan.
The Risk Management framework defines the risk management
responsibilities of all ‘personnel’ (staff members, contractors, committees
and volunteers) engaged in Council business. The Council believes that
good Risk Management is essential for the successful implementation of the
Community Strategic Plan, as it:
directly supports the achievement of Strategic Objective – Good
Governance
indirectly supports the achievement of the Council’s other strategic
objectives, through:
facilitating innovation, cooperation and the sharing of resources,
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enhancing the development and delivery of Council programs,
supporting the Council’s key values and ethics,
encouraging a closer working partnership between the Council
and the community,
ensuring consultation with all Stakeholders on key issues,
encouraging a proactive approach to problem solving.
SCOPE
This Risk Management Strategy will be implemented by all Council
departments and across all Council services, functions and activities,
whether directly controlled by Council or delivered through third party
arrangements. All employees, contractors, partner organisations and
volunteers engaged in the conduct of Council business are to apply
consistent, proactive and systematic risk management practices in the
employment of Council resources and the delivery of Council services.
Successful Risk Management relies on input from all stakeholders and
ownership of identified risks by responsible staff. To manage risks in
accordance with best practice, the Council will observe the principles
contained in AS/NZS ISO 31000 Risk Management – Principles and
Guidelines. Council’s established business practices, policies and
procedures will be reviewed, to assist in the consistent implementation of
the risk management strategy.
STRATEGY PRINCIPLES
The principles of the Strategy are to identify, evaluate and prioritise the
Council’s risk, associated opportunities and threats, with a view to:
exploring opportunities for improvements, and
reducing, mitigating, transferring or eliminating threats.
protecting the Council’s corporate image as a professional, responsible
and ethical organisation and an employer of choice;
ensuring that the organisation's culture and risk management policy are
aligned;
determining risk management performance indicators that align with
performance indicators of the organization;
aligning risk management objectives with the objectives and strategies
of the organisation;
ensuring legal and regulatory compliance;
assigning accountabilities and responsibilities at appropriate levels within
the organisation;
ensuring that the necessary resources are allocated to risk
management;
communicating the benefits of risk management to all stakeholders;
recognising that successful risk management relies on input from all
employees and stakeholders; and
ensuring that the framework for managing risk continues to remain
appropriate.
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RISK MANAGEMENT REQUIREMENTS AND PROCEDURES
Risk Management principles shall be a consideration in all Council decision
making processes. In accordance with its common law ‘duty of care’,
statutory responsibilities and Council Policy, the Council will ensure that
resources are allocated to:
minimise the Council’s exposure to loss and litigation;
protect and enhance the Council’s reputation;
protect the Council’s financial and physical assets; and
maintain ‘personnel’ Health & Safety programs.
In order to manage these processes, there is a Risk Management
Coordinator whose role is to act as a resource to the Executive
Management Team, reporting through the Finance Manager. The purpose
of this role is to:
coordinate risk management information flows vertically and horizontally
across the organisation;
compile and maintain the risk management manual which shall be used
as a reference by all stakeholders in the risk management function;
compile and maintain the Council’s risk register as a controlled
document and coordinate its regular review and amendment
according to authorized procedure;
coordinate the provision of risk management training to the
organization; and
coordinate and maintain the Risk Management Improvement Plan
RESPONSIBILITIES
All employees, contractors and volunteers are to be familiar with and
competent in the application of the Council’s risk management policy and
strategy. The Council, General Manager, Directors, Managers and
supervisors are accountable for adherence to this strategy within their areas
of responsibility. Detailed responsibilities are listed in the Risk Management
Procedure.
RISK MANAGEMENT PROCEDURE
The Risk Management procedure to be applied within the Ku-ring-gai
Council is based on AS/NZS ISO 31000 Risk Management – Principles and
Guidelines. A copy of this procedure is provided at Appendix 5.
PERFORMANCE REVIEW
The risk strategy is reviewed on an annual basis by Council’s Audit
Committee, to ensure its continued suitability and effectiveness against the
requirements of AS/NZS ISO 31000 Risk Management – Principles and
Guidelines and Council’s Risk Management Policy. Records of such reviews
are to be maintained on file. The risk management responsibilities detailed
in the Risk Management Procedure are incorporated into all Council
Position Descriptions and the performance measures developed for all staff
are to form the basis of annual performance appraisals.
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RISK ASSESSMENT
Council has completed a risk assessment, which defines appropriate risk
management actions for significant risks in relation to the acquisition of 828
Pacific Highway. Key risks have been identified in the areas of:
strategy, for example, risk to corporate objective achievement;
people, for example, staff morale or satisfaction;
compliance, for example, with the Community Strategic Plan;
environment, for example reduced resource usage;
operational, for example, borrowing costs; and
financial, for example, failure to divest specific assets to fund the
purchase.
The risk assessment is presented as Appendix 6.
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PROBITY
OBJECTIVES
1. COUNCIL APPROVAL
A. To ensure detailed information and financial analysis is
provided to enable the Council to assess the options with a view to
determining the preferred option in accordance with the Local
Government Act 1993.
B. To obtain relevant delegations to enable direct negotiations
and due diligence to proceed within the delegation framework.
2. DIRECT NEGOTIATIONS WITH VENDOR
A. To ensure that negotiations are carried out in a transparent
and accountable manner and accord with Council’s resolution and
delegations.
B. To ensure that negotiations are carried out in a transparent
and accountable manner and accord with Acquisition & Divestment of
Land Policy 2009, and I.C.A.C-Guidelines for Managing Risks in Direct
Negotiations.
3. DUE DILIGENCE STAGE
A. To develop and document due diligence requirements to be
completed as resolved by Council.
B. To ensure that the engagement of prospective consultants
undertaking due diligence required by the Council are experienced,
capable and can complete the body of work within specified timeframes.
C. To ensure that the due diligence information is robust and
enables Council to assess the impacts with a view to determining to
proceed with the purchase.
4. CONTRACT STAGE
A. To ensure that contract documentation is accurate and
reflects the requirements resolved by Council and negotiated under
delegation.
B. To ensure that the contractual terms and conditions
documented protect Council’s interest.
5. TENDER STAGE
A. To ensure that the design and refurbishment tender process
is transparently fair to the tenderers.
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B. To ensure that the contract arising from the tender process is
consistent with the requirements of Local Government Act & Regulations,
Council Procurement Process and provides value for money.
6. REPORTING STAGE
A. To report to stakeholders at relevant stages in the project on
the fulfilment, or otherwise, of the requirements of this Probity Plan.
EXECUTION OF THE PROBITY PLAN
(Note: References are to the Objectives set out in the Plan above)
1. COUNCIL APPROVAL
A. and B. • Since 2010, Council has considered a number
of reports on the acquisition of property for the relocation of administration
services. Information provided to Council has included strategic and
financial justification to support the acquisition. Briefing sessions and
workshops were held with Councillors to ensure all elements of the
proposed acquisition were clearly articulated.
A series of investigations were completed to understand organisational
needs in terms of accommodation and service delivery. Detailed
information and financial analysis was provided to enable the Council to
assess the options with a view to determining the preferred options in
accordance with Local Government Act 1993. Council resolution has been
obtained which delegated authority to the General Manager and Mayor to
enter into negotiations in line with Council’s objectives.
B. • Pre-purchase information investigations in
accordance with adopted Acquisition & Divestment of Land Policy
reported to Council to establish delegations and limitations.
2. DIRECT NEGOTIATIONS WITH VENDOR
A. and B • All negotiation meetings were conducted
with a minimum of two (2) Council staff in attendance and one being a
Director. All minutes arising from meetings are distributed to each party to
confirm accuracy and then recorded in Council’s electronic records
management system.
Negotiated purchase price within Council’s resolution.
3. DUE DILIGENCE STAGE
A. • Due Diligence documentation drafted to reflect
Council’s resolution. Draft Due Diligence documentation prepared by
Council’s solicitors. Draft Due Diligence documentation and proposed
process reported to General Managers and Directors Group. Final Due
Diligence documents executed by General Manager.
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B • Legal and building condition and service due
diligence undertaken by independent consultants. Council’s procurement
processes observed for the engagement of independent advice.
Ensure that consultants have no bias or conflict of interest.
C • Legal Due Diligence completed on current and
proposed leases, status of Bank Guarantees and securities, service
agreements for plant and equipment and accuracy of rental information,
accrued debtors and undisclosed abatements. Building condition and
service due diligence reports peer reviewed. Due Diligence Reports and
information utilised to improve asset and financial information and establish
baseline for further negotiations in line with Council’s adopted position. Due
Diligence information incorporated into Council’s Capital Expenditure
Review.
4. CONTRACT STAGE
A. • Ensure that contractual information reflects
negotiated positions and accord with Council’s resolution. Contract
executed in accordance with Council’s delegations.
B. • Draft contract prepared by Council’s solicitors. Ensure
that contract documentation is reviewed by technical staff for accuracy of
terms and conditions.
5. THE TENDER STAGE
A. • Review tender documentation and proposed
process.
• Review criteria for selection of preferred proponent.
• Ensure that all tenders are received at one place and
that each tender received is recorded and assessed; normally tenders will
be required to be lodged in Council’s tender box and/or via Tenderlink by a
closing date and opened, and recorded, immediately following the closing
time on the closing date.
• Ensure that non-conforming tenders are included or
excluded from the assessment depending upon the conditions of tender.
• Ensure that the formalities of the tender are adhered
to, eg, execution of contracts and payment of initial deposit.
• Review outcome before final decision to ensure
selection can be justified on the stated criteria.
B. • Review the fundamental terms of the actual contract
to ensure conformity with the proposed contract as proposed in the tender
documentation.
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6. REPORTING STAGE
A. • Report to the General Manager any matter
considered to be a probity failure in any processes where such failure has
not been remedied in consultation with relevant persons. Report to the
General Manager at the end of the various stages of the process,
confirming or otherwise, fulfilment of probity requirements. Prepare and
submit to the General Manager, if required, a Public Information Document
at the conclusion of the task reporting generally on the processes by which
the project has progressed to conclusion from a probity perspective. The
purpose of such document will be to ensure that one document
encompasses all relevant probity matters in relation to the project, as
performed.
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TENDER EVALUATION AND VALUE FOR MONEY
The Project is to be procured in a number phases with different
methodologies, all of which must satisfy the requirements of:
Tendering Guidelines for Local Government, October 2009;
Local Government (General) Regulation 2005;
Local Government Act 1993;
NSW Government procurement Guidelines, December 2011; and
Council’s Acquisition and Divestment of Land Policy, 2009.
TENDERING
Transaction Tendering Methodology
Acquisition of 828 Pacific Highway Refer below.
Service Providers for capital
expenditure works and/or office fitout
works to 828 Pacific Highway
Service providers are proposed to be
procured pursuant to the guidelines
outlined above.
Service Providers for relocation of
Council Administration
Service providers are proposed to be
procured pursuant to the guidelines
outlined above.
Table 15 - Procurement Methodologies
ACQUISITION OF 828 PACIFIC HIGHWAY
The proposed acquisition is being assessed as a single sourced opportunity.
Council has assessed the acquisition plus other associated costs against the
market for similar space and determined that the proposal represents
appropriate value.
The methodology that has been implemented is:
obtain an independent valuation;
negotiate a property acquisition price subject to due diligence and
appropriate authorisations;
enter into an exclusivity agreement at no cost to allow time to
adequately assess the property and obtain authorisations;
commission a comprehensive report into the integrity of the building
and an expert opinion of the full extent of costs; and
compare the valuation advice against the purchase price to determine
whether or not the transaction represents good value for money.
Agreed Commercial Terms
Council’s agreed commercial terms are:
purchase price $22.2million + GST;
formal exchange - 1/10/2012 with 10% deposit; and
settlement - 1/12/2012 balance of monies and possession.
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Assessment of Price
BEM Property Consultants and Valuers9 provided a market valuation report.
The valuation report advises three different bases of valuation as outlined in
the table below. All figures exclude GST.
Valuation Methodology Value Agreed Terms vs
Valuation
1. Current Market Value excluding
Ground Lease
The first method for this basis
determines the net income from the
building after outgoings, capitalises
that amount using a rate of 9.5%,
adjusts for rental overs or shortfalls,
and reduces by leasing up costs for
the empty space.
The second method uses the direct
comparison approach. A number of
comparable office buildings were
reviewed throughout the North
Shore railway corridor. Comparisons
were made for similar standard
buildings on a price per square
metre comparison basis.
$21,570,000 +$630,000
2. Current Market Value including
the obligation to pay the
Ground Lease
This method uses the same method
as basis 1, however reduces the
values by the net present value of
Council’s interest in the ground
lease.
$18.430,000 +$3,770,000
3. Special Value to Ku-ring-gai
Council as adjoining landowner.
This method considers the value to
Council in strategically being in a
position to consolidate land, and the
ability to relocate to a superior
building in the preferred location of
Gordon Town Centre.
$20,275,000 to
$21,200,000
+$1,925,000 to
+$1,000,000
Table 16 – Valuation Methodology
The most directly relevant valuation for the current situation is basis 3
because it considers Council’s foregone asset value for the ground lease
and it also considers the added value to Council in purchasing an adjacent
property.
Compared to the valuation, the purchase price represents a premium of
between 5% and 10%. The valuation report advises that this is a commercial
decision for the purchaser to decide. In terms of the procurement
requirements of the Capital Expenditure Guidelines, Council considers that
9 Valuation Report, BEM Property Consultants and Valuers, 22 July 2011
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the 5% to 10% premium on the valuation is a fair and reasonable price to
pay considering that:
Council approved a report dated 3 November 2011, that tabled a
purchase price of up to $25.0m;
the proposal represents a unique opportunity to resolve Council’s
accommodation needs and to maintain Council’s administration base
at Gordon, which is the civic heart of the LGA; and
the proposal allows Council latitude to redevelop, sell or otherwise, the
land occupied by the existing administration building in support of the
Gordon Town Centre strategy.
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REPORTING
The reporting mechanisms for the Project will ensure that the decision
making is accountable to Council and the community. The following
reporting requirements will be implemented:
quarterly reporting to Council detailing the progress on the Project and
covering issues including time, cost, quality, design, risks and issues;
quarterly reporting of budget variances and issues to Council;
maintaining and updating the Project in Council’s budget and financial
reports; and
reporting on the Project in Council’s DPOP and annual report; and
notifying the Division of Local Government in respect of any major issues
such as cost increases over 10%.
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DISCLAIMER
This report is furnished without liability on the part of Capital Insight, its
employees or representatives. In preparing this document Capital Insight
has relied upon information conveyed to it by third parties and Capital
Insight has not verified the accuracy of that information. Whilst Capital
Insight has no knowledge that any information contained in this report is
incorrect at the time of writing, no statement or information contained in
this document should be relied upon unless the person satisfies themselves
by inspection or otherwise as to the correctness of the statement or
information.
This report is for the confidential use only of the party to whom it is
addressed (the client) for the specific purposes to which it refers. We
disclaim any responsibility to any third party acting upon or using the whole
or part of its contents or reference thereto that may be published in any
document, statement or circular or in any communication with third parties
without prior written approval of the form and content in which it will
appear.
While all due care has been taken by the authors to prepare the attached
financial models and projections from the best information available at the
time of writing, it has been necessary to make various assumptions and rely
on verbal and sometimes unverifiable information. No responsibility can be
taken for errors or inaccuracies that may have occurred both with the
programming or the financial projections and their assumptions.
This report itself does not constitute a valuation of any property or interest in
property. In preparing this report we have relied upon information
concerning the subject property and/or proposed development provided
by the client and we have not independently verified this information
excepted where noted in this report.
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APPENDIX 1 – COUNCIL’S SPACE DEMAND ANALYSIS
Project Name: Ku-ring-gai Council
Project No: 12207002
Issue: C
Issue Date: 03/09/12
Comment: For Approval
SCHEDULE of ACCOMMODATION - ORGANISATION SUMMARY
ORGANISATIONAL TOTAL 3634
Space Ratio : 14 Sqm/Person
(Space ratio does not include any Additional Spaces
BUSINESS LINE AREAS NUMBERS OF STAFF
PERSONNEL AREA UNIQUE FACILITIES
CLIENT FILE STORAGE
TOTAL AREA inc. CIRCULATION
sqm sqm sqm sqm
SPACE RATIO
sqm/pers
Community 51 240.3 12.8427 350 7
Corporate 49 372.6 80.7733.12 608 12
Development & Regulation 58 315.36 75.399 612 11
Operations 3 21.96 00 27 9
Strategy & Environment 40 222.12 32.2581 419 10
Civic 10 95.76 09 131 13
Forecast Staff & Support Space Growth 38 171 12.6111.42 369 10
Councillors 2 40 045 106 53
TOTALS 251 1479.1 405.54 213.76 2623 10
SUPPORT SPACES NUMBER OF FACILITIES
SIZE NET AREA TOTAL AREA (inc. CIRCULATION
sqm sqm sqm
COMMENTS
Quiet Room - 2 person 8 6.48 51.84 653.6 x 1.8m - 4 per floor
Meeting Room - 4-6 person 4 12.96 51.84 653.6 x 3.6m - 2 per floor
Meeting Room - 10 person 2 18.9 37.8 473.6 x 5.4m - 1 per floor
Meeting Room - 16 person 2 38.88 77.76 975.4 x 7.2m - 1 per whole floor
Training Room 1 80 80 100
Kitchen / Breakout / Informal Meeting 2 90 180 2251 per floor
Utility / Storage 4 12.6 50.4 633.0 x 4.2m - 2 per floor
Computer / Server Room 1 70 70 88Approximate size of proposed building's existing raised access floor area
Floor by Floor Comms / Patch Rooms 1 9 9 111 per floor
Council Chambers 1 125 125 156
Chambers' Ante Room 1 55 55 69
Chambers' Kitchen 1 20 20 25
1011808.64
ADDITIONAL SPACESNot included in Space Ratio
NUMBER OF FACILITIES
SIZE NET AREA TOTAL AREA (inc. CIRCULATION
sqm sqm sqm
COMMENTS
Nil 0 0 0 0
00
Project Name: Ku-ring-gai Council
Project No: 12207002
Issue: C
Issue Date: 03/09/12
Comment: For Approval
CommunityCommunityCommunityCommunity
Principal Business of Business Unit
Key Location Factors within the Building
Public Access for Customer Services
SCHEDULE OF ACCOMMODATION - by WORKGROUP
Person (s) Interviewed:
Date Interviewed:
POSITION
OCCUPANT
WORKSTYLE STAFF NUMBERS AREA ALLOWED TOTAL COMMENTS
A B C D E
Customer Services 10 To remain in current building
Call Centre WS1 6 4.5 27
Family Day Care OF1 6 12.96 77.76
Youth Services WS3 4 3.24 12.96
Child Services WS3 2 3.24 6.48
Director & Assistant WS2 2 8.64 17.28
Aged Care WS3 4 3.24 12.96
Events WS3 6 3.24 19.44
Administration WS1 6 4.5 27
Media & Communications OF1 2 12.96 25.92
Media & Communications WS1 3 4.5 13.5
51STAFF NUMBERS TOTAL
STAFF AREA TOTAL 240.3
FILE STORAGE FACILITIES SIZE QUANTITY FACILTY AREA TOTAL COMMENTS
Communications 1 1.5 6.3Lm could be culled1.5
Media Relations 1 0.3 0.3
Media Communications Store 1 4.62 4.62
Cabinets 2 0.45 0.9
Cultural Devlopment Central Storage 1 4.62 4.62
Business Unit ADJACENT SAME FLOOR NEXT FLOOR SEPARATED COMMENTS
Library No Yes Yes No
Civic No Yes Yes No
Corporate No Yes Yes No
Strategy & Environment Yes No No No
Operation Yes No No No
Project Name: Ku-ring-gai Council
Project No: 12207002
Issue: C
Issue Date: 03/09/12
Comment: For Approval
Leisure & Cultural Development 2 0.45 0.9
TOTAL 12.84
UNIQUE FACILITIES SIZE QUANTITY FACILTY AREA TOTAL COMMENTS
Group Processes & Knowledge Sharing 3 9 27 Youth Services, Child Services, Administration
UNIQUE FACILITIES TOTAL 27
39.84BUSINESS LINE FACILITIES TOTAL
TOTAL BUSINESS LINE AREA 280.14
INCLUDING CIRCULATION70
TOTAL BUSINESS LINE AREA 350
Project Name: Ku-ring-gai Council
Project No: 12207002
Issue: C
Issue Date: 03/09/12
Comment: For Approval
CorporateCorporateCorporateCorporate
Principal Business of Business Unit
Key Location Factors within the Building
SCHEDULE OF ACCOMMODATION - by WORKGROUP
Person (s) Interviewed:
Date Interviewed:
POSITION
OCCUPANT
WORKSTYLE STAFF NUMBERS AREA ALLOWED TOTAL COMMENTS
A B C D E
Finance OF1 6 12.96 77.76
Finance WS1 12 4.5 54
Director & Assistant WS2 2 8.64 17.28
Lands Info OF1 3 12.96 38.88
HR OF1 6 12.96 77.76
Records WS1 8 4.5 36
Governance WS1 6 4.5 27
IT OF1 2 12.96 25.92
IT WS1 4 4.5 18
49STAFF NUMBERS TOTAL
STAFF AREA TOTAL 372.6
FILE STORAGE FACILITIES SIZE QUANTITY FACILTY AREA TOTAL COMMENTS
Records Basement Storage 0 0 Basement Storage so not in NLA0
Archive Compactus 1 12.4 x 2.7 1 33.6 33.6
Archive Compactus 2 5.9 x 0.9 1 5.31 5.31
Archive Compactus 3 4.3 x .76 1 3.3 3.3
Legal & Strong Room 1 7.56 7.56
Records Compactus 3.3 x 0.9 2 2.97 5.94
Records Central Storage 1 2.6 2.6
IT Store 1 7.56 7.56
Business Unit ADJACENT SAME FLOOR NEXT FLOOR SEPARATED COMMENTS
Civic No No Yes No
Library No No Yes No
Strategy & Environment No No Yes No
Development & Regulation Yes No No No
Project Name: Ku-ring-gai Council
Project No: 12207002
Issue: C
Issue Date: 03/09/12
Comment: For Approval
Finance Storage 1 12 12
Facilities Storage 1 0.4 Storeroom TBC0.4
GIS Storage 1 2.5 2.5
TOTAL 80.77
UNIQUE FACILITIES SIZE QUANTITY FACILTY AREA TOTAL COMMENTS
Group Processes & Knowledge Sharing 1 9 9
Mailing Room 1 7.56 7.56
Records Trolley Area 1 7.56 7.56
Finance Sorting Area 1 9 9
UNIQUE FACILITIES TOTAL 33.12
113.89BUSINESS LINE FACILITIES TOTAL
TOTAL BUSINESS LINE AREA 486.49
INCLUDING CIRCULATION122
TOTAL BUSINESS LINE AREA 608
Project Name: Ku-ring-gai Council
Project No: 12207002
Issue: C
Issue Date: 03/09/12
Comment: For Approval
Development & RegulationDevelopment & RegulationDevelopment & RegulationDevelopment & Regulation
Principal Business of Business Unit
Key Location Factors within the Building
SCHEDULE OF ACCOMMODATION - by WORKGROUP
Person (s) Interviewed:
Date Interviewed:
POSITION
OCCUPANT
WORKSTYLE STAFF NUMBERS AREA ALLOWED TOTAL COMMENTS
A B C D E
Individual Offices OF1 12 12.96 155.52
Director & Assistant WS2 2 8.64 17.28
Social Dens WS3 44 3.24 142.56
58STAFF NUMBERS TOTAL
STAFF AREA TOTAL 315.36
FILE STORAGE FACILITIES SIZE QUANTITY FACILTY AREA TOTAL COMMENTS
Central Storage 1 50 50
Assessment Storage 1 14.4 14.4
Director Development & Regulation 1 2.7 2.7
Director Development & Assessment 1 2.7 2.7
Ranger Lockers 44 0.125 5.5
TOTAL 75.3
UNIQUE FACILITIES SIZE QUANTITY FACILTY AREA TOTAL COMMENTS
Group Processes & Knowledge Sharing 6 9 54
Collaborative Club 1 45 45
UNIQUE FACILITIES TOTAL 99
Business Unit ADJACENT SAME FLOOR NEXT FLOOR SEPARATED COMMENTS
Rangers No No Yes No
Technical No Yes No No
Corporate Yes No No No
174.3BUSINESS LINE FACILITIES TOTAL
TOTAL BUSINESS LINE AREA 489.66
INCLUDING CIRCULATION122
TOTAL BUSINESS LINE AREA 612
Project Name: Ku-ring-gai Council
Project No: 12207002
Issue: C
Issue Date: 03/09/12
Comment: For Approval
OperationsOperationsOperationsOperations
Principal Business of Business Unit
Key Location Factors within the Building
SCHEDULE OF ACCOMMODATION - by WORKGROUP
Person (s) Interviewed:
Date Interviewed:
POSITION
OCCUPANT
WORKSTYLE STAFF NUMBERS AREA ALLOWED TOTAL COMMENTS
A B C D E
Director - Visiting Office OF1 1 12.96 12.96
Individual Hives WS1 2 4.5 9
3STAFF NUMBERS TOTAL
STAFF AREA TOTAL 21.96
FILE STORAGE FACILITIES SIZE QUANTITY FACILTY AREA TOTAL COMMENTS
Nil 0 0 0
TOTAL 0
UNIQUE FACILITIES SIZE QUANTITY FACILTY AREA TOTAL COMMENTS
Nil 0 0 0
UNIQUE FACILITIES TOTAL 0
Business Unit ADJACENT SAME FLOOR NEXT FLOOR SEPARATED COMMENTS
Depot No No Yes No
Community No Yes No No
Technical Yes No No No
Strategy & Environment Yes No No No
0BUSINESS LINE FACILITIES TOTAL
TOTAL BUSINESS LINE AREA 21.96
INCLUDING CIRCULATION5
TOTAL BUSINESS LINE AREA 27
Project Name: Ku-ring-gai Council
Project No: 12207002
Issue: C
Issue Date: 03/09/12
Comment: For Approval
Strategy & EnvironmentStrategy & EnvironmentStrategy & EnvironmentStrategy & Environment
Principal Business of Business Unit
Key Location Factors within the Building
SCHEDULE OF ACCOMMODATION - by WORKGROUP
Person (s) Interviewed:
Date Interviewed:
POSITION
OCCUPANT
WORKSTYLE STAFF NUMBERS AREA ALLOWED TOTAL COMMENTS
A B C D E
Individual Offices OF1 4 12.96 51.84
Director & Assistant WS2 2 8.64 17.28
Social Den WS1 34 4.5 153
40STAFF NUMBERS TOTAL
STAFF AREA TOTAL 222.12
FILE STORAGE FACILITIES SIZE QUANTITY FACILTY AREA TOTAL COMMENTS
Urban Planning Storage 1 3.7 3.7
Strategic Planning Storage 1 4 4
Strategy & Environment Storage 1 12.5 12.5
Central Library 1 3.65 3.65
Strategy & Environment Lockers 40 0.125 5
IPA Storage 1 3.4 3.4
TOTAL 32.25
UNIQUE FACILITIES SIZE QUANTITY FACILTY AREA TOTAL COMMENTS
Group Processes & Knowledge Sharing 3 9 27
Collaborative Club 1 45 45
Drawing Tables 3 3 9
UNIQUE FACILITIES TOTAL 81
Business Unit ADJACENT SAME FLOOR NEXT FLOOR SEPARATED COMMENTS
Corporate No No Yes No
Operations Yes No No No
Project Name: Ku-ring-gai Council
Project No: 12207002
Issue: C
Issue Date: 03/09/12
Comment: For Approval
113.25BUSINESS LINE FACILITIES TOTAL
TOTAL BUSINESS LINE AREA 335.37
INCLUDING CIRCULATION84
TOTAL BUSINESS LINE AREA 419
Project Name: Ku-ring-gai Council
Project No: 12207002
Issue: C
Issue Date: 03/09/12
Comment: For Approval
CivicCivicCivicCivic
Principal Business of Business Unit
Key Location Factors within the Building
SCHEDULE OF ACCOMMODATION - by WORKGROUP
Person (s) Interviewed:
Date Interviewed:
POSITION
OCCUPANT
WORKSTYLE STAFF NUMBERS AREA ALLOWED TOTAL COMMENTS
A B C D E
Individual Offices OF1 6 12.96 77.76
Social Den WS1 4 4.5 18
10STAFF NUMBERS TOTAL
STAFF AREA TOTAL 95.76
FILE STORAGE FACILITIES SIZE QUANTITY FACILTY AREA TOTAL COMMENTS
Nil 0 0 No storage requirement identified in Profile Systems Report0
TOTAL 0
UNIQUE FACILITIES SIZE QUANTITY FACILTY AREA TOTAL COMMENTS
Collaborative Club 1 9 9
UNIQUE FACILITIES TOTAL 9
Business Unit ADJACENT SAME FLOOR NEXT FLOOR SEPARATED COMMENTS
Technical Yes No No No
Community No No Yes No
Council Chamber Yes No No No
9BUSINESS LINE FACILITIES TOTAL
TOTAL BUSINESS LINE AREA 104.76
INCLUDING CIRCULATION26
TOTAL BUSINESS LINE AREA 131
Project Name: Ku-ring-gai Council
Project No: 12207002
Issue: C
Issue Date: 03/09/12
Comment: For Approval
Forecast Staff & Support Space GrowthForecast Staff & Support Space GrowthForecast Staff & Support Space GrowthForecast Staff & Support Space Growth
Principal Business of Business Unit
Key Location Factors within the Building
SCHEDULE OF ACCOMMODATION - by WORKGROUP
Person (s) Interviewed:
Date Interviewed:
POSITION
OCCUPANT
WORKSTYLE STAFF NUMBERS AREA ALLOWED TOTAL COMMENTS
A B C D E
Forecast growth - 2015 WS1 7 4.5 31.5 Based on Ku-ring-gai LGA‘s resident population growth @ 0.8%
Forecast growth - 2020 WS1 10 4.5 45 Based on Ku-ring-gai LGA‘s resident population growth @ 0.8%
Forecast growth - 2025 WS1 10 4.5 45 Based on Ku-ring-gai LGA‘s resident population growth @ 0.8%
Forecast growth - 2030 WS1 11 4.5 49.5 Based on Ku-ring-gai LGA‘s resident population growth @ 0.8%
38STAFF NUMBERS TOTAL
STAFF AREA TOTAL 171
FILE STORAGE FACILITIES SIZE QUANTITY FACILTY AREA TOTAL COMMENTS
Storage 1 12.6 1Lm per person12.6
TOTAL 12.6
UNIQUE FACILITIES SIZE QUANTITY FACILTY AREA TOTAL COMMENTS
Utility / Storage 1 12.6 12.6
Kitchen / Breakout / Informal Meeting 1 45 45
Quiet Room - 2 person 2 6.48 12.96
Meeting Room - 4 - 6 person 1 12.96 12.96
Meeting Room - 10 person 1 18.9 18.9
Comms / Patch Room 1 9 9
UNIQUE FACILITIES TOTAL 111.42
124.02BUSINESS LINE FACILITIES TOTAL
TOTAL BUSINESS LINE AREA 295.02
INCLUDING CIRCULATION74
TOTAL BUSINESS LINE AREA 369
Project Name: Ku-ring-gai Council
Project No: 12207002
Issue: C
Issue Date: 03/09/12
Comment: For Approval
CouncillorsCouncillorsCouncillorsCouncillors
Principal Business of Business Unit
Key Location Factors within the Building
SCHEDULE OF ACCOMMODATION - by WORKGROUP
Person (s) Interviewed:
Date Interviewed:
POSITION
OCCUPANT
WORKSTYLE STAFF NUMBERS AREA ALLOWED TOTAL COMMENTS
A B C D E
Mayor's Office 1 30 30
Mayor's PA 1 10 10
2STAFF NUMBERS TOTAL
STAFF AREA TOTAL 40
FILE STORAGE FACILITIES SIZE QUANTITY FACILTY AREA TOTAL COMMENTS
Nil 0 0 0
TOTAL 0
UNIQUE FACILITIES SIZE QUANTITY FACILTY AREA TOTAL COMMENTS
Councillor's Room 1 30 30
Councillor's Boardroom 1 15 15
UNIQUE FACILITIES TOTAL 45
45BUSINESS LINE FACILITIES TOTAL
TOTAL BUSINESS LINE AREA 85
INCLUDING CIRCULATION21
TOTAL BUSINESS LINE AREA 106
Project Name: Ku-ring-gai Council
Project No: 12207002
Issue: C
Issue Date: 03/09/12
Comment: For Approval
BRANCH NAME WORKSTYLE TYPE AREA ALLOWEDNUMBER OF STAFF
WORKSTYLE TYPE SUMMARY - BY DEPARTMENT
TOTAL AREA
Community
10
OF1 8 12.96 103.68
WS1 15 4.5 67.5
WS2 2 8.64 17.28
WS3 16 3.24 51.84
Corporate
OF1 17 12.96 220.32
WS1 30 4.5 135
WS2 2 8.64 17.28
Development & Regulation
OF1 12 12.96 155.52
WS2 2 8.64 17.28
WS3 44 3.24 142.56
Operations
OF1 1 12.96 12.96
WS1 2 4.5 9
Strategy & Environment
OF1 4 12.96 51.84
WS1 34 4.5 153
WS2 2 8.64 17.28
Civic
OF1 6 12.96 77.76
WS1 4 4.5 18
Forecast Staff & Support Space Growth
WS1 38 4.5 171
Councillors
1 30 30
1 10 10
1479.1 TOTAL AREA TOTAL STAFF 251
WORKSTYLE TYPE NUMBER OF STAFF AREA ALLOWED
WORKSTYLE TYPE SUMMARY - OVERALL
TOTAL AREA
1 30 30
1 10 10
10
OF1 48 12.96 622.08
WS1 123 4.5 553.5
Project Name: Ku-ring-gai Council
Project No: 12207002
Issue: C
Issue Date: 03/09/12
Comment: For Approval
WS2 8 8.64 69.12
WS3 60 3.24 194.4
1479.1 TOTAL AREA TOTAL STAFF 251
COMMERCIAL IN CONFIDENCE
24388 Capital Expenditure Review 46
APPENDIX 2 – DIAGRAMS FOR OCCUPATION OF 828 PACIFIC
HIGHWAY
Floor NLA Department Department Department Department Support Space Support Space Support Space Total NLA Utilised
Difference in NLA to Utilised
SpaceLevel 5 1050.8 0
Level 4 1225.8 0
Level 3 1485.3Strategy &
EnvironmnentDevelopment &
Regulation Operations Civic Support Space419 612 27 131 296.3 1485.3 0
Level 2 1791.7 Corporate Community Councillors Chambers Computer RoomSupport Space & Training Room
608 350 106 250 88 376.7 1778.7 13
Level 1 1938.3 Growth Support Space369 0 369 1569.3
Total NLA 7491.9 3633
COMMERCIAL IN CONFIDENCE
24388 Capital Expenditure Review 47
APPENDIX 3 – INCREMENTAL COSTS OF OPTIONS
DRAFTprinted 14/09/2012
Kuringai Municipal Council
Office Accommodation Relocation Project
Incremental Costs of Options $000's1 Economic Appraisal (Uninflated)
2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25 2025/26 2026/27 2027/28 2028/29 2029/30 2030/31 2031/32 total 4.0% 7.0% 10.0%
Base Case - Remain at 818 Pacific Hwy
2Opportunity Costs of Land 12,897.5 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 12,897.5 12,401.4 12,053.7 11,725.0
3Forecast Capital Refurb/Replace 451.5 542.6 35.5 234.8 1,241.5 24.0 394.4 12.1 1.6 1,661.3 63.0 211.9 211.9 211.9 211.9 211.9 211.9 211.9 211.9 211.9 6,569.5 4,703.8 3,789.0 3,129.3
Total Capital 13,349.0 542.6 35.5 234.8 1,241.5 24.0 394.4 12.1 1.6 1,661.3 63.0 211.9 211.9 211.9 211.9 211.9 211.9 211.9 211.9 211.9 19,467.0 17,105.2 15,842.7 14,854.3
Temporary Lease Costs 301.2 308.8 0.0 324.4 665.0 0.0 0.0 0.0 0.0 752.4 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2,351.9 1,907.4 1,655.4 1,453.74Major Repairs and Maintenance 141.4 182.7 36.7 12.3 143.2 13.3 323.8 56.5 14.9 15.5 94.0 94.0 94.0 94.0 94.0 94.0 94.0 94.0 94.0 94.0 1,880.3 1,299.5 1,028.1 839.4
5Maintenance, Utility and Other Operating Costs 387.1 396.8 406.7 416.9 427.3 438.0 448.9 460.2 471.7 483.5 495.6 507.9 520.6 533.7 547.0 560.7 574.7 589.1 603.8 618.9 9,889.0 6,507.7 4,959.9 3,904.4
Total Recurrent 829.7 888.3 443.4 753.6 1,235.5 451.3 772.7 516.6 486.6 1,251.4 589.6 602.0 614.7 627.7 641.0 654.7 668.7 683.1 697.8 712.9 14,121.1 9,714.6 7,643.4 6,197.4
Total Costs 14,178.7 1,430.9 478.9 988.3 2,477.0 475.2 1,167.1 528.7 488.2 2,912.7 652.6 813.9 826.6 839.6 852.9 866.6 880.6 895.0 909.7 924.8 33,588.1 26,819.9 23,486.2 21,051.8
6Residual Value 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 9,802.1 9,802.1 4,473.6 2,533.0 1,457.0
Total Benefits 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 9,802.1 9,802.1 4,473.6 2,533.0 1,457.0
Net Cash Flow -14,178.7 -1,430.9 -478.9 -988.3 -2,477.0 -475.2 -1,167.1 -528.7 -488.2 -2,912.7 -652.6 -813.9 -826.6 -839.6 -852.9 -866.6 -880.6 -895.0 -909.7 8,877.3 -23,786.0 -22,346.3 -20,953.1 -19,594.7
NPV -22,346.3 -20,953.1 -19,594.7 NPV/I -1.31 -1.32 -1.32
BCR 0.2 0.1 0.1
IRR N/A
Option 1 - Relocation to 828 Pacific Hwy
7Acquisition Costs 22,300.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 22,300.0 21,442.3 20,841.1 20,272.7
8Forecast Capital Refurb/Replace 160.2 101.6 17.4 858.6 388.1 104.9 256.6 79.2 149.4 304.8 121.0 121.0 121.0 121.0 121.0 121.0 121.0 121.0 121.0 121.0 3,631.2 2,626.2 2,128.5 1,765.5
9Fitout Costs 3,960.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 3,960.0 3,807.7 3,700.9 3,600.0
10Contingency 206.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 206.0 198.1 192.5 187.3
11Relocation Costs 354.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 354.7 341.1 331.5 322.5
12Council PM Costs 187.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 187.2 180.0 175.0 170.2
Total Capital 27,168.1 101.6 17.4 858.6 388.1 104.9 256.6 79.2 149.4 304.8 121.0 121.0 121.0 121.0 121.0 121.0 121.0 121.0 121.0 121.0 30,639.2 28,595.4 27,369.6 26,318.2
13Major Repairs and Maintenance 36.0 7.0 2.8 5.3 0.0 1.9 0.0 2.1 0.0 2.2 5.7 5.7 5.7 5.7 5.7 5.7 5.7 5.7 5.7 5.7 114.5 84.0 70.1 60.7
14Loss of Council Rates 7.3 14.6 15.0 15.4 15.8 16.2 16.7 17.2 17.7 18.3 18.9 19.5 20.1 20.9 21.6 22.4 23.3 24.3 25.3 26.4 376.9 243.5 182.9 141.9
15Maintenance, Utility and Other Operating Costs 583.0 717.3 636.5 661.8 688.2 715.7 744.4 774.5 805.9 838.9 873.4 909.8 948.0 988.4 1,031.1 1,076.2 1,124.2 1,175.2 1,229.6 1,287.9 17,810.0 11,502.6 8,652.9 6,731.1
20Loss of Ground Lease Rental 0.0 133.1 133.1 133.1 133.1 133.1 133.1 133.1 133.1 133.1 133.1 133.1 133.1 133.1 133.1 133.1 133.1 133.1 133.1 133.1 2,529.5 1,681.3 1,286.0 1,012.4
16Rent Abatement 61.8 110.5 205.5 205.5 205.5 220.0 232.5 232.5 232.5 232.5 249.0 263.1 263.1 263.1 263.1 281.7 297.7 297.7 297.7 297.7 4,712.6 3,039.2 2,275.4 1,756.4
Total Recurrent 688.1 982.6 992.9 1,021.1 1,042.6 1,087.0 1,126.8 1,159.4 1,189.3 1,225.0 1,280.1 1,331.2 1,370.1 1,411.2 1,454.6 1,519.2 1,584.0 1,636.0 1,691.4 1,750.8 25,543.6 16,550.6 12,467.2 9,702.4
Total Costs 27,856.2 1,084.2 1,010.4 1,879.7 1,430.8 1,191.9 1,383.4 1,238.6 1,338.7 1,529.8 1,401.1 1,452.2 1,491.2 1,532.2 1,575.7 1,640.2 1,705.0 1,757.0 1,812.5 1,871.9 56,182.8 45,146.0 39,836.9 36,020.7
17Residual Value 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 14,563.6 14,563.6 6,646.6 3,763.5 2,164.8
18Lease Revenue Part 828 Pacific Hwy 494.3 525.4 1,260.4 1,309.2 2,131.1 2,213.7 2,299.5 2,388.6 2,481.1 2,577.3 2,677.1 2,780.9 2,888.6 3,000.6 3,116.8 3,237.6 3,363.1 3,493.4 3,628.7 3,769.4 49,636.6 30,975.1 22,595.9 16,987.0
19Lease Revenue Car Park/Other Income 155.5 189.4 309.6 436.2 569.5 585.3 602.0 619.7 638.4 658.2 679.3 701.8 725.7 751.4 778.9 808.4 840.2 874.6 911.8 952.3 12,788.2 8,050.8 5,915.7 4,481.3
Total Benefits 649.8 714.8 1,570.0 1,745.4 2,700.6 2,799.0 2,901.5 3,008.2 3,119.5 3,235.5 3,356.4 3,482.6 3,614.4 3,751.9 3,895.7 4,046.0 4,203.3 4,368.0 4,540.6 19,285.2 76,988.4 45,672.5 32,275.1 23,633.1
Net Cash Flow -27,206.4 -369.4 559.7 -134.3 1,269.9 1,607.1 1,518.1 1,769.6 1,780.7 1,705.7 1,955.3 2,030.4 2,123.2 2,219.7 2,320.0 2,405.8 2,498.2 2,611.0 2,728.1 17,413.4 20,805.6 526.5 -7,561.8 -12,387.6
NPV 526.5 -7,561.8 -12,387.6 NPV/I 0.02 -0.28 -0.47
Payback -27,206 -27,576 -27,016 -27,150 -25,881 -24,273 -22,755 -20,986 -19,205 -17,499 -15,544 -13,514 -11,391 -9,171 -6,851 -4,445 -1,947 664 3,392 20,806 BCR 1.0 0.8 0.7
Payback Period (yrs) 17.7 IRR 4.2%
Less the Base Case Net (Cost)/Benefit -14,179 -1,431 -479 -988 -2,477 -475 -1,167 -529 -488 -2,913 -653 -814 -827 -840 -853 -867 -881 -895 -910 8,877 -23,786 -22,346 -20,953 -19,595
Incremental Cost/Benefit -13,028 1,061 1,039 854 3,747 2,082 2,685 2,298 2,269 4,618 2,608 2,844 2,950 3,059 3,173 3,272 3,379 3,506 3,638 8,536 44,592 22,873 13,391 7,207
Results Summary ($m) Base Case Option 1
Economic Appraisal
- NPV at 7% discount rate -20,953 -7,562
- rank 2 1
Payback
Notes:1Economic appraisal conducted using NSW Government Guidelines Tpp07-5, discount rate at 7% with sensitivities tested at 4% and 10%.
2Opportunity cost based on HillPDA Generic Land Valuations 2009 report, unimproved land value Commercial/Mixed Use rate of $2,500 psm, recognising that current use is not the best use of the land
3Capital cost forecast over 11 years by SGA Property Consulting. Annual average used in the remaining years.
4R&M cost forecast over 10 years by SGA Property Consulting. Annual average used in the remaining years.
5Existing Council Building maintenance and operating costs provided by Council
6Residual is for existing land value Commercial/Mixed Use, does not depreciate. No value for building as it will be past its 60 year useful life
7Acquisition cost $22.2m as per Council advice is included in addition to $100,000 for consultancy and legal costs
8Capital cost forecast over 10 years by SGA Property Consulting. Annual average used in the remaining years.
9Fitout costs based on RLB Construction Costs manual, 2011 rates, $1100 per sqm
10Based on 5% of capital Refurb/replacement costs (year 1) and Fitout costs
11Relocation costs estimated at $98.54 per sm, based on 2007 NSW TAM guideline rates, increased at 3% CPI per annum.
12Project Management costs estimated at 4% of year 1 Refurb, fitout, contingency and relocation costs
13R&M cost forecast over 10 years by SGA Property Consulting. Annual average used in the remaining years.
14Loss of Council rates forecast and provided by Council
15Existing Council Building maintenance and operating costs provided by Council
16Rent free abatement is a lease incentive to ensure tenants are attracted to the site, based on 28% of unleased premises, as well as agreed Sara Lee and North Shore Associates values
17
18Lease revenue as provided by Council
present values
Residual is based on the full existing unimproved land value (based on HillsPDA rates 1900 per s/m for Gordon), as it does not depreciate, with an estimate for the remaining
value of the building which will have 17 years of its 60 year useful life remaining at the end of the appraisal period.
Capital Insight Pty Ltdpage 1
Incremental Flows KMC 24442 83512 5.1 KK KMC Economic Appraisal v1.2
COMMERCIAL IN CONFIDENCE
24388 Capital Expenditure Review 48
APPENDIX 4 - COMMUNITY CONSULTATION STRATEGY
Public Consultation and Communication Strategy New administration building purchase Goals
To keep the Ku-ring-gai community well-informed about the purchase of Council’s new administration building, masterplanning of the amalgamated land holdings, reclassification of land to repay loan and any changes to Council services as a result.
Provide planned, proactive, timely, consistent and honest communication to the Ku-ring-gai community about the project to ensure their expectations are realistic and well-managed
Target audiences
All Ku-ring-gai residents and ratepayers All Ku-ring-gai businesses Occupiers of facilities proposed for reclassification Users of facilities proposed for reclassification Media
Key messages
The existing Council administration building is at full capacity, run down, expensive to maintain and requires significant expenditure to bring up to modern office standard. (Examples include flooding, air conditioning, elevators breaking down, lack of parking, lack of accessibility)
We have purchased the building next door to the Council Chambers site, which will be the future home for our administration staff.
The new building is larger, modern, provides improved facilities for staff to service the community.
The new building cost $22 million paid for by loans, which we will repay by selling surplus Council assets.
We have identified 18 sites that we could potentially sell, however before we can do this, these site will need to be reclassified. (List sites, most are underutilised open space)
The sites identified are mostly underutilised buildings and/or open spaces. The closing of these sites overtime will not impact on community service delivery in Ku-ring-gai.
Reclassification of Council sites is a legislative process and there will be community consultation including a public exhibition and a community hearing conducted by an independent Chairperson. There will be a report back to council and the community before the land is reclassified.
The reclassification enables Council to consider which of these assets will be sold and when. We have a wonderful opportunity to revitalise the Council Chambers site and give it back to the
community by creating a multi-purpose civic and community hub. The community hub could include a range of facilities like performance spaces, meeting rooms,
galleries, open space, cafes, restaurants etc. The heritage value of the current chambers site will always be retained. What new civic and community facilities would you like to see at Council Chambers site? Tell us
at www.kuringgaicommunityhub.com.au There will be more extensive community consultation about the civic and community hub through
the masterplanning stages. Relocating to the new building will take some time as we plan to refurbish the new building to
make it environmentally sustainable? Need correct words here? We will strive to ensure there is no disruption to civic and community services during the
relocation stages. We will keep the community well informed of the changes throughout this process with regular
updates. Measurement of communications success
Number of communications outputs achieved Amount of positive media coverage Number of people engaged in online forum
Tactics Stage Tactic Audience Timing Distribution Responsibility Pre-Acquisition Media Training Deborah Silva, GM,
Directors and Economic Development Officer
Once – July 2012 N/A Tiffiny Kellar
Post Acquisition Report to Council for endorsement
Councillors Media
July meeting - hard copies councillors - Council website
Deborah Silva
Post Acquisition
Phone calls and face to face meetings
Occupiers/users of land to be reclassified – Lifeline and child centre
Same time as July report N/A Deborah Silva and Nick van de Peer
-Post Acquisition -Pre masterplanning community hub - Reclassification - Relocation - Masterplanning Community hub
Media release and proactive interviews
All target audiences -Day after July meeting - Reminder for people to have their say in August - Regular media releases as we progress through stages
- North Shore Times - Hornsby Advocate - Sydney Morning Herald - other local media
Eric Aubert and chosen spokesperson
All stages Council website All target audiences -Day after July meeting - Regularly updated as we progress through the stages
Website – 50,000 users per month
Tiffiny Kellar
All stages Social media All target audiences -Day after July meeting -Day after July meeting - Regularly updated as we progress through the stages
Facebook and Twitter Tiffiny Kellar
All stages Story in Ku-ring-gai E-news
All target audiences Last Wednesday of each month Subscriber database – 6,000 Tiffiny Kellar
-Pre-masterplanning community hub -Masterplanning
Bang the Table online forum for suggestions for community hub
All target audiences Day after July meeting to early September
Online Nick van de Peer
All stages Mayor’s message All target audiences Determined by mayor Website, E-news, subscriber database - 70
Eric Aubert
All stages Story in Ku-ring-gai Update
All target audiences Quarterly – first one October 2012
30,000 rates notices, website, retirement villages, libraries
Eric Aubert
Relocation Outdoor banners All target audiences TBC Outside current chambers site Tiffiny Kellar Relocation Posters All target audiences TBC - Electronic posters at council
chambers - Bus shelters - Shopping centres - libraries
Tiffiny Kellar
Relocation/ Masterplanning
Advertising All target audiences TBC North Shore Times Tiffiny Kellar
COMMERCIAL IN CONFIDENCE
24388 Capital Expenditure Review 49
APPENDIX 5 - RISK MANAGEMENT – PRINCIPLES AND GUIDELINES
Risk Management Procedure Risk Management Procedure Risk Management Procedure Risk Management Procedure –––– January 2011January 2011January 2011January 2011
2010/096753 Page 1 of 12 pages
1.1.1.1. PurposePurposePurposePurpose
The purpose of this procedure is to define how the Risk Management Policy & Risk Management Strategy will be implemented in a practical, coordinated and systematic manner.
2.2.2.2. ObjectiveObjectiveObjectiveObjective
The objective of this Procedure is to ensure that sound risk management practices and procedures are fully integrated into the Council’s strategic and operational planning processes.
3.3.3.3. ScopeScopeScopeScope
The Risk Management Procedure and Risk Management System (RMS) applies to all Council departments and across all Council services, functions, activities and processes. This includes those directly controlled by Council or delivered through third party arrangements.
All employees, contractors, partner organisations and volunteers engaged in the conduct of Council business are to apply consistent, proactive and systematic risk management practices in the employment of Council resources and the delivery of Council services.
4.4.4.4. PPPPrinciplesrinciplesrinciplesrinciples
The Risk Management System at Ku-ring-gai Council is based on the 11 key principles outlined in AS/NZAS/NZAS/NZAS/NZS S S S ISO 31000 Risk Management ISO 31000 Risk Management ISO 31000 Risk Management ISO 31000 Risk Management –––– Principles and Guidelines. Principles and Guidelines. Principles and Guidelines. Principles and Guidelines.
Risk Management at KuRisk Management at KuRisk Management at KuRisk Management at Ku----ringringringring----gai willgai willgai willgai will
• Create and protect value.
• Be an integral part of all organisational processes.
• Be part of decision making.
• Explicitly address uncertainty.
• Be systematic, structured and timely.
• Be based on the best available information.
• Be tailored to the needs of the organisation.
• Take human and cultural factors into account.
• Be transparent and inclusive.
• Be dynamic, iterative and responsive to change.
• Facilitate continual improvement of the organisation.
Doc distributionDoc distributionDoc distributionDoc distribution Internal/external Doc statusDoc statusDoc statusDoc status Approved File NoFile NoFile NoFile No 2010/096753
Document ownerDocument ownerDocument ownerDocument owner Director Corporate
Contact officer/s Contact officer/s Contact officer/s Contact officer/s Finance Manager
Risk Management Coordinator
Approval dateApproval dateApproval dateApproval date 21/1/11 Approved byApproved byApproved byApproved by GMD
Effective datEffective datEffective datEffective dateeee 21/1/11 Review periodReview periodReview periodReview period 3 Years Review dateReview dateReview dateReview date 21/1/14
History of Approved VersionsHistory of Approved VersionsHistory of Approved VersionsHistory of Approved Versions
VersionVersionVersionVersion Effective dateEffective dateEffective dateEffective date Summary of changesSummary of changesSummary of changesSummary of changes
0 Final draft following update form Risk Management Coordinating Committee
1 21/1/11 Finalised and approved for use by GMD 21/1/11
Risk Management Procedure Risk Management Procedure Risk Management Procedure Risk Management Procedure –––– January 2011January 2011January 2011January 2011
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Table of ContentsTable of ContentsTable of ContentsTable of Contents
1. Purpose............................................................................................................................................................ 1 2. Objective .......................................................................................................................................................... 1 3. Scope ............................................................................................................................................................... 1 4. Principles......................................................................................................................................................... 1 5. Definitions........................................................................................................................................................ 3 6. Legislative Framework................................................................................................................................... 3 7. Associated Documents or References .......................................................................................................... 3 8. Risk Management Responsibilities ............................................................................................................... 3 9. Setting Departmental Risk management Objectives ................................................................................... 4 10. System Structure........................................................................................................................................ 4 Figure 1: Risk Management System Structure................................................................................................. 5
11. Implementation - The Risk Management Process................................................................................... 6 Figure 2: The Risk Management Process ......................................................................................................... 6 11.1. Risk Context ............................................................................................................................................ 6 11.2. Risk Assessment .................................................................................................................................... 7 11.3. Risk Criteria ............................................................................................................................................ 8
12. Risk Registers............................................................................................................................................. 8 13. Risk Treatment and Control....................................................................................................................... 8 13.1. Risk Treatment Plans............................................................................................................................. 9 13.2. Risk Management Improvement Plans................................................................................................. 9 13.3. Strategic Risk Management Plan.......................................................................................................... 9 13.4. Key Risk Controls ................................................................................................................................... 9
14. Risk Monitoring......................................................................................................................................... 10 14.1. Risk Register Review............................................................................................................................ 10 14.2. Treatment Monitoring .......................................................................................................................... 10 14.3. Key Performance Indicators ................................................................................................................ 10
15. Consultation and Communication ........................................................................................................... 11 16. Training...................................................................................................................................................... 11 17. System Evaluation .................................................................................................................................... 11 18. Record Management ................................................................................................................................ 11 19. Document Control..................................................................................................................................... 12
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5.5.5.5. DefinitionsDefinitionsDefinitionsDefinitions
Risk: “The chance of something happening that will have an impact on objectives”. AS/NZS ISO 31000:2009, AS/NZS ISO 31000:2009, AS/NZS ISO 31000:2009, AS/NZS ISO 31000:2009, Risk ManRisk ManRisk ManRisk Management agement agement agement –––– Principles and Guidelines. Principles and Guidelines. Principles and Guidelines. Principles and Guidelines. Consequently it is the threat or probability that an action or event, will adversely or beneficially impact on Council’s ability to achieve its objectives or in simple terms the “Uncertainty of Outcome” from pursuing, either a future positive opportunity or an existing negative threat, in trying to achieve a current objective. It is measured in terms of Consequences and Likelihood.
Risk Management: “The culture, processes and structures that are directed towards the effective management of potential opportunities and adverse effects”.
AS/NZS ISO 31000:2009, Risk Management AS/NZS ISO 31000:2009, Risk Management AS/NZS ISO 31000:2009, Risk Management AS/NZS ISO 31000:2009, Risk Management –––– Principles and Guidelines. Principles and Guidelines. Principles and Guidelines. Principles and Guidelines.
For the purposes of this Policy, Risk Management is defined as “the planned and systematic approach to manage risk within Council’s risk appetite and risk tolerance levels and provide reasonable assurance regarding the achievement of Council’s aims, objectives and opportunities within the Council by the identification, assessment and control of uncertainties which may impact on the achievement of Council’s aims, objectives and opportunities.”
6.6.6.6. Legislative FrameworkLegislative FrameworkLegislative FrameworkLegislative Framework
• Occupational Health and Safety Act 2000
• Occupational Health and Safety Regulation 2001
• AS/NZS ISO 31000 Risk Management – Principles and Guidelines.
7.7.7.7. AssociatedAssociatedAssociatedAssociated Documents or References Documents or References Documents or References Documents or References
• COSO – Enterprise Risk Management
• Risk Management Policy
• Risk Management Strategy
• Risk Matrix
• Risk Guides
• Risk Assessment Guide
• Risk Register Template
8.8.8.8. Risk Management ResponsibilitiesRisk Management ResponsibilitiesRisk Management ResponsibilitiesRisk Management Responsibilities
The responsibilities for all ‘personnel’ in relation to risk management are outlined in RIS-ALL-RS-0003 Risk Management Responsibilities. This document will be integrated into Position Descriptions where appropriate and amended from time to time.
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9.9.9.9. Setting Setting Setting Setting DepDepDepDepartmental Risk management artmental Risk management artmental Risk management artmental Risk management ObjectivesObjectivesObjectivesObjectives
Each Department within Council is to develop an annual set of high level objectives in relation to risk management. These key objectives will be endorsed by The General Manager and Directors Group.
These objectives will be developed and reviewed as part of the annual Delivery Program and Operational Plan process. The Departmental risk management objectives and any actions required to meet the objectives will be monitored and updates provided using the Performance Planner system.
The objectives will be developed to meet the four key objectives of the Risk Management System (RMS) outlined below
• StrategicStrategicStrategicStrategic – relating to high-level goals, aligned with and supporting the Council’s mission/vision.
• OperationsOperationsOperationsOperations – relating to effectiveness and efficiency of the entity's operations, including performance and profitability goals. They vary based on management's choices about structure and performance.
• Reporting Reporting Reporting Reporting – relating to the effectiveness of the departments reporting. They include internal and external reporting and may involve financial or non-financial information.
• ComplianceComplianceComplianceCompliance – relating to the entity's compliance with applicable laws and regulations.
10.10.10.10. SSSSystem Structureystem Structureystem Structureystem Structure
The following diagram represents the key components of the Risk Management System. The Risk Management Procedure is the highest level ‘doing’ document and details the processes to be followed or provides links to Risk Guides which provide further detail or instructions.
The key enabling componentskey enabling componentskey enabling componentskey enabling components of the Risk Management System are detailed in blue shading and are:
• Risk Management Procedure;
• Risk Management Responsibilities;
• Activity Risk Assessment Guide, including the Integrated Risk Matrix & Risk Criteria & Evaluation Guide;
• Risk Treatment Guide;
• Risk Assessment Training.
The primary outputsprimary outputsprimary outputsprimary outputs that will drive the continuous improvement of risk management are highlighted in orange and are:
• Activity Risk Registers – Work Group Specific
• Risk Treatment Plan - Work Group Specific
• Significant Risk Registers – Department Specific
• Risk Management Improvement Plan - Department Specific
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Figure Figure Figure Figure 1111: : : : Risk Management System StructureRisk Management System StructureRisk Management System StructureRisk Management System Structure
Risk Treatment
Plan
Work Group
Specific
Activity Risk
Register
Work Group
Specific
Significant Risk
Register
Department
Specific
Risk Management
Policy
Risk Management
Improvement Plan
Department
Specific
Risk Management
Strategy
Risk Management
Procedure
Risk Register
Guide
Activity Risk
Assessment
Guide
Risk
Matrices
Risk Criteria
& Evaluation
Specific Risk
Guides
Event Risk
Guide
Property
Risk Guide
Risk Treatment
Guide
Risk Monitoring
Guide
Components
of Risk
Risk Library
Project Risk
Guide
Contract
Risk Guide
Purchasing
Risk Guide
Volunteer
Risk Guide
Council &
Committee
Risk Guide
OHS
Risk Guide
Technology
Risk Guide
Investment
Risk Guide
Risk Management
Training
Risk
Overview /
Induction
Risk
Assessment
Training
Risk
Treatment &
Monitoring
Training
Maintain
Risk
Records
Training
Key Risk Controls
KPI’s
Review
Timetable
GuidesTools or
Forms
Key
Enabling
Primary
Outputs
Key Strategic
Documents
Risk Management
Responsibilities
Strategic Risk
Management Plan
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11.11.11.11. Implementation Implementation Implementation Implementation ---- TTTThe Risk Management Processhe Risk Management Processhe Risk Management Processhe Risk Management Process
Figure Figure Figure Figure 2222: : : : The Risk Management ProcessThe Risk Management ProcessThe Risk Management ProcessThe Risk Management Process
Source: AS/NZS ISO 3100:2009 Risk Management – Principles and Guidelines, Page 14
11.1.11.1.11.1.11.1. RRRRisk Context isk Context isk Context isk Context
The risk context or environment is important when considering risk as it not only impacts on the management of risk, but also what constitutes an acceptable level of risk. Both external and internal environments must be considered.
The risk context will be a core component of risk management training to ensure that environmental issues are considered as part of both daily risk management and reviews of risk registers.
External environmental context can be broken down into the following:
• Social / cultural,
• Political,
• Legal / regulatory,
• Financial / economic,
• Technological,
• Natural / physical environment.
Internal environmental factors which can impact on risk management include:
• Organisational culture,
• Organisational structure,
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• Organisational Policies and Procedures,
• Organisational systems, including internal processes – how well formalised and communicated they are,
• Effective use of technology,
• Integration of risk management with business processes,
• Effectiveness of decision making processes,
• Effectiveness of communication and consultation processes,
• Induction, training and instruction of personnel.
11.2.11.2.11.2.11.2. RRRRisk Assessmentisk Assessmentisk Assessmentisk Assessment
Risk Assessment is the formal process of reviewing, activities, locations, sites, projects, contracts etc. to identify and control or manage risk. The purpose of the risk assessment process is to identify as many risks as possible so that they can be defined, understood and managed / controlled by those people who are involved in the activity, location or process.
Risk Assessment is further broken down into risk identification, analysis and evaluation, which will be further discussed below.
Risk Guides are the ‘doing’ or ‘how to’ documents and provide much greater detail and assist with the risk assessment process in relation to different forms of risk. They are a tool to assist those personnel who are carrying out risk assessments on specific activities, in specific areas, or where specific issues effect processes or outcomes.
Please refer to the Risk Guides page on Kasey for further details.
Departments or relevant workgroup(s) are to complete a review of an existing risk register/ risk assessment and update it with changes whenever any of the following occur:
• An incident or injury occur,
• There are new or changes to existing activities or processes,
• Prior to the purchase or introduction of new technology (plant, equipment, materials) or there are significant changes to existing technology,
• Acquisition/divestment of property,
• Legal and other requirements change or are amended,
• Organisational structural changes are made.
• Resolutions of Council, Ku-ring-gai Planning Panel, Joint Regional Planning Panel.
11.2.1.11.2.1.11.2.1.11.2.1. RRRRisk Identificationisk Identificationisk Identificationisk Identification
Risk identification is about identifying the ‘hazards’ or sources of risk and the risk or outcome of the hazard occurring.
• A risk is an event – it has to have a cause and an outcome.
• If a risk and the cause of the risk have not been identified and defined they cannot be effectively managed.
• A risk can have either positive and/or negative outcomes.
11.2.2.11.2.2.11.2.2.11.2.2. RRRRisk Analysis and Evaluationisk Analysis and Evaluationisk Analysis and Evaluationisk Analysis and Evaluation
Risk analysis is all about further defining the risk and its outcome into a measurable format. Key to risk analysis is defining the consequence and likelihood of the event occurring or the level of risk. In this way we can then prioritise action and controls depending on level of risk.
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The Risk Matrix provides the tool to define consequence, likelihood and therefore level of risk. It also provides a guide to evaluate the level of risk against standard criteria to determine what type of action is required.
Further details are detailed in the Risk Assessment Guide page on Kasey.
11.3.11.3.11.3.11.3. RRRRisk Criteriaisk Criteriaisk Criteriaisk Criteria
Included as Step 3 of the Risk Matrix is a table which breaks down the risk score into criteria for action. The risk criteria define what is an acceptable level of risk for the organisation to carry. It also defines what type of action (if any), priority level and timeframe for action is required to mange or mitigates the risk.
Initially the risk criteria timeframes for action are to be used with the pre-control risk score, and once the risk management system is established the post-control risk score is to be used for monitoring or action timeframes.
12.12.12.12. RRRRisk Registersisk Registersisk Registersisk Registers
The organisation will use risk registers to pull together all of the existing risk assessment and control measures for evaluation and initial development of the Risk Action Plans and Risk Management Improvement Plans.
The Risk Register Template will be the standard format for risk registers. Each unit will be required to developed and maintain a risk register, built around reporting lines and the nature of the activities of the unit. In some cases it may mean there is only one risk register for the whole unit, in others there may be multiple registers to cover all of the different activities that are carried out.
All Risks which are defined as Significant Risks – Organisational wide or cross unit impact (Please refer to Risk Register Guide for more details) will be collated into a Significant Risk Register. Each Department will have a Significant Risk Register.
13.13.13.13. RRRRisk Treatment and Controlisk Treatment and Controlisk Treatment and Controlisk Treatment and Control
All risks require review to assess whether the current level of risk is acceptable. Most risks require treatment and control. In many cases effective control measures may already be defined and in place.
The risk registers will define what control measures are currently in place for the specific risk and what the level of risk is with those controls in place.
An evaluation of the control effectiveness will be carried out to assess what level of control over the risk is provided by the control(s) and review the level of compliance with the control requirements.
The final part of the review process is to select the risk treatment option. To do so it is essential to determine whether the risk, with the existing controls in place is acceptable as it is, further improvement is required to mitigate the risk in the short or long term, or if the risk is unacceptable until further review and action is taken. The acceptability of risk is defined in the risk registers as follows:
• Acceptable as is;
• Acceptable with further simple controls;
• Significant Risk – Unit specific which requires further action – to be included in Risk Treatment Plans;
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• Significant Risk – Organisational wide or cross unit impact – to be included in the Risk Management Improvement Plan for the Department(s);
• Not acceptable - DO NOT UNDERTAKE until review.
Further details about risk treatment and control can be found in the Risk Treatment & Control Guide.
13.1.13.1.13.1.13.1. RRRRisk Treatment Plans isk Treatment Plans isk Treatment Plans isk Treatment Plans
A summary of all risks which require risk treatment actions in a specific unit will be collated into a Risk Treatment Plan for the unit. It will be a living document and will contain all risk actions assessed as requiring treatment at the unit level.
The Risk Treatment Plan will be a tab in the Unit’s Risk Register so it is easy to access and keep up to date. Preparation, review and monitoring of the Risk Treatment Plans will take place on a quarterly basis in conjunction with the programmed development and review of the Delivery Program and Operational Plan.
13.2.13.2.13.2.13.2. RRRRisk Management Improvement Plansisk Management Improvement Plansisk Management Improvement Plansisk Management Improvement Plans
Each Department will have a Risk Management Improvement Plan which will collate and define further action required to address Significant Risks which have organisational wide or cross unit impact.
All actions in the Department Risk Management Improvement Plan(s) will require a more detailed action or implementation plan. This is to ensure that they are effectively planned for and implemented in a consistent and coordinated manner.
Risk Management Improvement Plans and the individual actions required in them will be coordinated and monitored using the Performance Planner System.
13.3.13.3.13.3.13.3. SSSStrategic Risk Management Plantrategic Risk Management Plantrategic Risk Management Plantrategic Risk Management Plan
On an annual basis the Audit Committee will (in consultation with the General Manager) annually review all of the significant risks of the organisation to prioritise and develop a Strategic Risk Management Improvement Plan. This will be completed by using the Department Risk Improvement Plans as the basis for the review.
The Strategic Risk Management Plan will define key organisational wide risk management improvement actions which will be a priority across the whole organisation, or which require significant resourcing and/or funding.
The Strategic Risk Management Plan actions will be coordinated and monitored using the Performance Planner System.
13.4.13.4.13.4.13.4. KKKKey Risk Controlsey Risk Controlsey Risk Controlsey Risk Controls
Key Risk Controls are those controls which are the primary control mechanism for the particular risk. They will be identified in the risk registers and will generally be an organisational wide risk control measure.
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14.14.14.14. RRRRisk Monitoringisk Monitoringisk Monitoringisk Monitoring
It is important that risk is monitored on a regular basis to ensure it is effectively managed. To assist in the ongoing monitoring of risk, Enterprise Risk Management will be a regular agenda item on meetings, a core part of action plans, an item on Council Report Templates, and will be considered as part of any business planning process.
14.1.14.1.14.1.14.1. RRRRisk Register Reviewisk Register Reviewisk Register Reviewisk Register Review
Risk Registers will be reviewed on an annual basis prior to the formulation of the next annual Risk Treatment Plan. This planned review will commence in line with the financial planning cycle.
Risk Registers will also be subject to adhoc review, and amended as required whenever any of the following occur:
• An incident or injury occur,
• There are new activities or processes, or changes to existing activities or processes,
• Prior to the purchase or introduction of new technology (plant, equipment, materials) or there are significant changes to existing technology,
• Legal and other requirements change or are amended,
• Organisational structural changes are made.
14.2.14.2.14.2.14.2. Treatment MonitoringTreatment MonitoringTreatment MonitoringTreatment Monitoring
Risk Treatment Monitoring is both formal and planned and an ongoing adhoc process.
Each Workgroup will put in place a Risk Treatment Monitoring system which suits its operational requirements and the level of risk which it is exposed to.
The Risk Registers have a column which records the outcome of the last treatment review and the date it was carried out. Those completing the treatment monitoring will ensure the Risk Registers are updated with the outcome of the monitoring.
The work plans will be used as the driver for the risk treatment monitoring system.
14.3.14.3.14.3.14.3. Key Performance IndicatorsKey Performance IndicatorsKey Performance IndicatorsKey Performance Indicators
The organisation will set Key Performance Indicators (KPI) related to Risk Management which will be reviewed on a quarterly basis, in conjunction with the Delivery Program and Operational Plan reviews.
Each KPI will be linked to one of the four (4) key objective areas of the Risk Management System (as outlined in section 5 of this procedure):
• Strategic;
• Operational;
• Reporting;
• Compliance
While each Department’s KPI’s should be aligned to the Organisational Wide approach, they should be specific enough to ensure that the activities/outcomes of the Department are being delivered effectively. i.e. the Operational KPI’s will be much more tailored than the Compliance KPI’s, which will generally be the same organisational wide.
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15.15.15.15. ConsultaConsultaConsultaConsultation and Communicationtion and Communicationtion and Communicationtion and Communication
Risk Management will be an agenda item on the General Manager and Directors Meeting, and in this way will be used to communicate any specific risk management issues to the rest of the organisation.
From the GM’s desk will have a standing item in relation to Risk Management to:
• assist in communicating the need to practice risk management;
• advising of any changes to the risk management system;
• providing up to date industry risk management information;
The community newsletter should have a regular article on risk management to update residents and key stakeholders that we have a risk management system and how it applies to them.
Kasey, Council’s Intranet is the access point for staff to the Risk Management System. The news section of Kasey will be used to provide details of any current risk management news.
Council’s Website will contain a page related to risk management to advise stakeholders that Council has a Risk Management System and how it applies to them.
16.16.16.16. TrainingTrainingTrainingTraining
All staff will receive an introduction to risk management as part of their commencement of employment induction.
The Risk Management Coordinator, in consultation with the RMCC will carry out an annual organisational wide Risk Management Training Needs Analysis. The outcome of this TNA will be an annual Risk Management Training Plan, which will be integrated with the organisational training plan prepared by Human Resources.
The Risk Management Coordinator is responsible for coordinating/facilitating any Risk Management Training.
17.17.17.17. SSSSystem Evaluationystem Evaluationystem Evaluationystem Evaluation
The Risk Management System will be reviewed for effectiveness by the Risk Management Coordinating Committee on an annual basis. This review will be documented and details kept in TRIM.
18.18.18.18. RRRRecord Management ecord Management ecord Management ecord Management
All records related to Risk Management will be stored in TRIM. Specific containers will be set up to store Risk Management System documents and associated records.
A Risk Management Records Matrix RIS-ALL-RS-0013 will be developed to assist users in storing risk management records with an appropriate title in the correct location.
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19.19.19.19. DDDDocument Controlocument Controlocument Controlocument Control
All Risk Management System documents will be document controlled.
The Risk Management Policy & Procedure will be on the corporate Policy & Procedure document templates. The remainder of the Risk Management System documents will be on the document template described below.
The following table sets out the document owners/approvers for the Risk Management System:
DocumentDocumentDocumentDocument Document OwnerDocument OwnerDocument OwnerDocument Owner Document ApproverDocument ApproverDocument ApproverDocument Approver
Risk Management Policy Director Corporate Council
Risk Management Strategy Risk Management Coordinating Committee (RMCC)
General Manager
Risk Management Procedure & Risk Management System Structure
Director Corporate General Manager
All other Risk Management System documents
Risk Management Coordinator Finance Manager
All Risk Management System documents will have a header and footer which will be formatted as below:
DOCUMENT NAMEDOCUMENT NAMEDOCUMENT NAMEDOCUMENT NAME
Document number:
RIS-AAA-PR-XXXX
Document owner: Issue number : #
Name Page X of X Issued: Month Year
Approved by: Name Review: Month Year
Uncontrolled document when printed. Refer to thUncontrolled document when printed. Refer to thUncontrolled document when printed. Refer to thUncontrolled document when printed. Refer to the Kasey or TRIM for current version.e Kasey or TRIM for current version.e Kasey or TRIM for current version.e Kasey or TRIM for current version. TRIM:#
Document numbering will be structured as follows:
RIS-AAA-BB-XXXX
• RIS is the prefix which designates that it is a Risk Management System document.
• AAA is a 3 letter designation of the Department the document is relevant to: ALL is for the whole organisation, COM = Community, COR = Corporate, D&R = Development and Regulation, OPS = Operations, S&E = Strategy and Environment.
• BB is the type of document: PR = Procedure, GU = Guide, FO = Form, RR = Risk Register, etc.
• Is a unique 4 number identifier.
A Document Control Register will be kept up to date by the Risk Management Coordinator.
Please refer to TRIM: 2010/055519.
Documents will have a three (3) year review frequency.
If minor process or formatting changes are required, the document can be updated by the document owner without the formal approval process being required.
COMMERCIAL IN CONFIDENCE
24388 Capital Expenditure Review 50
APPENDIX 6 – RISK ASSESSMENT
28/11/2011 RISK ASSESSMENT Sun Building Capital Acquisition ‐ October 2011.XLS Sun Acqusition RISK REGISTER
Ref # Task or Activity Risk Source Risk Owner Risk
Con
sequ
ence
Like
lihoo
d Pre Treatment/Control
Risk Score(Inherent Risk)
Existing/Proposed Treatments/Control Measures
Con
sequ
ence
Like
lihoo
d Post Treatment/Control
Risk Level(Residual Risk)
Strategic Value of site to Council & other strategic issues
STRATEGIC - Corporate Objectives
Councillors* Lost opportunity to consolidate Councils assets
base in line with Council Strategic DirectionIII.Moderate C.Possible Moderate - 4
* Maintain open communication with building owner to determine property acquisition potential.
II.Minor C.Possible Moderate - 3
PEOPLE - Perceptions of ‘Personnel’ / Morale or Satisfaction
GMD* Negative impact on staff morale of failure to
secure suitable alternate accommodation in the short to medium term.
III.Moderate B.Likely Medium - 5
* Communication strategy developed and being deployed across the organisation in line with accommodation study* Cross organisational Champions engaged to work with accommodation study consultants* Minor refurbishment to common areas implemented
II.Minor C.Possible Moderate - 3
STRATEGIC - Corporate Objectives
GMD* Failure of the building to meet the
accommodation requirements of current & future needs
IV.Major C.Possible Medium - 5
* Premises has double capacity of existing administration building* Premises adjoins existing administration building and provides potential for site amalgamation * Accommodation study being developed with findings and recommendations that can translate into any premises.
II.Minor D.Unlikely Low - 2
COMPLIANCE - Governance GMD
* Failure of decision to meet the direction of Community Strategic Plan
II.Minor C.Possible Moderate - 3* Relocation of Council's administration services identified in Delivery Program & Operational Plan - Capital Works Program 2011/2012.
II.Minor D.Unlikely Low - 2
STRATEGIC - Service Delivery / Reputation
Councillors * Community/staff dissatisfaction with outcomes III.Moderate C.Possible Moderate - 4
* Accommodation Relocation identified in Delivery Program & Operational Plan 2010/2011. * Detailed Community information/notification to be undertake during Masterplanning process
III.Moderate D.Unlikely Moderate - 3
Operational value to Council
ENVIRONMENT - Environmental effects
GMD* Opportunity to reduce resource usage and costs by acquiring property with improved
environmental performance.IV.Major C.Possible Medium - 5
* Review of building services to be undertaken as part of due diligence*NABERS rating required as part of due diligence
OPERATIONAL - Financial / Marketing / Customers
GMD* Opportunity to reduce/eliminate significant
upcoming and ongoing building maintenance costs of existing building
IV.Major B.Likely High - 6* Building condition and service assessment report to be undertaken as part of due diligence process
OPERATIONAL - Direct Operational Impact
GMD
* Opportunity to minimise impact on staff and services during any accommodation
upgrade/relocation due to close proximity of site to current accommodation.
III.Moderate D.Unlikely Moderate - 3* Plan for staged relocation of staff and services due to existing tenancies.
Funding of purchase
COMPLIANCE - Governance GMD
* Unable to secure decision from Council as to land divestment to fund purchase of building
V.Catastrophic C.Possible High - 6
* Council resolution to commence reclassification process obtained* Clearly articulate to community & stakeholders the purpose of reclassification* Reclassification to commence immediately* Reclassification LEP to be undertaken in accordance with legal and statutory requirements
IV.Major D.Unlikely Moderate - 4
OPERATIONAL - Financial / Marketing / Customers
GMD* Loss of $ from inappropriate/high borrowing
costs for capital acquisitionV.Catastrophic C.Possible High - 6
*Reclassification process to be prioritised*Land divestment to be completed no later than 2015/2016*Formal land valuations of identified sites to be obtained
IV.Major C.Possible Medium - 5
OPERATIONAL - Financial / Marketing / Customers
Manager Integrated Planning,
Property and Assets
* Opportunity to consolidate and remove ambiguity around current ground lease
arrangement.II.Minor C.Possible Moderate - 3 * Acquisition will combine land and building under one tenure
1/2 Version: 1
28/11/2011 RISK ASSESSMENT Sun Building Capital Acquisition ‐ October 2011.XLS Sun Acqusition RISK REGISTER
Ref # Task or Activity Risk Source Risk Owner Risk
Con
sequ
ence
Like
lihoo
d Pre Treatment/Control
Risk Score(Inherent Risk)
Existing/Proposed Treatments/Control Measures
Con
sequ
ence
Like
lihoo
d Post Treatment/Control
Risk Level(Residual Risk)
OPERATIONAL - Financial / Marketing / Customers
Manager Integrated Planning,
Property and Assets
* Loss of $ due to poor property market [leasing & sales]
V.Catastrophic C.Possible High - 6
*Land divestment to be closely monitored to ensure land divestments occur within valuation range*Commercial agent engaged to manage commercial leasing.*Commercial agent engaged to manage land sale process
IV.Major C.Possible Medium - 5
OPERATIONAL - Financial / Marketing / Customers
Manager Integrated Planning,
Property and Assets
* Reduced return on investment from hurried sale of properties funding acquisitions
V.Catastrophic C.Possible High - 6* Ensure reclassification commences immediately* Obtain independent property consultancy advice on property market cycle to optimise timing of sale
IV.Major C.Possible Medium - 5
STRATEGIC - Service Delivery / Reputation
Councillors* Negative reputational impact from divestment of
community assets for purchaseIII.Moderate A.Almost
certain High - 6
* Clearly articulate to community & stakeholders the purpose of reclassification* Reclassification LEP to be undertaken in accordance with legal and statutory requirements
III.Moderate B.Likely Medium - 5
Negotiation & purchase of building
COMPLIANCE - Legal
Manager Integrated Planning,
Property and Assets
* Failure to secure approval to proceed with purchase due to non-compliance with LG Act
and/or DLG requirementsIV.Major B.Likely High - 6
* DLG Capital Expenditure Guidelines - December 2010 followed to ensure compliance with requirements.* Ongoing discussion with key contacts in DLG to ensure no misunderstandings.
IV.Major D.Unlikely Moderate - 4
COMPLIANCE - Governance
Manager Integrated Planning,
Property and Assets
* Failure to meet Councils Acquisition and Divestment of Land Policy 2009
IV.Major E.Rare Moderate - 3 * Develop Probity Plan and engage Probity Officer II.Minor D.Unlikely Low - 2
OPERATIONAL - Financial / Marketing / Customers
Manager Integrated Planning,
Property and Assets
* Loss of $ from failure to secure property for appropriate price
IV.Major B.Likely High - 6* Valuation undertaken* Council to consider and 'special value' attributed to property
III.Moderate C.Possible Moderate - 4
STRATEGIC - Service Delivery / Reputation
Manager Integrated Planning,
Property and Assets
* Loss of $ from purchasing building with significant unidentified problems
IV.Major C.Possible Medium - 5* Building Assessment and Condition Reports required. * Building Services & Equipment Report required. * Hazardous Materials Inspection, Report and Register required.
III.Moderate C.Possible Moderate - 4
OPERATIONAL - Financial / Marketing / Customers
Manager Integrated Planning,
Property and Assets
* Payment of inflated price due to vendor knowledge of Councils
III.Moderate C.Possible Moderate - 4* Valuation undertaken.* Report to Council on Vendor's price expectations* Report to Council on any Special Value attributed to land
III.Moderate C.Possible Moderate - 4
Change management and physical relocation
PEOPLE - Perceptions of ‘Personnel’ / Morale or Satisfaction
GMD* Failure to adequately consult with staff re: significant changes to work environment &
processesII.Minor B.Likely Moderate - 4
* Staff consulted with throughout process and their ideas and requests integrated where ever possible.
II.Minor D.Unlikely Low - 2
PEOPLE - Injury and Disease (includes workers and community)
Project Manager
* Failure to identify existing OHS Issues and action them as part of the relocation/refurbishment
III.Moderate B.Likely Medium - 5
* Staff Communication Plan developed * Staff to be consulted with throughout process and their ideas and requests integrated where ever possible to eliminate or treat risks identified.
III.Moderate C.Possible Moderate - 4
STRATEGIC - Service Delivery / Reputation
GMD* Failure to adequately notify community of disruption to Council Services
IV.Major C.Possible Medium - 5* Need to prepare detailed community information and communication package to be delivered progressively over period leading up to the works being carried out
III.Moderate D.Unlikely Moderate - 3
COMPLIANCE - Legal
Project Manager
* Failure to conduct workplace inspection before handover to staff
IV.Major C.Possible Medium - 5 * Conduct workplace assessment before handover back to staff IV.Major C.Possible Medium - 5
COMPLIANCE - Legal
Project Manager
* Failure to amend emergency evacuation procedures and signage
IV.Major C.Possible Medium - 5* Establish internal relocation team from Building Services * Undertaken as part of staff relocation process
IV.Major C.Possible Medium - 5
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