over PPP report
Kenneth Davidson, October 30, 2006
WITH public-private partnerships,
the devil is in the detail. In Parliament's Public Accounts and
Estimates Committee report on PPPs, 30 pages that referred to
specific PPP contracts were removed from an earlier draft of the
report before it was tabled in Parliament among a flood of
reports on the final day of sitting before November 25.
Why committee chairwoman Christine
Campbell would agree to the deletion of the most sensitive part
of the report is understandable. She is a former minister in the
Bracks Government and is believed to be a contender for the
position of Speaker of the Legislative Assembly if the Bracks
Government is returned to office.
What hasn't been explained is why
none of the other members of the nine-member committee didn't
complain publicly and loudly about the censored report.
The shadow treasurer, Robert Clark,
was responsible for the Opposition's acquiescence to removal of
the most important and damaging section of the report.
Clark could have insisted on the
relevant pages being re-incorporated into the report or, if the
Government members used their numbers to support the position
taken by Campbell, exercised the Opposition's right to produce a
Clark did not take the opportunity
to point out the Government's cavalier attitude to spending
taxpayers' money by insisting on the inclusion of the details of
contracts such as the County Court redevelopment, Southern Cross
Station redevelopment and the already highly sensitive buyback
of government concession notes worth some $2.2 billion for $900
million from the operators of CityLink to gift the franchisees a
return of 11 per cent.
In a telephone interview with Clark
last week, he said he wasn't prepared to fight Campbell over the
excised pages because from the time she showed the censored
draft to the committee to the time it had to be printed to be
tabled in Parliament, the committee had no opportunity to check
whether the pages were "factually correct". Had they not been,
the Opposition may have been "exposed to criticism".
The important thing, said Clark, was
that the report contained the recommendations that the
Opposition wanted, and it was important to get these out. Maybe.
It is worth noting that the inquiry into PPPs extended over two
parliaments and committee members also travelled to Europe and
interstate in pursuit of the report's findings.
At the very least, committee members
should have complained about the behaviour of Campbell, who sat
on the edited draft report for more than a month before showing
it to the committee — too late for members to read, digest and
question what they were expected to sign off in the report.
The behaviour of Campbell, and the
lazy, mushroom-like acquiescence of the committee members, makes
a mockery of the recommendation on governance, evaluation and
accountability arrangements, which stated the Government should
"improve opportunities for parliamentary oversight of
public-private partnership financial arrangements and
The contempt that executive
government holds for parliament is summed up in the contrast
between the committee recommendation that "long-term peppercorn
leases extending beyond the concession period should not be
given to a private consortium, unless it can be clearly
demonstrated that there is a public benefit" and a study by
Ernst & Young.
The latter was designed to promote
more property PPPs such as the County Court, in which four of
the participants were bureaucrats from the departments of Human
Services, Infrastructure and Treasury and Finance.
The peppercorn lease recommendation
only makes sense against the details of the County Court PPP
contract discussion that was censored from the committee report.
Fortunately, the main elements of the contract can be put
together from official documents.
These show that the private partner
(project financier ABN Amro) was given a 99-year lease on the
site on the corner of Lonsdale Street and William Street for a
peppercorn rental of $1 for 99 years. In return, it was required
to build and operate the County Court, to be leased to the
Government over 20 years for $533 million, for a structure that
cost $140 million to build.
At the end of the lease period, the
Government will have nothing. If the Government in 2022 decided
to buy an equivalent building, it would cost about $500 million,
given the inflation in land and building costs.
By contrast, the owners of the
County Court will have a building with a depreciated value of
$108 million on prime land in the CBD-leased site for a further
79 years, for a peppercorn rent.
The deal is a scandalous waste of
taxpayers' money, and the major beneficiary was the Packer
family's Challenger Financial Services Group.
Contrast this with the Ernst & Young
report, which said this property deal "ranks as one of the most
innovative … the state purchases court facilities on the basis
of time used, i.e. the volume risk is transferred to the private
sector, and the facility does not revert back to the state at
the end of the contract, i.e. residual risk is also
Yes, you read correctly. Taxpayers
have been spared the risk of having a redundant building on
their hands if crime abates. (In that unlikely event, wouldn't
the rational response be to sell the site, which would probably
be worth some $300 million?)
The mind boggles at the possibility
of negative property values emerging in the CBD in the next 20
years. It is only conceivable in the context of events so
terrible and so remote that the negative value of the property
would be trivial by comparison, if it registered at all.