Penny Webster: Auckland Council's HQ - good value despite repair bill

This building offered the opportunity to reduce accommodation costs, increase productivity and deliver a substantial return on the council's investment through capital gains. Photo / Jason Oxenham

Opinion

The decision to purchase 135 Albert St for the Auckland Council's central city headquarters will continue to deliver substantial value for money for ratepayers and productivity gains for staff - even with the cost of additional repairs.

In December 2011, it became clear that council's central city accommodation was no longer viable or providing value for money for ratepayers. Staff were spread across seven locations; leases were expiring on some offices, other offices had significant safety issues, and staff were wasting valuable time moving between locations.

The chief executive was given delegated authority to negotiate and complete the purchase of 135 Albert St.

This building offered the opportunity to reduce accommodation costs, increase productivity and deliver a substantial return on the council's investment through capital gains.

The council undertook extensive due diligence before purchasing the building, as well as the normal legal checks and structural reviews. This work identified the potential for around $4.2 million of remedial work required on the cladding. After settling on a discounted purchase price of $104 million, the additional $4.2 million was set aside in future budgets for repairs.

In late July 2012, councillors were advised verbally of the acquisition and the decision was then publicly announced. This was formally reported to an open meeting of the strategy and finance committee the next month, with the report clearly referring to the need to budget $4.2 million for repairs to the stone cladding.

The council was aware that the cladding would need ongoing maintenance over the life of the building.

It was only when the council had full ownership of the building and had begun fit-out work that the full extent of the need for cladding remedial work became clear.

While the cost of the remedial work will not be insignificant, it needs to be viewed in context.

While the cost of the remedial work will not be insignificant, it needs to be viewed in context. When the council bought the building in 2012 it was estimated that this move would save ratepayers $102 million in the first 20 years, compared to previous leased accommodation.

The move has secured staff productivity gains by reducing the dead time of staff moving between locations.

In a sign of the strong commercial interest in our building, we have received numerous unsolicited offers to buy the building at prices in the region of $200 million-$250 million.

The doubling of the value of the building provides future options for the council to release the capital at a later stage.

Purchasing 135 Albert St remains a sound decision for the council to have taken. It followed a strong business case and a robust process.

While unforeseen costs will sometimes occur, they should always be seen in the wider context, which in this case remains good for the council and good for ratepayers.

Debate on this article is now closed.

Penny Webster is chairwoman of Auckland Council's finance and performance committee.