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


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


24388 83512 DC dc KMC CER 26102012 ii

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


24388 Capital Expenditure Review 1

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.



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.



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.



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;



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.



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



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



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



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



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



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.



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



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



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



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



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



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



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



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.



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.


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



$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.



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.



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.


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



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


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.



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%


Rank 2 1

Minus

20%


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%


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



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.



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



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



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



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



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.



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,



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.



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.



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.



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.



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.



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.



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.



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.



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



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.



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%.



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.



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



Issue: C



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



Issue: C



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



Issue: C



CorporateCorporateCorporateCorporate





Date Interviewed:

POSITION

OCCUPANT


A B C D E

Finance OF1 6 12.96 77.76

Finance WS1 12 4.5 54


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




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


Civic No No Yes No

Library No No Yes No

Strategy & Environment No No Yes No

Development & Regulation Yes No No No



Issue: C



Finance Storage 1 12 12

Facilities Storage 1 0.4 Storeroom TBC0.4

GIS Storage 1 2.5 2.5

TOTAL 80.77


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







Issue: C



Development & RegulationDevelopment & RegulationDevelopment & RegulationDevelopment & Regulation





Date Interviewed:

POSITION

OCCUPANT


A B C D E

Individual Offices OF1 12 12.96 155.52


Social Dens WS3 44 3.24 142.56




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



Collaborative Club 1 45 45



Rangers No No Yes No

Technical No Yes No No

Corporate Yes No No No







Issue: C



OperationsOperationsOperationsOperations





Date Interviewed:

POSITION

OCCUPANT


A B C D E

Director - Visiting Office OF1 1 12.96 12.96

Individual Hives WS1 2 4.5 9




Nil 0 0 0

TOTAL 0


Nil 0 0 0



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






Issue: C



Strategy & EnvironmentStrategy & EnvironmentStrategy & EnvironmentStrategy & Environment





Date Interviewed:

POSITION

OCCUPANT


A B C D E



Social Den WS1 34 4.5 153




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




Drawing Tables 3 3 9



Corporate No No Yes No

Operations Yes No No No



Issue: C









Issue: C



CivicCivicCivicCivic





Date Interviewed:

POSITION

OCCUPANT


A B C D E


Social Den WS1 4 4.5 18




Nil 0 0 No storage requirement identified in Profile Systems Report0

TOTAL 0





Technical Yes No No No

Community No No Yes No

Council Chamber Yes No No No







Issue: C



Forecast Staff & Support Space GrowthForecast Staff & Support Space GrowthForecast Staff & Support Space GrowthForecast Staff & Support Space Growth





Date Interviewed:

POSITION

OCCUPANT


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%


STAFF AREA TOTAL 171


Storage 1 12.6 1Lm per person12.6

TOTAL 12.6


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







Issue: C



CouncillorsCouncillorsCouncillorsCouncillors





Date Interviewed:

POSITION

OCCUPANT


A B C D E

Mayor's Office 1 30 30

Mayor's PA 1 10 10


STAFF AREA TOTAL 40


Nil 0 0 0

TOTAL 0


Councillor's Room 1 30 30

Councillor's Boardroom 1 15 15








Issue: C



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



Issue: C



WS2 8 8.64 69.12

WS3 60 3.24 194.4

1479.1 TOTAL AREA TOTAL STAFF 251



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



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



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



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


2010/096753 Page 2 of 12 pages

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


2010/096753 Page 3 of 12 pages

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.


2010/096753 Page 4 of 12 pages

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


2010/096753 Page 5 of 12 pages

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


2010/096753 Page 6 of 12 pages

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,


2010/096753 Page 7 of 12 pages

• 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.


2010/096753 Page 8 of 12 pages

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;


2010/096753 Page 9 of 12 pages

• 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.


2010/096753 Page 10 of 12 pages

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.


2010/096753 Page 11 of 12 pages

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.


2010/096753 Page 12 of 12 pages

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.



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.


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


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



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

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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)



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




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



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


Negotiation & purchase of building

COMPLIANCE - Legal


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


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



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



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.




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


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.


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


* 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.



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


2/2 Version: 1

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