At the 10 April Council Meeting, MidCoast Councillors voted by nine (9) votes to one (1) to advance the $40 million Masters Office centralisation project to the Design stage which is estimated to cost around $1 million. Councillor Epov was the only one to vote against it and Cr McWilliams was away.
Readers may recall that back on 6 February, Council had voted, after considerable pressure from the community, (including a TV commercial and over 400 people attending a peaceful rally outside the Council Chamber) to have a further Cost Benefit Analysis Report (CBA) carried out, but one which: “excluded the subjective savings associated with staff ‘culture change’ and concentrate on actual realisable savings associated with the new work environment.
This meant that those mythical “staff culture change” benefits previously asserted to the community by Council’s Director of Corporate Services, Steve Embry in support of the Masters proposal for over 12 months, and included in all previous Cost Benefit Analysis Reports, (estimated at $76 million in value over 20 years) had to be dumped from the new Balmoral study.
Commissioned by the Staff
The new CBA report, was commissioned by staff without any consultation with the Councillors.
The Staff also provided the critically important ‘Source data’ (which has not been independently validated) for the study, which many in the community have seriously queried and in some cases now debunked.
So the fox was still ruling the chicken house (or the warehouse) and the Balmoral Group was selected and appointed to prepare a new Cost Benefit Analysis as the “independent” third party expert.
Balmoral confirms $40 M cost
Balmoral’s report confirmed what many in the Community have been asserting for some time, that the project would cost at least $40 Million dollars and they reported an insignificant Benefit Cost Ratio (BCR) of only 1.22 for the Masters warehouse centralisation option.
The so called “Campus Model” was costed on three Council owned sites: the Taree Office, the Forster Office and the MidCoast Water Office in Forster. The Gloucester Office (and all the costs) were not included in the Campus Model (nor the Masters model) nor was MidCoast Water building in Taree, which will soon be returned to Council. Also not included was the cost to operate a dedicated Service Centre of four staff at the new Forster Library (if it ever gets built) after the move to Masters at an estimated cost of $280,000 just on staff alone).
The Campus Model appeared to be heavily inflated with questionable costs in an attempt to make it appear less attractive. Balmoral estimated a cost for the Campus Model of $30,686,938 (Net Present Value) and a Benefit Cost Ratio (BCR) of 0.60.
So Councillors were only given the classic ‘Yes Minister’ option of picking from two highly inflated options; the $31 Million Campus model or the glossed up $40 Million Masters warehouse centralisation. A choice between three rotten apples and a toxic and festering water melon.
No other options nor even derivatives of the two options were considered, such as the ‘do nothing option’, that is, maintaining the status quo for a few years until the newly formed Council had stabilised.
The obvious conclusion formed by most rational residents, is that we can’t afford either model so let’s focus on our community’s needs and dump both models and go back to the drawing board.
A $31 million spend versus a $40 million (at this point) spend by a poor Council, with very limited sources of income (except for taxing the struggling ratepayers even further), which is struggling to provide adequate services as it is, would have been a more sensible decision.
Yet it appears the overwhelming majority of our Councillors are wedded to this proposal, regardless of the costs as it has now become a question of credibility and face saving.
In his speech opposing the proposal going ahead, Cr Peter Epov revealed that the CBA Consultant, Balmoral, had told Councillors in a private meeting [before the Council Meeting] that it was usual practice to have ‘a do nothing model’ in the Study for comparisons. Council ignored this.
Back in December 2017, Epov had argued that the original CBA should have included ‘a do nothing option’, but that was discounted by Mr Handford and not supported by other Councillors.
Cr Epov also identified that the General Manager from Balmoral clearly stated in that meeting that the benefits from either proposal were marginal.
Rabbit from the Hat
While the Council resolution called for the exclusion of “subjective savings”, and to “concentrate on actual realisable savings”, the new rabbit out of the hat by Mr Embry, was a new “staff productivity gain” estimated at 7% for the Masters site after a $40million spend, but on the Campus model no gain whatsoever in productivity from a potential spend of $31million.
Apparently, the 7% converts to a saving of $25 Million over 20 years, but won’t kick in for at least 7 years.
This new “staff productivity gain” was based on the reduction of 25 staff (apparently all from Mr Embry’s division) over a period of years. However there was no specific data nor details or evidence to support this so called “staff productivity gain” in the CBA and the Consultants were very quick to cover themselves with a qualification in the report that the 7% “staff productivity gain” came from MCC staff.
We understand that in the meeting prior to the Council meeting Mr Embry had suggested to Councillors that the 7% “staff productivity gain” was only a very rough estimate.
If this 7% “staff productivity gain” was excluded then the Masters Warehouse Centralisation proposal would have a BCR of 0.5 and below the Campus Model at 0.6 effectively meaning neither proposal stacks up.
Some much for complying with that Council resolution stipulating the exclusion of “subjective savings”, and to “concentrate on actual realisable savings”!
Other oddities in the Study
The seemingly inflated Campus Model included some questionable costs:
These include – 3 Internet Servers costing $450,000 each for the Campus option (does not include Gloucester) and only one in the Masters option. We understand Council is moving to a ‘Cloud based’ system later this year, so only one server should be required. The two offices in Forster are already connected by a dedicated fibre optic cable so they wouldn’t need two separate servers at $450,000 each.
The CBA was to be limited to three offices, not including Gloucester, yet there was a $150,000 IT allocation for a “Gloucester” Chamber included in the Campus Model.
A new roof valued at $2 million dollars for the Forster Office was costed in for the Campus model, this is more than the valuation for the entire building, clearly an unrealistic economic proposition. And was this $2 million figure included in the valuations?
There was no accurate calculation for the significant compensation that will be paid to the 70 Council staff who live around Forster who will have to commute daily to Taree. A quick back of the envelope calculation, puts it at over $700,000 per annum.
This also by the way equates to 238,820 kgs of additional CO2 emissions.
Then there is the extra cost of petrol, wear and tear to Council vehicles and CO2 emissions for the eighty other Council employees.
After speaking against the recommendation to proceed with the Masters centralisation proposal , Cr Epov tried to move an amendment but the Mayor interrupted Epov part way through reading out his amendment, and refused to accept Epov’s amendment.
We understand Cr Epov will be referring this matter to other authorities.
Epov was asking was that the CBA be put on public exhibition for public submissions and comments, and convene a workshop to investigate other options for the Masters Warehouse, including, but not limited to, a sporting venue and a concert / entertainment arena etc.
In earlier correspondence to Tinonee resident Mr Terry Stanton, which has been widely circulated, Mayor David West had expressly indicated that he would not be voting in support of the Masters Proposal should the projected cost exceed $30 Million.
So on the basis of what can best be described as a flimsy, somewhat slanted and questionable Cost Benefit Analysis Report, MidCoast councillors, bar one, have voted to approve a historic spend of a minimum $40 million dollars.
Contrast this against all the needs, priorities and programs that the community is currently identifying throughout the region in MidCoast Council’s “Community Conversations”.