Taxpayers may be left hundreds of millions of dollars out of pocket following a valuation dispute over buildings in Barangaroo South, Sydney.
The Supreme Court recently ruled in favour of property group Lend Lease after it filed a claim against the government’s Barangaroo Delivery Authority. The court ruling followed months of disagreement over how the land should be valued once building at Barangaroo South is complete.
The government had promised that a $1 billion investment in public space in Barangaroo would be delivered at no cost to the taxpayers, expected to be paid for by returns from the commercial precinct. The ruling meant that fully recouping the funds was now unlikely, and the Barangaroo Delivery Authority confirmed they have appealed the decision.
The dispute began when, in exchange for developing commercial, retail and residential buildings at Barangaroo South, Lend Lease agreed to pay the government a series of fixed payments believed to total about $450 million and so-called ''value-share payments'' based on land values.
The contributions were expected to cover about $1 billion in works, but the court ruling means the value share payments paid by Lend Lease will fall far short of government expectations.
The BDA argued those payments should be included when calculating the land values, because they formed part of the project's cash flow, while Lend Lease argued that the contributions were a funding arrangement to finance construction costs.
A source from the BDA has said: “We believe we have strong grounds to appeal and are doing so. As the matter is again before the courts, it wouldn’t be appropriate to comment further.”
An Auditor-General's report in December warned big cuts to the value share payments may affect the BDA's ability to fund the public domain and infrastructure, warning that other sources of revenue would be needed to “deliver the site at nil cost to taxpayers”.
The government may now be seeking to make up the shortfall through future Barangaroo development, including but not limited to a luxury hotel-casino owned by James Packer. Another alternative may include curbing the much touted plans for a new headland park.