Fed: Govt property sale program lashed by Audit report

AAP General News (Australia)
08-01-2001
Fed: Govt property sale program lashed by Audit report

By Jim Hanna, Economics Correspondent

CANBERRA, Aug 1 AAP - An independent report into the government's property sales programs
found it was set to cost taxpayers millions of dollars more in expensive rental agreements
than it raised.

The Australian National Audit Office (ANAO) report raises serious questions about how
the government conducts one its core policy initiatives - selling assets to repay government
debt.

The report into the Commonwealth Estate Property Sales Program criticised the sale
and leaseback arrangements of several government buildings by the Department of Finance
and Administration (DOFA).

The Australian Geological Survey Office building in Canberra, for example, was sold
in May last year for $152.4 million.

But taxpayers will pay $265 million over the next 20 years to rent the building back
from its new owners, the report found.

The Department of Foreign Affairs would pay 11.5 per cent of the sale price of its
purpose-built RG Casey building near Parliament House to rent it each year under a new
lease, it said.

The report was also critical of the department's 15 per cent "hurdle rate", the minimum
rate of return a property must achieve to be deemed efficient enough to keep.

It said a 10 per cent hurdle rate was more realistic, but many properties earmarked
for sale were already achieving that rate or better.

"ANAO's analysis indicates that if a hurdle rate of 10 per cent was applied, only eight
of 59 properties would have been scheduled for divestment, with a book value of $232 million,"

it said.

By using the higher hurdle rate, the government has been able to sell 56 of those properties
for $983 million in the three years to April 2001.

The report also said the hurdle rate was more than double the interest rate the government
paid on its debt, based on the monthly average Commonwealth bond rate for the past four
years.

This was described as monumental financial incompetence by opposition MP David Cox,
whose inquiries into the sale and leaseback of the RG Casey building led to the ANAO review.

"The reason the government wanted the upfront money from property sales was that it
wanted to be seen to reduce debt," Mr Cox said.

Finance Minister John Fahey defended the hurdle rate, saying the government decided
that scarce capital should not be tied up in bricks and mortar.

"It becomes a little arbitrary what the rate might be if there's a better use of your
capital," he told AAP.

But opposition finance spokesman Lindsay Tanner said the federal government's ideological
obsessions have cost taxpayers millions of dollars.

"It has sold assets to make short-term financial improvements at enormous cost to the
taxpayer in the long run," he said.

The report also criticised other key aspects of the program, saying more could be done
to protect taxpayers' interests.

But DOFA viewed its role as implementing "a property divestment program endorsed by
ministers and that it was not charged with the role of protecting the overall interest
of the commonwealth," it said.

Mr Fahey said defended the department, saying cabinet made a decision and it was the
DOFA's job to carry it out.

DOFA rejected all seven of the report's recommendations.

AAP jph/jnb/br

KEYWORD: PROPERTY NIGHTLEAD

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