SOUTH Gippsland Shire Council could have bought the current library site three times over but is locked into a lease that heavily favours the owners of the site.
The lease has been part of the council’s budget agendas for years, but a lease signed in 1997 for 20 years has meant council is unable to withdraw without extra considerable cost.
Through Freedom of Information, the Sentinel-Times can confirm council is locked into a 20 year lease of $43,230 per year, compounding each year by three per cent, or CPI, whichever is greater until 2017.
On a conservative three per cent increase per annum, council will pay $1.51 million over the 20 year life of the lease.
The property at 2 Smith Street has been confidentially valued at $500,000; it represents a 16 per cent return on investment.
Meanwhile, council has been selling off its surplus land, much of it odd-shaped blocks bequeathed to council in an effort to raise revenue and stave off a rate rise.
Budget discussions and a potential rate rise have been part of discussions even before the current council was elected.
Cr Don Hill successfully urged council to begin a rate review, along with zero-base budgeting. He successfully campaigned for council election on introducing an ‘equitable farming rate’.
The council’s rental agreements and office accommodation has been confirmed as part of council’s pre-budget talks.
“We are wading through the nitty gritty of the budget and have been for a number of months,” Mayor Jim Fawcett said.
“The rating differential group has been meeting since November and just as recently as last Wednesday made a presentation to council.
“On Thursday [February 13] a special meeting will be held to finalise the discussion paper, which will go out to the community and on which we welcome comments.
“We will look at incorporating the results of that discussion paper into our budget meetings.
“In addition our Sustainability Committee, which is just a fancy term for a budget committee, has been meeting once a month for the last three months.
“As part of that committee we have identified some key areas to investigate further.”
Cr Fawcett would not be drawn on what the ‘key areas’ were and whether the library lease was up for review, but noted council accommodation has previously and is likely to continue to be on council’s budget radar.
“Yes, we are looking at rental arrangements and officer accommodation requirements.
“If that includes discussing renewal of leases or otherwise, we will be able to talk about these areas in more detail when we go out to the public for budget comments,” Cr Fawcett said.
CEO Tim Tamlin said withdrawal from the library lease could be more costly than seeing out the last three years.
Asked whether council could justify spending $1.5 million over 20 years for a site worth $500,000, Mr Tamlin warned the lease was legally binding.
“As to whether council can justify the cost, that question should go back to the people who signed the lease all those years ago,” he said.
“The commissioners or councillors probably thought it was a good lease at the time.
“If you asked that same question to the present council, I would expect the answer today might be quite different.
“However, now we have a binding lease.
“A 20 year lease is not that uncommon and with commercial leases you can’t just get out of a lease.”
Mr Tamlin said the council was closely monitoring use, requirements and options for the Leongatha library in preparation for when the lease expires in June 2017.
“We must look at it before the lease expires in 2017. If we don’t, we are restricting our options.”
Those options included building elsewhere, utilising other council-owned properties, leasing different facilities, or re-negotiating the current lease.