Department of Treasury and Finance, $55,722,000

Administered Items for the Department of Treasury and Finance, $1,592,537,000

Membership:

Ms Chapman substituted for Mr Griffiths.

Ms Sanderson substituted for Mr Duluk.

Minister:

Hon. J.R. Rau, Deputy Premier, Attorney-General, Minister for Justice Reform, Minister for Planning, Minister for Housing and Urban Development, Minister for Industrial Relations, Minister for Child Protection Reform.

Departmental Adviser:

Mr J. Oliver, Chief Executive, HomeStart Finance.

The CHAIR: We are continuing with the proposed payment for the Department of Planning, Transport and Infrastructure, in addition to the new line of Department of Treasury and Finance with the Minister for Housing and Urban Development, the Minister Assisting the Minister for Housing and Urban Development. I declare the proposed payment open for examination and refer members to the Agency Statements, which are in Volumes 3 and 4. I call on the minister to introduce his new adviser.

The Hon. J.R. RAU: I have Mr Oliver here from HomeStart. I think it is agreed we will commence with HomeStart and then move on to other matters.

The CHAIR: Are you proposing to make an opening statement, minister?

The Hon. J.R. RAU: No.

The CHAIR: Deputy leader, are you proposing to make an opening statement?

Ms CHAPMAN: No.

The CHAIR: In that case, would you like to go to your first question?

Ms CHAPMAN: Yes. I refer to Budget Paper 3, page 85. It refers to commentary in respect of a number of public financial corporations. In particular, I refer to the HomeStart Finance aspects of this page. Incidentally, minister, are there any other references to HomeStart or financial information in the budget, apart from in Budget Paper 3?

The Hon. J.R. RAU: I am advised there is something on page 54.

Ms CHAPMAN: Of what?

The Hon. J.R. RAU: Budget Paper 3, page 54.

The CHAIR: We are looking at page 85, aren't we?

Ms CHAPMAN: No, the minister has just said that there is also a reference on page 54.

The CHAIR: In the same budget paper?

Ms CHAPMAN: Apparently.

The Hon. J.R. RAU: There is a table at the bottom about dividend and tax equivalent—

Ms CHAPMAN: Thank you. Which identifies the dividend summary.

The Hon. J.R. RAU: Yes.

Ms CHAPMAN: I will go back then to page 85, which has the commentary in respect of the distribution to government, which I am looking at. The commentary says:

In 2015-16 HomeStart Finance will make a $26.5 million distribution to government, comprising a dividend payment of $10.9 million and a return of capital payment of $15.6 million.

Can the minister identify what the return of capital payment relates to, and where is it otherwise recorded?

The Hon. J.R. RAU: I am advised there was a special dividend payment of $20 million and a normal dividend payment of $6.5 million, which were then reclassified as a dividend payment of $10.9 million and a return of capital payment of $15.6 million.

Ms CHAPMAN: Why?

The Hon. J.R. RAU: That is a matter you would need to speak to Treasury about, I think.

Ms CHAPMAN: Who reclassified it?

The Hon. J.R. RAU: I do not know. That is the way it is recorded.

Ms CHAPMAN: Yes, but I have not seen where it is recorded in that way. That is the information. On page 54, which you have just referred to, it talks about a $15.5 million budgeted dividend and ITE, which I assume is $15.6 million that is referred to on page 85.

The Hon. J.R. RAU: It should be $15.6 million, I think, yes.

Ms CHAPMAN: That is neither here nor there. I am trying to identify what the return of capital payment of $15.6 million is.

The Hon. J.R. RAU: I will have to try to take that on notice to find out why it is described in those ways. I do not know off the top of my head.

Ms CHAPMAN: Well, anyway, what is it and why was there a train change in that and whether the HomeStart administration, which I assume is the person sitting next to you—

The Hon. J.R. RAU: Mr Oliver, yes.

Ms CHAPMAN: —has either requested it or approved it in some way—

The Hon. J.R. RAU: I will find out whatever it is.

Ms CHAPMAN: —as to what the situation is and, as I say, why was it changed? In any event, it is still making provision for a capital payment to the government by way of dividend, which historically this corporation has done. I understand that, but if we could have some clarification as to what the actual money was that went back to government as a result of the distribution and what is budgeted for this year.

The Hon. J.R. RAU: We will take it on notice, yes.

Ms CHAPMAN: Thank you. I have no other questions.

The Hon. J.R. RAU: Nothing else?

Ms CHAPMAN: No, not on that issue.

The CHAIR: HomeStart has finished completely.

Ms CHAPMAN: Just before we move to Renewal SA, can the minister identify, under the Affordable Housing descriptor here, what he is talking about.

The Hon. J.R. RAU: Good question. I do not know.

Ms CHAPMAN: We were not able to ascertain anything in the actual—

The Hon. J.R. RAU: I am not sure where that came from. I did not prepare this document, but I do not know.

Ms CHAPMAN: My colleague in the committee wishes to ask some questions in relation to the Renewing Our Streets and Suburbs initiative, which relates to Renewal SA, which is really in the next element.

The CHAIR: We are allowing the HomeStart adviser to leave. The deputy leader wants to move to Renewal SA, so we are getting in a new batch of advisers.

Departmental Advisers:

Mr J. Hanlon, Chief Executive, Renewal SA.

Mr M. Devine, General Manager, Renewal SA.

Ms G. Vasilevski, General Manager, People and Place Management, Renewal SA.

Mr M. Buchan, General Manager, Corporate Services, Renewal SA.

Ms F. Delbridge, General Manager, Strategy and Innovation, Renewal SA.

Ms R. Ager, Director, Office of the Chief Executive, Renewal SA.

Ms CHAPMAN: Just before we commence on Renewal SA, which is where I think the advisers around you now are from, in the Affordable Housing component there is currently a role of Renewal SA's area of responsibility to receive, repair, sell and generally manage the asset base formerly of the Housing Trust stock.

The CHAIR: What page are you on?

Ms CHAPMAN: I am just trying to clarify something. The agenda provides, Madam Chair, that after HomeStart is Affordable Housing. That is not able to be identified by the minister anywhere in the budget.

The CHAIR: I am just not keeping up with you, that is all. There is no need to adopt that sort of supercilious tone. I am just trying to keep up with you. So, you are fishing for an answer?

Ms CHAPMAN: No, he has already given the answer, and he says he does not know where it is. What he has done is introduced his members of Renewal SA—

The CHAIR: That was with your consent.

Ms CHAPMAN: That is right, and that is why am going on—

The CHAIR: Keep a lid on it.

The Hon. J.R. RAU: If it helps people, I think page 76 is the relevant page in terms of what we are able to help people with.

Ms CHAPMAN: Sorry, page 76 of?

The CHAIR: Budget Paper 3.

The Hon. J.R. RAU: Page 82 is the capital program, 76 is the general operating.

Ms CHAPMAN: Of what document?

The CHAIR: Budget Paper 3.

The Hon. J.R. RAU: No. 3, pages 76 and 82. Just to explain to members of the committee, my area of responsibility and Renewal's area of responsibility encompass the property of the trust, or Housing SA, but the matter of the tenancies of those are managed by minister Bettison and the maintenance program is managed by minister Bettison's people, but the assets under that are our issue.

Ms CHAPMAN: I understand that. In relation to the asset base, my colleague the member for Adelaide wants to ask questions about that. I am happy for that to be in the Renewal SA line but, for the purposes of identification, whilst there is a reference at page 76 to Renewal SA in respect of its operating performance, and there is a commentary there, there is also a chapter, I suppose, in respect of Renewal SA specifically, commencing at page 80, and I will be dealing with that in due course. Before we move on to that, there is also—

The Hon. J.R. RAU: There is a reference on page 82 to the Housing Trust as well, I think.

Ms CHAPMAN: Yes, there is a reference under the capital investment.

The Hon. J.R. RAU: Yes, that is right; that is Renewing our Streets and Suburbs.

Ms CHAPMAN: In any event, I will defer now to my colleague the member for Adelaide, who has some questions for you about that.

Ms SANDERSON: I will use either that reference, page 82—

The CHAIR: Member for Adelaide, you have a question?

Ms SANDERSON: I do. Either from that reference paper, otherwise Budget Paper 4, Volume 1, page 116, highlights 2014-15, point 1, transfer of homes, can the minister outline the process and timing of the further 3,900 properties to be transferred—and that is part of the 5,000 that were to be transferred within five years, the government policy?

The Hon. J.R. RAU: We are trying to improve the engagement with the not-for-profit sector in this area. I would personally like these things to move along briskly, but we need to observe due process. At the moment, 1,100 properties have gone to the community housing sector—that is currently in progress, that is being dealt with—and we are putting together a program to deal with the other 3,900.

Ms SANDERSON: That will still be in time to meet your policy of 5,000 homes transferred by June 2018?

The Hon. J.R. RAU: I am advised that we appear to be on track to do that, yes.

Ms SANDERSON: Can the minister inform the committee how the government plans to meet the COAG agreement they signed in November 2009 of up to 35 per cent of social housing stock to be managed by community housing providers? As at 30 June 2014, that percentage was 14.33, so the 5,000 by June 2018 will come nowhere near that agreement.

The Hon. J.R. RAU: I am advised that we are hoping to be able to get to that by 2018. Clearly, we do have, though, a lot of work to do in that space—no question.

Ms SANDERSON: How would the minister address the net cost to the department that was incurred with the first 1,100 transferred so that we do not end up losing a lot of money out of Housing SA with the transfers?

The Hon. J.R. RAU: What cost to the department?

Ms SANDERSON: There is about a $5 million net loss because the cost of rent you lost by transferring the properties was outweighed by the expenses.

The Hon. J.R. RAU: If you are running a property management business with substantially less property to manage, clearly that suggests that there can be efficiencies in the way in which you manage what remains. Those are issues that I am sure the agencies are perfectly well aware of, and they will need to consider how they are going to manage those things.

Ms SANDERSON: Can the department outline how they are planning to do that? If they are transferring 5,000 out of 45,000, so that is more than 10 per cent, then they need to reduce overheads by 10 per cent, and there has been no change to staffing levels.

The Hon. J.R. RAU: How that is managed is a matter for them. I am advised that, in relation to the bit of this for which I have responsibility, there have been identified savings, operating costs and FTE reductions.

Ms SANDERSON: I look forward to seeing them in next year's budget. I have a second question, referring to Budget Paper 4, Volume 1, page 115: Social Housing, and again, stock transfer to Renewal SA. Just to give background, I quote from the Governor's speech in 2015:

Within 15 years, my government will renew all Housing Trust stock that predates 1968. More than 4,500 old homes located within 10 kilometres of the city will be renewed by 2020.

Given Manitoba, Playford and Pope Court properties located in the city were built in the 1970s and therefore after the 1968 criteria for redevelopment within 10 kilometres of the city by 2020, can the minister confirm these properties will not be redeveloped?

The Hon. J.R. RAU: I am not in a position to rule out any redevelopment because it may or may not be that, at some point in time, any of the assets that the state might hold, whether through Housing SA or another entity, are appropriate for redevelopment, and that will be considered as and when it occurs. All I can say is that, by reason of them not being pre-1968, they are not definitely in the target zone, that is all.

Ms SANDERSON: Could you confirm the current status? They are just up in the air? They are not a yes, but they are not a no?

The Hon. J.R. RAU: If there were any move to do anything about those properties, the residents would be the first people to know about it.

Ms SANDERSON: They were last time and, as you would have seen, it was a debacle, so that is why they are particularly sensitive on this issue.

The Hon. J.R. RAU: In respect of those particular properties, if there were to be any part of those properties involved in anything at some point in time in the future, the residents would be the first to know about that. Just to make my point again clear, they are not on the list of properties which will definitely be redeveloped.

Ms SANDERSON: But they are not off the list, are they?

The Hon. J.R. RAU: No, but no government asset is irretrievably off the list for potential redevelopment.

Ms CHAPMAN: Page 80 of Budget Paper 3 refers to the net contributions from Renewal SA to the government, indicating that there was an estimated result of dividends of $11.6 million. What was the result?

The Hon. J.R. RAU: All I am able to be able to say with some clarity is that Renewal did not pay a dividend.

Ms CHAPMAN: You will see on page 80, at about point 5 in the schedule, a description of a table of net contributions from Renewal SA to the government in millions, and it has income tax equivalents (this is for the estimated result for 2014-15), zero, plus dividends, $11.6 million, and then less grant subsidies and CSOs, $21.2 million. So, we have a net contribution to government of minus $9.6 million, but I am just talking about the dividend first. The estimated dividend there was to be $11.6 million: I am simply asking what it was in the end.

The Hon. J.R. RAU: We have some issues here about the way you describe things. I think it is best if I get back to you with something in writing about this. The gist of it is that I am advised that no dividend was actually paid to the state.

Ms CHAPMAN: I am sure that is right, but I am referring to it in its description because of the way it has been described in the table. It is described as a dividend. Obviously, after there is a reduction of these grant subsidies, etc., there is actually a minus—I understand that. Because this is an estimated result of these figures, all I am asking at this point is to clarify what happened six weeks later after this budget was published on 30 June. What were the real figures in the end?

The Hon. J.R. RAU: I am advised that there was a notional earning of $11.6 million, which it was decided after the publication of the budget papers would not in fact be paid. That is what I am advised.

Ms CHAPMAN: Right. And that notional dividend of $11.6 million is referred to also in the commentary, in the second sentence of the second paragraph:

However, Renewal SA is projecting to make special dividend payments of $11.6 million in 2014-15 and $5.3 million in 2015-16, mainly due to the anticipated return of net proceeds associated with the sale of its commercial properties.

So, you are saying that after the budget paper was published the decision to issue the proposed dividend of $11.6 million somehow was cancelled or vetoed?

The Hon. J.R. RAU: That is what I am advised, yes.

Ms CHAPMAN: By whom?

The Hon. J.R. RAU: The situation is that the board, Treasury and my office (me) were involved in that matter. Effectively the situation was, in my view, that, given the overall position of Renewal's balance sheet, it was not prudent to be making a dividend payment at this point in time.

Ms CHAPMAN: When did this occur?

The Hon. J.R. RAU: I will have to find out.

Ms CHAPMAN: Minister, this is rather an alarming piece of information, that we now have a different situation from what is published in the budget papers. It is not uncommon for Renewal SA, because every year since its existence there has been a deficiency and there have been explanations given as to excuses for why it has not made any money. But in this instance there is a published statement of a proposed dividend—in fact, an expectation that there is going to be a further dividend in our current financial year—and now you are telling us that, sometime in the last weeks, there has been a meeting between your office and the Treasury and some other party (I think you said the board) who have decided that they would cancel that.

The Hon. J.R. RAU: All I can tell you is that my understanding is that there has been consultation between Treasury and the board and it has been accepted that this payment would not proceed.

Ms CHAPMAN: Have you made any contribution to that decision as minister?

The Hon. J.R. RAU: I agree with it. I have not got in front of me the actual pieces of paper that relate to this, but I have a recollection of being concerned, as I said, given the overall performance of Renewal, about the circumstances of what amounted to a property sale return should be paid as a dividend rather than coming back in as part and parcel of the assets contributing to offsetting any liabilities of Renewal.

Ms CHAPMAN: Having accepted that there may be some justification for changing the decision as to dividend payments based on the parlous state of the finances of Renewal SA, why has there not been any announcement by your government, or you indeed, as to this very significant change in the budget arrangements and indeed the information about what money was to go from this entity to government?

The Hon. J.R. RAU: I do not know what Treasury have wished to say about this matter. As far as I was concerned, this is a satisfactory outcome and an appropriate outcome from the perspective of Renewal.

Ms CHAPMAN: It may have been, minister, and I can ask the Treasurer when he comes to this committee next week, but I am really asking for your side of the story. You are the one who is in charge of Renewal SA and responsible for it. There may be a very good, prudent determination that what has been published in this document presented to the parliament, if there is to be a significant change—and we are talking at least an $11.6 million change—as to why there has not been any statement, even from your side. I will ask the Treasurer next week about what his explanation is for not making any public statement on this. But if there is a valid reason, as you suggest, a prudent reason, given the financial circumstances of Renewal SA, why has there not been a statement about this publicly?

The Hon. J.R. RAU: I honestly do not know that this, but for the fact of this being caught up in the budget process, would be something of any interest generally to people—that is, an ongoing adjustment in the balance sheet of Renewal SA. I accept your point that it would have been better had this matter been resolved before the budget papers were published. Clearly, that would have been better than having them published reflecting this expectation and us subsequently resolving that that was not going to happen.

I accept that it would have been better had that not occurred but, from my point of view, given the fact that Renewal in my view was not in a position to be paying dividends given its other financial circumstances, it was entirely appropriate that there be a conversation with Treasury. I am personally pleased that Treasury accepted that this outcome was the appropriate outcome, and I think in terms of good government financing it is the appropriate outcome.

Ms CHAPMAN: Minister, I am not asking questions about whether it was a prudent decision to make; I am asking a question about why there has been no public disclosure since this budget has been published of this event, which is an $11.6 million difference. In fact, even coming to this committee, you could have told us what the situation was.

It is concerning to me that every year Renewal SA seems to be in a parlous state; that is nothing new to me and probably to this committee, because we have raised it a number of times. What is concerning to me is that there is a published position and there apparently has been some change. You say that the Treasury accepted that they would not require that dividend to be paid, presumably at the request of somebody, either the person sitting next to you and/or he and the board.

The Hon. J.R. RAU: Can I just make this clear: since I have been minister for Renewal, I have sought to come to an understanding as to the financial circumstances of Renewal. I have expressed on various occasions to Renewal staff, senior executives, and to Treasury people, my view that we needed to make some improvement in the performance of Renewal.

So I have been attempting, with the very able assistance of Mr Hanlon and his team, to try and get that happening. The exact mechanism by which this particular matter was dealt with, I would need to go away and do some delving on, because I remember being concerned about this. I remember agitating this with Mr Hanlon, and I remember the fact of this having been raised with Treasury. As to exactly when it came on and off the books, I would need to do some checking. But I say again, I think this is prudent, sound, public asset management.

Ms CHAPMAN: The $21.2 million which is in grants, subsidies and CSOs, does that remain?

The Hon. J.R. RAU: I am advised that it does, yes.

Ms CHAPMAN: So in essence then, without the obligation to pay the dividend, there should be near enough to, perhaps—well at least no loss as far as net contribution to government goes. There is not a call on them back or a loss on the balance sheet. It would wipe out the $9.6 million deficit at the end there.

The Hon. J.R. RAU: I am advised basically as follows: page 80—

Ms CHAPMAN: On page 80, yes.

The Hon. J.R. RAU: The expectation was that there would be a $300,000 loss.

Ms CHAPMAN: Where is that?

The Hon. J.R. RAU: Net contribution to government line, page 80, 2014-15, minus 0.3—

Ms CHAPMAN: Yes.

The Hon. J.R. RAU: In fact, the estimated result is minus 9.6.

Ms CHAPMAN: If the dividend was paid.

The Hon. J.R. RAU: Yes, and the dividend has not been paid.

Ms CHAPMAN: So what I am saying is, essentially with the dividend not being paid there would be no net liability. It should show that there is about a million dollars left.

The Hon. J.R. RAU: I think the problem is that this is not the whole balance sheet for—

Ms CHAPMAN: Well, that is obvious, but we are having to work with what we have got.

The Hon. J.R. RAU: Balance sheets are not my long suit, but what I am told is originally it was expected that the state would be contributing $300,000.

Ms CHAPMAN: Yes.

The Hon. J.R. RAU: Then it was anticipated they would be contributing $9.6 million.

Ms CHAPMAN: Which is the sentence underneath.

The Hon. J.R. RAU: Yes. And then, ultimately, it has turned out they are contributing $21.2 million.

Ms CHAPMAN: Yes; they were going to do that anyway.

The Hon. J.R. RAU: Yes.

Ms CHAPMAN: They were going to do that anyway. Can you provide to the committee a rewritten schedule on Renewal SA as to what the actual position is, with the correct commentary, as a result of this decision that was made arising out of the—

The Hon. J.R. RAU: We will get you something back, yes.

Ms CHAPMAN: I am talking about a correction of everything that is on page 80 under Renewal SA, as a result of the changes.

The CHAIR: On table 5.4?

Ms CHAPMAN: No, the commentary included, because the commentary is also now incorrect to that extent.

The Hon. J.R. RAU: I will ask the people concerned to provide a document which does that.

Ms CHAPMAN: Thank you. Having determined that there is not going to be a dividend paid for this financial year, what is the change, if any, to the proposed estimate dividend to be paid in this financial year of $5.3 million?

The Hon. J.R. RAU: All I can say is that I am advised, at the moment, that $5.3 million is in the budget. It is anticipated it will be made up by the sale of particular items.

Ms CHAPMAN: What?

The Hon. J.R. RAU: I do not think we want to announce the particular items, but there are particular properties that are—

The CHAIR: But this will all be part of the revised piece of paper that you are going to bring back, is it not?

The Hon. J.R. RAU: Yes, we can do that.

The CHAIR: Can we leave it at that?

Ms CHAPMAN: Alright. Let me just ask this then: $5.3 million is going to be left there as an estimate of the dividend, in anticipation that you will have certain assets that will be sold that will enable that to occur as a net amount of money that is prudent to pay to the government. But, even under that arrangement, under the current schedule, there would still be a deficit of $4.8 million.

So, unless Renewal SA is going to make a reasonable amount of money, if it continues in its current form, it has no hope of making that $4.8 million, and the government is going to be called upon to pay another $5 million in—or, in other words, a set-off against the dividend that it anticipated. So, even at best, under these figures, you are still at zero as far as a contribution goes to the government. That is the best position.

The Hon. J.R. RAU: Yes, I am advised that, at this stage, there is a reasonable—expectation might be too strong a word—

Ms CHAPMAN: It might be a bit strong; we have heard that before.

The Hon. J.R. RAU: —anticipation perhaps, or aspiration—

Ms CHAPMAN: Wish and a prayer.

The Hon. J.R. RAU: —aspiration that there will be sufficient funds by that stage to make that payment.

Ms CHAPMAN: That is to make the payment to the government and attend to the shortfall of $4.8 million?

The Hon. J.R. RAU: Yes. As long as the position of Renewal does not deteriorate further.

Ms CHAPMAN: The position of the what?

The Hon. J.R. RAU: The position of Renewal does not deteriorate further.

Ms CHAPMAN: Yes, well, that has not been comforting in the last three years, I would have to say. I appreciate that you have not been in charge and I appreciate that the person sitting next to you has not been responsible all that time, but I make the point that it is alarming at best that you are now presenting to this committee with a different arrangement.

We can talk about that being concealed but there is nothing so far that has given me any comfort that we are going to be in any better position at the end of this current financial year, because every year we are given promises about how they are hoping that the commercial sales are going to increase and the like.

Even without that news, I am concerned as to the presentation here, which has included significant grants from the government—just in this last financial year, in the 2014-15 year—being required, given that there has been the sale of significant assets in this last financial year that we know of. In fact, as of last year there were promises of significant moneys to come in, one of which was the option which cemented into a contract on the sale of the Gillman property.

That gave us at least some comfort as a committee that there was money forthcoming that would help deal with the circumstances of Renewal SA. So I am a bit concerned as to what the situation is, even as published. My question is: since 1 July last year to 30 June this year, how much money has Renewal SA received from ACP or any of the parties of ACP in respect of the Gillman project?

The Hon. J.R. RAU: I am advised that the answer to that is zero.

Ms CHAPMAN: Has there been any money paid by ACP or any of its partners to the government since 1 July this year?

The Hon. J.R. RAU: I am advised no.

Ms CHAPMAN: Is there anyone providing any deposits on to that site—that is, deposits of fill on to that site—and are any fees being paid for that at present?

The Hon. J.R. RAU: I am advised no, because there is no access available to the site.

Ms CHAPMAN: So at the moment it is generating no income.

The Hon. J.R. RAU: No income.

Ms CHAPMAN: And you have received no capital payments.

The Hon. J.R. RAU: No capital payments.

Ms CHAPMAN: Are you anticipating receiving any capital payments in this financial year?

The Hon. J.R. RAU: That is the expectation.

Ms CHAPMAN: How much?

The Hon. J.R. RAU: The expectation is that the first option, which is an amount of $45 million, will be exercised at some time during this financial year.

Ms CHAPMAN: Is that $45 million dependent on part of the conditions of that contract to conclude the rezoning of the site by the government?

The Hon. J.R. RAU: Yes.

Ms CHAPMAN: And I think you gave a statement to the parliament—

The Hon. J.R. RAU: Just so I am clear, I will explain this. There are several conditions. The first one is that the ACP put a deposit of a plan for land division over stage 1 within six months of that date subject to a DPA over the land having been dealt with, and ACP being satisfied that it has the necessary regulatory approvals for stage 1.

Ms CHAPMAN: The first one we have just discussed, and that is on its way, according to a ministerial statement you made a few weeks ago.

The Hon. J.R. RAU: Yes.

Ms CHAPMAN: And you expect that to be available in the next week, month?

The Hon. J.R. RAU: Soon.

Ms CHAPMAN: 'Soon' meaning?

The Hon. J.R. RAU: I do not know: I am not doing it. My expectation is that it will be done soon.

Ms CHAPMAN: And the second component, which is the regulatory obligation, how soon is that—

The Hon. J.R. RAU: I imagine that is a thing like the EPA and suchlike.

Ms CHAPMAN: Is there any expectation of when that is to be concluded?

The Hon. J.R. RAU: I am advised that the expectation is, if you take the finishing of the DPA as the starting point, approximately six months should see all the rest of the matters attended to.

Ms CHAPMAN: It would be your expectation, would it, or at least that of Renewal SA, that it is likely to have that first $45 million by the end of the year?

The Hon. J.R. RAU: It depends when all of these things are completed but, when they are, and as I just explained I have been told, if you take the starter's shot pistol as being the DPA being finished, approximately six months and then there is a 30-day settlement period. It is six months plus 30 days, so we are probably talking early next year rather than late this year, but it could be anywhere in that.

Ms CHAPMAN: At any rate, you are confident enough—at least, on the advice you are receiving, Renewal SA is confident—that it will receive that first $45 million in this financial year and, indeed, it is budgeted to receive it?

The Hon. J.R. RAU: Yes, as best we can tell. I am advised, and I have reason to have some confidence, that in this financial year it will occur.

Ms CHAPMAN: I am assuming that it has been budgeted for.

The Hon. J.R. RAU: It was budgeted for in 2014-15, which is part of the reason for things not being as robust as they might be. Obviously, if it does come in in 2015-16, that does change the budget situation for Renewal SA a lot.

Ms CHAPMAN: One would hope so. In any event, it is your intention that you will identify whether you still think the $5.3 million estimate of what is to be paid as a dividend and, if that is still the position of Renewal SA, that will be published in your revised schedule.

The Hon. J.R. RAU: Yes.

Ms CHAPMAN: I turn to the Adelaide Festival Centre precinct, which is at Budget Paper 4, Volume 3, page 71. Incidentally, it is referred to in Budget Paper 5, if I can just go to that, because it is something that is a little unusual in my observation of these documents. The budget implications of this project are referred to under the category of 'across government' on page 16.

The Hon. J.R. RAU: I think you will find this is actually in DPTI's budget, this particular matter.

Ms CHAPMAN: It shows its face in a number of different portfolios, actually, which is why I want to be clear about where it is.

The Hon. J.R. RAU: It is DPTI because they are, in effect, the project manager so, even though Renewal SA has a role in the sense that it is a landholder and has certain responsibilities in respect of the negotiation of matters between players and suchlike, the actual project management work will not be undertaken by Renewal: it will be undertaken by DPTI. So, if you like, DPTI is the project manager. People like the Festival Centre are clients in a way and some of the money pops up in their budget as well because some of the work that has been done on the Festival Centre is actually internal works, not structural external works.

Ms CHAPMAN: Yes, which raises the question as to why it is not in the DPTI portfolio. It is in this special category of across government, as is the Sampson Flat bushfire response payment.

The Hon. J.R. RAU: I am advised that it is sitting in Budget Paper 4, Volume 3, page 71.

Ms CHAPMAN: That is what I just referred to.

The Hon. J.R. RAU: Yes, there is a total operating impact of $25 million which is the first instalment, if you like.

Ms CHAPMAN: I understand that. That is referred to under the land use planning, $24.9 million.

The Hon. J.R. RAU: Yes.

Ms CHAPMAN: The increase in income is primarily due to the once-off contribution for the construction work at Adelaide Festival Centre precinct, then in brackets it has $25 million; I understand that. It is why I am asking you: why is it in this new category of some extra category in the budget measures statement document at Budget Paper 5, page 16, and not in the DPTI section of that document—

The Hon. J.R. RAU: Again, I think—

Ms CHAPMAN: —at page 45?

The Hon. J.R. RAU: I think that one you would have to ask the Treasurer about regarding why Treasury compile their documents in certain ways. All I can say again by way of clarification is that whilst Renewal has negotiating functions, everything else is not the project manager. They do not control the funds for this project. That is being controlled by DPTI, with the exception of some of the stuff which might be going directly to the Festival Centre by reason of it being for internal works there.

Ms CHAPMAN: Alright. The $25 million is in respect of the car park?

The Hon. J.R. RAU: That is a contribution towards the public realm.

Ms CHAPMAN: What contribution did the Walker Corporation make towards obtaining the development rights?

The Hon. J.R. RAU: I am advised that they are going to be making a contribution of $40 million towards the public realm.

Ms CHAPMAN: That was not my question. I appreciate that there is a capital contribution that they are making towards the public realm. I am talking about towards obtaining the development rights, or was that the sweetener?

The Hon. J.R. RAU: That is their contribution.

Ms CHAPMAN: The chief executive has provided a briefing in respect of the announced project which is a total investment of $610 million and, as you have pointed out at page 71, there is reference to the over four-year contribution from the government towards this project. What was the date of the document entailing the key commercial terms of agreement between the government and the Walker Corporation? Is it intended that that document will become a public document?

The Hon. J.R. RAU: I can find out the date for you and the document itself contemplates the further settling of a development agreement between the government and Walker Corp which is nearing completion presently. The expectation is once that second document has been completed, it would be no longer commercially sensitive for the first document to be released.

Ms CHAPMAN: And were you a signatory to the first document? That was the key commercial terms of agreement.

The Hon. J.R. RAU: I am advised I was not; it was the Minister for the Arts because of some ownership of land issue to do with the car park and the plaza.

Ms CHAPMAN: Regarding the development agreement—which you say is progressing, at least—is it proposed that you will be a party to that as minister?

The Hon. J.R. RAU: I am advised it would have to be the same parties that signed off to the original commercial terms of agreement, which would mean the arts minister.

Ms CHAPMAN: The Minister for Arts, presumably someone on behalf of Walker Corporation; anyone else?

The Hon. J.R. RAU: For the development agreement, I am advised that would be it.

Ms CHAPMAN: So that is only two?

The Hon. J.R. RAU: Because, I am advised, he would cover both the plaza and the Festival Centre.

Ms CHAPMAN: Is it proposed that after the development agreement has been signed that will also become available for public consideration?

The Hon. J.R. RAU: I am advised the understanding is that yes, it would.

Ms CHAPMAN: Regarding the terms of the lease entitlement with Walker Corporation which is anticipated pursuant to this development agreement—which is, I think, a 70-year lease, on the information that was provided at the briefing—what was the basis of the valuation of the right to develop at $6.9 million to $18 million for that 70-year lease?

The Hon. J.R. RAU: This is a very complex and arcane business, this business about valuation, and I will therefore ask Mr Hanlon, who is an expert on all matters, including valuation, to explain the process, at least.

Mr HANLON: Those two valuations, the one we received from the Valuer-General and one was an independent valuation, were on a leasehold over three stratums, that being the car park, the retail area of 4,200 square metres, and then an area that allowed for a tower of 20 storeys with a 2,200 metre area for built form on it. Those areas were independently and separately valued, which gave us the overall valuations. Obviously there was a difference between the Valuer-General and the independent valuation, with the independent valuation being the higher one (I forget the exact figure, but it was about $18 million). The Walker Corporation, for those rights, paid $40 million. They were for uses of retail, café space, and for a commercial office building of 40,000 square metres.

Ms CHAPMAN: That is the 20-storey building?

Mr HANLON: Yes; a 40,000 square metre office tower, and retail of 4,200 square metres. The car park is built at a loss, so there is zero value, in the end, on the area that was provided for the car park.

Ms CHAPMAN: Can you just explain that, how that becomes a loss?

Mr HANLON: The total built form for the car park is $125 million to build the car park. Once completed, operational, revenue and all costs, the value is $80 million.

Ms CHAPMAN: Per year?

Mr HANLON: That $80 million is its full value, capitalised value.

Ms CHAPMAN: Capitalised value, but what is the income stream on it after that?

Mr HANLON: It is calculated per car park, but it was valued at about $7,500 a car park and 1,600 car parks. But a capitalised value of the built form was at $80 million.

Ms CHAPMAN: That may be so but it is still an income-generating asset, not for you, not for Renewal SA, but for the Walker Corporation.

Mr HANLON: But the capital value takes in the revenue stream into that particular car park as well.

Ms CHAPMAN: Yes, I appreciate that.

Mr HANLON: So it is a loss leader, basically. You are building the car park. If you just went out on the car park alone, you would not have been able to find somebody to build it for that and they would not have come up with that much capital to build that car park.

Ms CHAPMAN: That may be so but other people were not offered, were they?

Mr HANLON: Yes, they were. There was an expression of interest process that was opened back in 2011. There were a number of parties that put in an expression of interest to build the car park and the Walker Corporation won that expression of interest.

The CHAIR: This might be a good time to draw your attention to the clock, which means we have gone beyond time.

Ms CHAPMAN: To be continued.

The CHAIR: There being no further questions, I declare the examination of the proposed payments for the Department of Planning, Transport and Infrastructure and the Department of Treasury and Finance adjourned until tomorrow. I thank everyone for their attendance and participation today.

At 18:16 the committee adjourned to Thursday 23 July 2015 at 09:30.