Department of Planning, Transport and Infrastructure, $860,537,000

Administered Items for the Department of Planning, Transport and Infrastructure, $9,208,000

Department of Treasury and FInance, $70,268,000

Administered Items for the Department of Treasury and Finance, $1,752,379,000

Minister:

Hon. S.C. Mullighan, Minister for Transport and Infrastructure, Minister for Housing and Urban Development.

Departmental Advisers:

Mr J. Hanlon, Chief Executive, Renewal SA.

Mr M. Devine, General Manager, Renewal SA.

Mr D. De Luca, General Manager, Renewal SA.

Mr M. Buchan, General Manager, Renewal SA.

Ms G. Vasilevski, General Manager, Renewal SA.

Ms R. Ager, Director, Renewal SA.

The CHAIR: I declare the proposed payments open for examination, refer members to the agency statements at Volume 4 and call on the minister to make an opening statement if he wishes and to introduce his new advisers.

The Hon. S.C. MULLIGHAN: I will introduce the advisers: John Hanlon, the Chief Executive of Renewal SA, Mark Devine from Renewal SA and Damian De Luca from Renewal SA. Rather than make an opening statement, I think the member for Mount Gambier was going to ask some omnibus questions to kick off.

Mr BELL: The omnibus questions are:

1. Will the minister provide a detailed breakdown of expenditure on consultants and contractors above $10,000 in 2016-17 for all departments and agencies reporting to the minister, listing the name of the consultant, contractor or service supplier, cost, work undertaken and method of appointment?

2. In financial year 2016-17 for all departments and agencies reporting to the minister, what underspending on projects and programs was (a) approved and (b) not approved by cabinet for carryover expenditure in 2017-18?

3. For each department and agency reporting to the minister, please provide a breakdown of attraction, retention and performance allowances, as well as non-salary benefits paid to public servants and contractors in the years 2015-16 and 2016-17.

4. For each agency for which the minister has responsibility:

(a) How many FTEs were employed to provide communication and promotion activities in 2016-17 and what was their employment expense?

(b) How many FTEs are budgeted to provide communication and promotion activities in 2017-18, 2018-19, 2019-20 and 2020-21, and what is their estimated employment expense?

(c) The total cost of government-paid advertising, including campaigns, across all mediums, in 2016-17, and budgeted cost for 2017-18.

5. For each agency for which the minister has responsibility:

(a) What was the cost of electricity in 2016-17?

(b) What is the budgeted cost of electricity in 2017-18?

(c) What is the provisioned cost of electricity in 2018-19, 2019-20 and 2020-21?

6. For each grant program or fund the minister is responsible for, please provide the following information for the 2016-17, 2017-18, 2018-19, 2019-20 and 2020-21 financial years:

(a) Balance of the grant program or fund;

(b) Budgeted (or actual) expenditure from the program or fund;

(c) Budgeted (or actual) payments into the program or fund;

(d) Carryovers into or from the program or fund; and

(e) Details, including the value and beneficiary, of any commitments already made to be funded from the program or fund.

Mr PISONI: I will start with Budget Paper 3, page 83 and the income table. We are seeing that there are dividends, and in the 2017-18 year we are seeing $13.9 million in dividends. This year, it is an estimated $17 million, but then we see dramatic drop-offs to $3.6 million and $9 million in the years following. Can you advise of the reason for the expected lower dividend payments in the forward estimate years?

The Hon. S.C. MULLIGHAN: I am advised that the dividends are a function of the after-tax profits achieved by Renewal SA, which in turn are heavily influenced by the dollar value of land sales that are scheduled to occur in those particular years. That explains the fluctuations between 2016-17 when it lifts from $2.1 million up to $13.9 million and then further to $17 million and then dropping back down to $3.6 million. I am advised that that largely reflects either larger or higher value land sales in those particular financial years.

Mr PISONI: Does that mean you are expecting less activity in those years?

The Hon. S.C. MULLIGHAN: You mean in terms of the number of properties sold?

Mr PISONI: Less activity by Renewal SA.

The Hon. S.C. MULLIGHAN: I am advised that it is not related to the level of activity but more the value of the landholdings that are to be sold in that particular year. So in 2016-17 I am advised that total sales are expected to be $70.5 million but $96.8 million in 2017-18, and that leads directly to the increase in the dividend between $2.1 million in 2016-17.

Mr PISONI: What are those sales in the forward estimates?

The Hon. S.C. MULLIGHAN: Which year? Do you mean across all forward estimates?

Mr PISONI: Yes.

The Hon. S.C. MULLIGHAN: I do not have the forward estimates, but I have a year. I have sales in Woodville West, Playford Alive, St Clair, Lightsview, Bowden, Tonsley, Seaford, Port Adelaide, Gillman, Edinburgh Parks. I might have to take some further advice about whether it is appropriate to reveal the dollar values, given that they are yet to be sold.

Mr PISONI: Are you getting that advice now?

The Hon. S.C. MULLIGHAN: It confirmed my comment to you earlier that we perhaps should not disclose those dollar amounts prior to selling those particular parcels of land.

Mr PISONI: Was the sale of the Gillman land finalised in the 2016-17 year? Did that have any impact on dividends?

The Hon. S.C. MULLIGHAN: Not in the 2016-17 year, no.

Mr PISONI: So the tender process for Gillman is closed?

The Hon. S.C. MULLIGHAN: Yes; we are not accepting any further offers.

Mr PISONI: How many offers do you have for the Gillman land?

The Hon. S.C. MULLIGHAN: My understanding is that we have had five interested parties, but we are yet to finalise the sale transaction.

Mr PISONI: When is that likely to happen?

The Hon. S.C. MULLIGHAN: I cannot be specific with the date, but I am advised in the near future.

Mr PISONI: I do not understand what that means.

The Hon. S.C. MULLIGHAN: It would be closer to the distant future. Perhaps another way I can express it is we have budgeted for some income from that land sale in this financial year that we are in at the moment, 2017-18.

Mr PISONI: The full amount?

The Hon. S.C. MULLIGHAN: Given we have not finalised the transaction, I cannot really answer that question completely.

Mr PISONI: Was it a tender process or an expression of interest process?

The Hon. S.C. MULLIGHAN: It was an expression of interest process: expressions of interest and then short-listed.

Mr PISONI: Are any of those for the entire lot?

The Hon. S.C. MULLIGHAN: I cannot go into that detail until the transaction is finalised.

Mr PISONI: Are you able to indicate what jobs will be created from any of the tenders?

The Hon. S.C. MULLIGHAN: Not at this point in time, not until we are in a position to announce a finalised transaction and whatever the associated details of that transaction are.

Mr PISONI: The tender document that is out at the moment for the demolition of parts of the old Royal Adelaide Hospital, when will that be finalised?

The Hon. S.C. MULLIGHAN: I am advised in early August.

Mr PISONI: Is it expected that the Gillman site will be used for landfill?

The Hon. S.C. MULLIGHAN: Our intention is that material removed from that site, including soil, would be directed towards landholdings that Renewal SA owns. If a landholding at Gillman were to pass out of government hands, then that would preclude it from being used. I should qualify that by saying, unless that formed part of the arrangements under the transaction.

Mr PISONI: Which transaction? The Gillman land sale transaction or the tender transaction?

The Hon. S.C. MULLIGHAN: The Gillman land sale transaction.

Mr PISONI: Will you be waiting for an outcome on the decision on the Gillman land sale before you award the contract for demolition of the old Royal Adelaide Hospital?

The Hon. S.C. MULLIGHAN: No, because we have a separate landholding at Gillman, near the east Grand Trunkway Road, which is our soil bank operation, so it could well be directed there. It is not contingent on how the Gillman land sale transaction is finalised.

Mr PISONI: What is the estimated landfill volume for the old Royal Adelaide Hospital site?

The Hon. S.C. MULLIGHAN: I think our estimate, for all the material that needs to come off that site in total, is approximately 300,000 tonnes.

Mr PISONI: In regard to the Walker car park project, has any substantial work started or any demolition? I have not noticed anything other than the fact we have been kicked out of the car park.

The Hon. S.C. MULLIGHAN: You have noticed that, have you?

Mr PISONI: I have noticed that, yes.

The Hon. S.C. MULLIGHAN: You and 68 others.

Mr PISONI: You have not noticed it, obviously, because your driver will drop you off at the front door.

The Hon. S.C. MULLIGHAN: I have noticed it. Certainly, the grade separation works have commenced in between Parliament House and the Festival Centre.

Mr PISONI: Was Walker doing that?

The Hon. S.C. MULLIGHAN: No, that is the early works program that we are funding. What has also commenced is the Festival Centre upgrade. In terms of Walker's car park redevelopment, once the grade separation works have reached a particular threshold of completion, he can then commence his car park redevelopment.

Mr PISONI: So Walker Corporation has not spent any money on the Riverbank development?

The Hon. S.C. MULLIGHAN: In terms of infrastructure works, I am advised no, but in terms of preparatory works including design, etc., yes.

Mr PISONI: Is there a hold-up with Walker Corporation because of an investigation by the Auditor-General or ICAC?

The Hon. J.M. Rankine interjecting:

The CHAIR: Order!

The Hon. J.M. Rankine interjecting:

The CHAIR: Order, member for Wright!

The Hon. J.M. RANKINE: That is the modus operandi, is it not?

The CHAIR: Member for Wright, that is not a question. Minister.

The Hon. S.C. MULLIGHAN: I am not aware of that. I understand that the Auditor-General made some comments in the estimates committee yesterday about him looking at the arrangements in Festival Plaza but, beyond that, I am not aware.

Mr PISONI: Have you been advised of any hold-ups with Walker's involvement due to any investigations?

The Hon. S.C. MULLIGHAN: No, I think the time frame that we are now seeing roll out has been a result of certainly protracted negotiations and the timing of the different elements of the infrastructure works. As I mentioned earlier, once the grade separation works have reached a particular threshold, then he is obliged, I think, to commence work after that point in time. I am advised that we have not yet reached that threshold with the grade separation works. I am told that there is an agreed works program between Walker and the government for the scheduling of his works for the car park and then the plaza.

Mr PISONI: When is the Walker office development due to start?

The Hon. S.C. MULLIGHAN: I am advised that after the grade separation works have reached that particular threshold, he then has a 20-month period to complete the car park and then the associated elements of the plaza and the retail precinct out the back of Parliament House. In total, as at the date of the agreement that he reached with government to proceed, he has six years to substantially commence his commercial building, so all those processes are within that period. If he does not commence that office building within that period of time, then he is obliged to wear the full cost of the works in kind and the plaza works and he loses his development approval for the tower.

Mr PISONI: What is the date when that is triggered?

The Hon. S.C. MULLIGHAN: Six years after the commencement of the car park, which is February 2018.

Mr PISONI: Sorry?

The Hon. S.C. MULLIGHAN: That period commences from February 2018.

Mr PISONI: That is when the car park will start; is that what you are saying?

The Hon. S.C. MULLIGHAN: Yes.

Mr PISONI: Are there any consequences if the car park does not start by February 2018?

The Hon. S.C. MULLIGHAN: It depends on what the cause of the delay is, but there are rights that the state is able to exercise if there is a delay attributable to Walker.

Mr PISONI: What are those penalties?

The Hon. S.C. MULLIGHAN: My understanding is that he loses his financial contribution to the precinct, as well as his development rights of the tower.

Mr PISONI: He has six years in which to start the tower; how long to finish it?

The Hon. S.C. MULLIGHAN: We would estimate a build time of approximately 24 months. It is not contracted because it would be unfeasible to substantially commence a commercial office tower and not complete it without incurring significant financial loss to the developer.

Mr PISONI: Is there a legal definition of what the start is?

The Hon. S.C. MULLIGHAN: Of substantial commencement?

Mr PISONI: Yes.

The Hon. S.C. MULLIGHAN: Yes, I am advised there is. I understand there is a definition and it is one that is consistent with the majority of our commercial developments that we do across the portfolio.

Mr PISONI: Previously—

The Hon. S.C. MULLIGHAN: Just to clarify, I am advised that it is worded in a way that the developer cannot do what has been done on O'Connell Street, for example, which is to include demolition of an existing structure and classify that as substantial development. The actual building must actually commence, rather than there be just some sort of demolition works.

Mr PISONI: So we are not going to have a hole in the ground for a substantial period of time?

The Hon. S.C. MULLIGHAN: I am hoping that you will have a hole in the ground in which you can park in the future.

Mr PISONI: The Treasurer has previously ruled out that the Walker office tower will have government accommodation. Does that still stand?

The Hon. S.C. MULLIGHAN: My understanding is that there is no precommitment from the government to take out accommodation.

Mr PISONI: In June this year, DPTI issued a market call for government office accommodation seeking suitable premises available in the market for two government office accommodation requirements with fit-out of new or existing refurbished premises. The two requirements are summarised as approximately 9,000 square metres to 12,000 square metres available from late 2019 in any location in the Adelaide CBD, core or frame, and approximately 13,000 to 16,000 square metres available from late 2020 in any location in the Adelaide CBD, core or frame. Can you rule out that Walker Corporation will be recipients of that call?

The Hon. S.C. MULLIGHAN: To provide some context, DPTI is, on behalf of the general government sector, the manager of office accommodation arrangements. In the last 18 months to two years, we have recruited a particular individual who was responsible for managing the property portfolio of Australia Post. He and his team have been engaged in an ongoing process to consolidate government office accommodation throughout the CBD—in some small number of non-CBD matters as well, but focused within the CBD, given the significant amount of holding that we have in the CBD.

Those calls you have made mention of have been designed to anticipate when existing lease arrangements for government departments come up and to then go to the market to see what other accommodation arrangements—preferably more competitively provided by the market—can be entered into. This has meant that over the course of the last two years there has been a substantial consolidation in the number of sites that we occupy in the CBD. In addition to reducing the number of sites, we have also reduced the square metreage of our accommodation.

As you can imagine, reducing that square metreage has led to significant dollar savings as rental costs have decreased. It is also a pretty good time to be in the market because dollars per square metre rates are very attractive and there are significant price incentives, as well as other incentives, being offered by building owners. Your question was, given that we have three market calls, I think you said—

Mr PISONI: Two.

The Hon. S.C. MULLIGHAN: Two, 2018 and—

Mr PISONI: No, 2019 and 2020.

The Hon. S.C. MULLIGHAN: 2019 and 2020. I think you can foresee that, given we have an estimated car park commencement date of February 2018 and that, if the building were to progress on the quickest time frame and it is indeed a two-year build time, it would be cutting it extremely fine for government office accommodation, through the DPTI tendering process that you referred to, to be able to make it into that building. On top of that, there has been no commitment or no requirement for government to take out government office accommodation in the Walker building.

The only thing I think we have stipulated is that we have a right of consultation or a right of refusal, depending on which tenants are going to take out the ground floor, so that the government can be comfortable that whoever is located on that ground floor is consistent with the sort of tenant and contributor to a revitalised plaza precinct that we would ideally like to see.

Mr PISONI: Is the government ruling out Walker participating in that process?

The Hon. S.C. MULLIGHAN: I do not think we are ruling it out, but we have certainly made no commitment and there is no requirement on government to take out office accommodation space. If he were to approach government and offer leasing terms on a very favourable basis compared with what the market was providing, for example, then we would be in a position where we would have to seriously consider moving into that premises, but there is no commitment and no obligation for government to take out office accommodation space in that building.

Mr PISONI: What if Walker Corporation said that they could actually start immediately if they received those tender calls? Would the government award Walker the accommodation contract to speed the project up?

The Hon. S.C. MULLIGHAN: I do not think they can commence immediately because they will not be able to get access or they will not be able to commence—

Mr PISONI: Immediately from 18 February. You are in buildings now. You can extend the lease on a monthly tenancy if it is going to be tight. Businesses do this sort of thing all the time.

The Hon. S.C. MULLIGHAN: I am advised that not only have we made no precommitment but I think there is a particular clause in our legal arrangements with Walker that there will be no government precommitment for his building. If he were to offer commercial terms separately from that that were acceptable to government at some point in time in the future, then it would be up to a government in the future to decide, but we have made no commitment, nor do we have any obligation, to take out any space in that building. That was a key tenet of our negotiations with them.

Mr PISONI: Just to clarify, does that mean that the Walker Corporation would be precluded? Would it be unable to tender for this if it had not started the work?

The Hon. S.C. MULLIGHAN: I think the distinction we draw in this arrangement is that we are not participating in, and cannot participate in, a precommitment with Walker where the opportunity for government office space to be taken out in his particular development is done on a bilateral basis, but if at some point in the future he had a completed building or a building nearing substantial completion and we were currently in the market for government office accommodation, then it would be open to the government of the day to test whatever offer he is able to make to the government along with the rest of the market.

This distinction is the participation in a market process that is open for people to put offers to government broader than just Walker. I think that has been a key part of the state's position in this, that there is no precommitment or obligation on the state to take out any floor space in that building.

Mr PISONI: To clarify, does that mean that the Walker Corporation would be precluded from any market call, even if accommodation were not required for three or four years, if the work has not begun?

The Hon. S.C. MULLIGHAN: I do not think it would be countenanced by the government as being precluded from a market call, but there would be a preclusion of us entering into discussions or an arrangement on a direct basis outside of testing the market. As you have mentioned with those examples of government office accommodation needs in the future, particularly two of those coming in the future, I do not think that there is any expectation from the government—I cannot speak on behalf of the developer—that that building is likely to be delivered in a time period that means it could meet the government's needs in accommodating that floor space demand.

Mr BELL: Can the minister confirm the value of payments to the Riverbank Precinct authority in each year of the forward estimates?

The CHAIR: Is that on the same page?

Mr BELL: Page 179, Budget Paper 4.

The Hon. S.C. MULLIGHAN: In 2016-17, the Riverbank Authority had a budget for its administration of $734,000 and it had a project delivery budget of $4.35 million. I will have to come back to you on the subsequent financial years.

Mr BELL: Do those two figures you have just—

The Hon. S.C. MULLIGHAN: Sorry, I can fill in that rich detail. For 2017-18, the budget is $753,000; for 2018-19, it is $772,000; for 2019-20, it is $791,000; and for 2020-21, it is $811,000.

Mr BELL: Do those figures that you have given, particularly for this year's budget, represent the total value of funding to the Riverbank Precinct authority from the state government?

The Hon. S.C. MULLIGHAN: The $734,000 relates to its administration and management. On top of that, there was $4.3 million worth of projects that were delivered from the Riverbank Authority that it received money for.

Mr BELL: There is no other money going in there?

The Hon. S.C. MULLIGHAN: I do not think so.

Mr PISONI: My question is on the status of the ORAH site. Are you able to advise when a plan will be announced for the ORAH site?

The Hon. S.C. MULLIGHAN: We hope we will be in a position to do that in the not too distant future. We have had a period of exclusive negotiations with the preferred proponent, which is a joint venture between John Holland and Commercial and General. They provided their most recent proposal to the government approximately four weeks ago. That is being worked through by Renewal, which has been tasked with managing the negotiation process, and then that will be considered by the government for a decision. We imagine it will be decided in a number of weeks.

Mr PISONI: Does the proposal for Commercial and General include towers no greater than 12 storeys?

The Hon. S.C. MULLIGHAN: I cannot go into the details of their current proposal, but I have certainly made the government's position clear in the media about what our expectation is in terms of elements of the development; that is, South Australians have become used to buildings of a particular height on that site, which I think is approximately 53 metres high, and we are seeking from the market something in keeping with that.

Mr PISONI: What is the expectation of the mix of commercial versus retail that the government is aiming for on the site?

The Hon. S.C. MULLIGHAN: Before we entered into this period of exclusive negotiations with the proponent, we released, in broad terms, their proposal for the site. That included the retention and re-use of the five heritage buildings on the corner of the site, bounding Frome Road and North Terrace, and repurposing the easternmost heritage building into a hotel and the establishment of a large multi-use commercial research and higher education facility spanning the back of those buildings.

There is approximately 35,000 square metres of space within that building for those different uses. They have proposed up to 1,000 apartments for residential dwellings for student accommodation and for aged care. That is what they proposed. Where we are at the moment is working through the details of the most recent offer that they put to government. As I said, that was about four weeks ago, so we are still going through all that detail.

Mr PISONI: Does that include a due diligence process as well?

The Hon. S.C. MULLIGHAN: Certainly, we are conducting a due diligence process throughout the course of these negotiations for the purposes of being able to finalise the transaction.

Mr PISONI: Is that something that is done with your department, with Treasury, or do you bring in outside help for that?

The Hon. S.C. MULLIGHAN: There is a negotiation and evaluation team that has been established that involves senior executives from Renewal SA and external expert commercial legal advice. They have sought advice from time to time from other consultants during the course of this, and that is used by the negotiation team and the evaluation panel in evaluating the offer that is being put to government by the proponent.

Mr PISONI: The evaluation is being conducted by external—

The Hon. S.C. MULLIGHAN: By a combination of government officers supplemented with expert external advice, where necessary.

Mr PISONI: How does that work? Do you get a report from the independent valuators and then that is evaluated by the department? What is the process?

The Hon. S.C. MULLIGHAN: There is a range of different advice that the government would receive for this project, as well as for some other projects. That would include expert advice about commercial land and the expert legal advice we would get throughout the process, as well as any other advice from external experts that is brought on as is necessary by the negotiation and evaluation team.

Mr PISONI: Is any of the land or any of the ORAH site going to be sold freehold?

The Hon. S.C. MULLIGHAN: The government has made it clear that we are prepared to issue ground leases but not sell freehold.

Mr PISONI: What is the maximum term of ground lease that you are prepared to offer?

The Hon. S.C. MULLIGHAN: That is to be negotiated, but I have stated publicly that the community's expectation of what we have seen in other parts of the Riverbank Precinct of Adelaide, which we would consider the old RAH to be in—in fact, I think the first one was the lease expiring in 2085 over the ASER site, which was issued in 1985—is that it is nothing longer than 99 years, but we have not finalised our discussions with them. It may be shorter.

Mr PISONI: If I could take you back to the Riverbank area in regard to the announcement yesterday by the Casino, are you able to advise whether we will see any further restrictions on the access to the bridge to the Oval when that development starts?

The Hon. S.C. MULLIGHAN: The management of pedestrian access around that area is designed to keep the Riverbank footbridge open and where possible, particularly for major events, to provide direct access through to what we call the northern entrance of the Adelaide Railway Station. There is a requirement that, in relation to the package of works that is underway at the moment for the grade separation, we will be able to use that northern entrance and exit of the Railway Station in time for the Ashes Test.

What we have seen, though, is that it has been closed for football games this season. We have had to redirect Railway Station foot traffic out of the southern entrance of the Railway Station onto North Terrace and around, in between the Intercontinental building and the Railway Station building down to the level of where the footbridge lands on this side of the Torrens. The management of those sorts of access arrangements is what we are going to see. My understanding is that maintaining access for a defined number of events has been part of the signed agreement with SkyCity so that the works for their new facility there maintains pedestrian access over the bridge.

I should make it clear that I think it is the government's perspective that the issue is not so much about access over the bridge itself but about how people get from this side of the bridge into the different facilities between the bridge and North Terrace. The management has been around into and out of the northern part of the train station, which is the closest part of the train station. Your question was about closing down access to the footbridge itself. That is not the issue: it is actually managing people who are in between North Terrace and the footbridge and managing the access around there.

Mr PISONI: Is that access suitable for those with disabilities?

The Hon. S.C. MULLIGHAN: I am advised that they have no right to close access during the course of the development in its entirety. The way we have managed disability access from, say, North Terrace, when the rear of the train station is not open and people are not able to traverse from the train station at grade onto the footbridge, will be managed in the same way. Where foot traffic is walking down that 20 steps or whatever it is at the back of the Intercontinental, there is the lift there as well, and that is how we managed. That is coordinated by the plaza precinct group.

Mr BELL: Minister, can you indicate when you first became aware that there were issues with the way that the Office of the State Coordinator-General, Jim Hallion, was calling in applications?

The Hon. S.C. MULLIGHAN: I will check. I am not sure if I was made specifically aware, although from time to time I think I have come across complaints, most recently aired in the last week or two publicly, but I would have to check. I do not recall being specifically made aware, but I would have to go back and check that.

Mr BELL: In May 2015, the state government used planning laws to approve a development of Hungry Jack's on the corner of Edwards Street and Brighton Road, South Brighton. Approval had previously been rejected by both the City of Holdfast Bay and the ERD Court. The initial application of the council valued the project at just $1.4 million. However, when it was put to the DAC, its value had jumped to $3.3 million. A freedom of information request to the City of Holdfast Bay now reveals that the true capital value is $2.45 million. My question to the minister is: do you have confidence in the work of the Coordinator-General given the obvious and significant discrepancies between the three values of this project?

The Hon. S.C. MULLIGHAN: I am not familiar with the details of that particular project and, indeed, that might be the project that has been aired publicly recently that is making me recall that there have been concerns raised with the process in that instance. I should also point out that the Coordinator-General does not actually report to me. I think they have recently been moved to the Department of Treasury and Finance; nonetheless, I am happy to take up this particular issue and bring back some information for the committee.

Mr BELL: It seems to be a big jump from $1.4 million, $3.3 million recorded to the DAC and then $2.45 million, which through freedom of information is the capital cost used by the City of Holdfast Bay.

My next set of questions relates to a Stirling service station that was brought to me by the Hon. Rory McEwen. What action would the minister expect the DAC to take if they were advised that a builder had commenced construction on a DAC-approved development without first gaining council development approval?

The Hon. S.C. MULLIGHAN: I probably could not comment fulsomely because it might be a question better directed to the Minister for Planning because he oversees the DAC process and those elements of the planning approval process. I can certainly refer that question to him and bring back some information to the committee.

Mr BELL: At the same time, one of the conditions of the DAC approval for the Stirling service station is that landscaping, which was approved by DAC, be undertaken by the builder. Why has the developer been allowed to progress the development to a point where it is now impossible to satisfy the DAC planning condition? In essence, they have built to a point where landscaping cannot occur because there is not a one-metre setback from the boundary fence.

The Hon. S.C. MULLIGHAN: I will have to raise that with the land use planning area and bring back a briefing for the committee.

Mr PISONI: Budget Paper 3, pages 77 to 78, where there is a series of tables, refers to how Renewal SA receives a community service obligation (CSO) payment for non-commercial activities in some development projects such as the Tonsley Park redevelopment and the implementation of government social housing policies and activation projects.

The dividend is paid to government by Renewal SA. It is estimated to rise from $2.1 million in 2016-17 to $13.9 million in 2017-18 and $17 million in 2018-19. That table is on page 78. How does the government decide and how does the private sector know when Renewal SA is working on a commercial project generating a dividend to government and when it is working on a non-commercial project which is receiving community service obligation payments from the government?

The Hon. S.C. MULLIGHAN: Certainly the fact that community service obligations are being paid indicates that there are non-commercial activities being undertaken by Renewal SA, which are being reimbursed or paid up-front, as the case may be, centrally from government for those activities. It is commonly the case that some activities within a particular development are commercial and some other activities are not commercial and require a community service obligation.

The large precinct developments, such as Bowden and Tonsley, for example, are likely to have a mix of both of those activities. When facilities are not strictly regarded as being commercial or are invested in and do not provide a direct commercial return, they are the sorts of things that attract a community service obligation. They fluctuate across the project from year to year depending on when those sorts of contributions are being made. If you are after a reconciliation year by year of those CSOs by project, I am happy to provide that.

Mr PISONI: Does that include subsidised or free rent for businesses? Is that a community obligation?

The Hon. S.C. MULLIGHAN: I am not sure. I think providing facilities and paying for them up-front, such as the commercial space with the pods at Tonsley, which people go in and operate out of, may trigger a trend.

The advice I have just received is that if Renewal SA is to undertake a non-commercial activity then that would attract a CSO from Treasury. If that were part of an effort to attract or keep or see grow a particular business in South Australia, which would otherwise be regarded as an industry attraction or industry development initiative, and there were facilities or reduced costs provided, that would be the sort of thing that would attract a community service obligation. You mentioned cheap or subsidised rent. If, in fact, that were the case, that we had done that, then that would attract a CSO.

Perhaps the qualification about the cheap or the discounted rent would be that if we were holding buildings or facilities that were not being tenanted, and we desired to fill them with a tenant, then we may provide discounted rent or very cheap rent, in some cases maybe even free rent. I am thinking of some of the shops on St Vincent Street at Port Adelaide that would not attract a CSO because it would be a decision by Renewal itself to enter into an arrangement with somebody in order to fill what was otherwise vacant space. If that rent were offered to a business or a number of businesses in a particular facility at less than market rates, I guess the determination by Renewal goes towards whether or not that attracts a CSO.

Mr PISONI: What was the case with The Henry Austin restaurant in Chesser Street that is closing now that it has to pay $100,000 a year in rent? Was there a business case put to the government? Most restaurateurs, or anyone in business, will need to sign a personal guarantee for rent when they are leasing properties. There are not many landlords who will hand over to a company keys to a property without a personal guarantee by one of the developers. What were the circumstances of that and how is it that someone can walk away from a rent-free period once the rent-free period finishes?

The Hon. S.C. MULLIGHAN: My understanding is that the building that that particular restaurant operated in is a privately owned building—it is not owned by government—and that the proprietor of that business, which is closing, participated in a scheme managed by Renew Adelaide, which is not part of government and which is not part of Renewal SA. However, the government—

Mr PISONI: It does receive grants, does it not?

The Hon. S.C. MULLIGHAN: The government, from DPC, has provided grants to Renew Adelaide to help activate otherwise empty spaces. The other example I can think of is the shops in Topham Mall between Waymouth Street and Currie Street. Several of those have been managed by Renew Adelaide. There is a relationship between Renew Adelaide and the landlord where they suggest to the landlord that they can get a vacant tenancy filled for them on the basis that there would be some discounted rent. I think the idea is that, after a period of time, once that new business gets itself up and running and can operate, that landlord then transitions them to something more akin to a market rate.

I am advised that the operating model for Renew Adelaide—and, again, it is not a government agency—is that they offer 30-day rolling leases to these businesses that set up and try to get on their feet. In the last financial year, 2016-17, 25 new businesses, or what they call 'city activations', commenced under the program, 20 new vacant properties were activated and 10 commercial leases were signed. They advise us that 56 full-time equivalent jobs were created by Renew through this program.

Mr PISONI: Is there a process in place for Renewal SA projects that are similar so that the ongoing lease is negotiated prior to the free rent or discounted rent period given? Is there a policy of not allowing businesses that are competing with like businesses that are paying full rent in the same vicinity to use discounted rent or free rent from the body?

The Hon. S.C. MULLIGHAN: I am advised that the short answer is yes. In principle, a determination is made that Renewal will only undertake what it deems to be commercial activities. If it is asked by the government to do something that is non-commercial, then it will demand a CSO for that activity.

But I also understand that there is a judgement call that is made by Renewal if it has landholdings that are vacant and untenanted whereby, if it is consistent with the objectives of Renewal to have those buildings tenanted, then they may offer cheap or, in some cases, even free rent to those businesses. As to whether there is a policy to make sure that, under that sort of arrangement, there cannot be the establishment of a new business that may offer the same goods or services that existing businesses in the area offer, I will have to seek some further advice.

I am advised that for the cheap or discounted rent arrangement that you mentioned, I think, when it has occurred in the past it has been Renew that has negotiated those particular arrangements with the landlords in question who own those properties. I do not think we have done that with our own holdings.

The exception is that down at Port Adelaide there have been tenancies that have been filled at discounted or free rent. The way in which we have done that is via Renew Adelaide where the grant funding was made available to Renew Adelaide, some of which has been dedicated for activation of Port Adelaide sites. That is how that has been managed. After 12 months, they must go to a commercial rent.

Mr PISONI: Who pays the outgoings—such as the council rates, electricity, water—for those who are on free rent arrangements?

The Hon. S.C. MULLIGHAN: My understanding is that the subsidy is for the actual rental payments, but the businesses that go into these premises are responsible for paying the outgoings.

Mr PISONI: Is that generally a personal guarantee? Is that an arrangement they have directly with the service providers, like SA Water or SA Power Networks?

The Hon. S.C. MULLIGHAN: Perhaps what might be best is if we seek some detail about how some of these arrangements have worked direct from Renew Adelaide, and I can provide that to the committee, rather than my trying to give generalisations about this.

Mr PISONI: Can I take you now to Budget Paper 3, chapter 4, page 69, land and other fixed assets. The value of government land assets is estimated to fall across the forward estimates period, from $6.418 million as of the end of June 2017 to $6.285 million. Is that the subject of sales, or is that the outcome of an asset valuation tender that was issued earlier in the year?

The Hon. S.C. MULLIGHAN: That is a good question. I will have to come back to you on that. These are land assets for the entire general government sector, rather than just for Renewal. As you can imagine, Crown land, for example, comes under the balance sheet of the environment department. DPTI has significant land holdings as well. Perhaps what I can do is treat that as an omnibus question and try to bring back some sort of reconciliation to the committee.

Mr PISONI: I refer you to page 78 of the same budget paper. I think in the last budget TAFE properties were transferred to Renewal SA. Are you able to advise what the income from TAFE to Renewal SA has been since that transaction occurred?

The Hon. S.C. MULLIGHAN: In 2017-18, it is $53.8 million; in 2018-19, it is $55.4 million; in 2019-20, it is $57 million; and in 2020-21, it is $58.7 million.

Mr PISONI: Are they market rates?

The Hon. S.C. MULLIGHAN: My understanding is yes.

Mr PISONI: How many square metres of TAFE property are dormant or not being used by TAFE?

The Hon. S.C. MULLIGHAN: Perhaps I can come back to you with a reconciliation of the sites and what they are being used for.

Mr GRIFFITHS: Can I get some clarification. There is a significant increase in the value of land held by Renewal SA.

The Hon. S.C. MULLIGHAN: Yes.

Mr GRIFFITHS: For the previous financial year, can you give me an end of year result for the value of it and what it is at 30 June 2017? I ask this question on the basis of the dividend payments that feature in future years. We discussed that earlier on in this session, where it goes from $17 million down to the $3 million range. I presume that Renewal SA has a charter of a return on investment based on—

The Hon. S.C. MULLIGHAN: Profit.

Mr GRIFFITHS: Yes, profit, but as a value of the land held. I presume you have forward works in place that would ensure that, as much as possible, you are getting that. With a significant reduction in the value of the profit or the dividend, even though values have gone up of the land held, is there a concern that the return is not actually being achieved?

The Hon. S.C. MULLIGHAN: It is more reflective that from year to year we estimate putting to market larger or smaller tranches of land. Rather than saying larger or smaller in terms of square metreage, larger or smaller values of tranches of land.

I think that in the 2016-17 financial year the dividend you refer to was relatively small and then it grows quite significantly. In 2016-17, I think the figure I read out before was $58 million or $60 million of sales, and then that grows to $80 million or $90 million of sales. That sale revenue enables Renewal SA to generate a higher profit and then a high dividend gets paid.

In terms of the land value itself of Renewal SA's holdings, that would have increased at least by the amount of the additional assets that we received in the transfer of TAFE properties to our portfolio. Then there would be net of any consideration about increasing or decreasing values for particular bits of land that we own. Does that sort of break it up?

Mr GRIFFITHS: It does in a general sense, yes. Of the $619 million of capital investment—I presume most of that was in land—that was in the 2016-17 period.

The Hon. S.C. MULLIGHAN: That represents the value of the TAFE properties.

Mr GRIFFITHS: Only the TAFE land?

The Hon. S.C. MULLIGHAN: Yes.

Mr GRIFFITHS: It is.

The Hon. S.C. MULLIGHAN: Yes, that is the $619.6 million figure.

Mr PISONI: Has there been any consideration of any sales in the forward estimates of TAFE property?

The Hon. S.C. MULLIGHAN: Not within our portfolio of TAFE properties, no. As for whatever other properties TAFE owns, I am not privy to that.

Mr PISONI: Has the Datacom lease been finalised now for the Tea Tree Gully TAFE?

The Hon. S.C. MULLIGHAN: Can I come back to you on that; I am not sure we have that.

Mr PISONI: So we do not know if the building works can be started?

The Hon. S.C. MULLIGHAN: I think we actually have to chase down that detail from TAFE SA, so leave that with us and we will—

Mr PISONI: It is not with TAFE SA, I do not believe.

The Hon. S.C. MULLIGHAN: I am advised that the head lease is with TAFE SA and then they are able to sublease space within that building.

Mr BELL: I have a question on that same theme. Does DSD pay TAFE any money to then offset the rent that then gets paid back to Renewal SA?

The Hon. S.C. MULLIGHAN: We arrived at a market valuation for these properties, which is the figure the member for Goyder was referring to, that $619.6 million. We have required a commercial rent to be paid on that each year, and they were the figures that I gave to the member for Unley before, the $50-odd million a year. As to the extent that DSD, which pays that rent, requires budget supplementation from Treasury, I am not sure, but that may be the case. I think, if you still have those hearings to go, it might be worth pursuing that with them, but I do not have visibility of that.

Mr PISONI: Finishing up, minister, I have some questions on Affordable Homes in Budget Paper 3, page 83, land sales. How many homes were sold through Renewal SA's Affordable Homes in the 2016-17 financial year and what is the number of South Australians with mortgages currently residing in properties sold by Affordable Homes properties?

The Hon. S.C. MULLIGHAN: Was your question specifically related to the last financial year?

Mr PISONI: Yes.

The Hon. S.C. MULLIGHAN: I am told it is 157.

Mr PISONI: And the total number?

The Hon. S.C. MULLIGHAN: Is over 2,100.

Mr PISONI: How many of those homes are located on or belong to sites with land belonging to or sold through Renewal SA?

The Hon. S.C. MULLIGHAN: That is a good question. My understanding is that, at least for the last financial year, there were 28 in the St Clair development and 14 in Broadmeadows. Going back further over that 2,100, I am not sure whether we would have an understanding of that.

Mr PISONI: How much was spent on advertising in the 2016-17 year for Affordable Homes?

The Hon. S.C. MULLIGHAN: I am not sure we can break that down out of our general advertising expense.

Mr PISONI: Have there been any processes or discussions about the privatisation of Affordable Homes within the current financial year or over the forward estimates?

The Hon. S.C. MULLIGHAN: Many of the Affordable Homes properties, by their very nature, are private because they are sold within developments that Renewal SA either makes the land available for or joins with the private sector in. Quite often, these homes have been sold by developers in these developments direct to the—

Mr PISONI: But there are commissions paid to Renewal SA or Affordable Homes, are there not?

The Hon. S.C. MULLIGHAN: I am not sure whether commissions are paid, but I can take that on notice. It might just be that we have provided a lot of land on which that developer's development occurs and then they are able to sell the properties off. Under the affordable housing policy, 15 per cent of those properties must be priced at a particular threshold.

Mr PISONI: Can you perhaps get back to us with a figure on that question about how much has been received in commissions?

The Hon. S.C. MULLIGHAN: I will take that on notice. Do you have anything else omnibus-wise?

The CHAIR: The omnibus questions are in.

Mr PISONI: We did those.

The Hon. S.C. MULLIGHAN: You have done them all? You do not need to do anything separately?

Mr PISONI: You were having a nap earlier.

The Hon. S.C. MULLIGHAN: So that was for all?

The CHAIR: They are the same for both sections because you are the one minister. There being no further time for questions, I declare the examination of the Department of Planning, Transport and Infrastructure, administered items for the Department of Planning, Transport and Infrastructure and administered items for the Department of Treasury and Finance referred to committee B, and the Department of Treasury and Finance line is to be adjourned until Tuesday 1 August. I thank the minister and his advisers for their attendance and the members of the committee and the table staff for their assistance.

At 12:32 the committee adjourned to Friday 28 July 2017 at 09:00.