The Sydney council that sold its offices to spend the next decade renting them back

The projected cost of Blacktown City Council’s plan to construct two new administrative offices has blown out by more than $460 million in three years, as the cash-strapped council spends up to a decade paying rent to a mega-developer for its existing chambers.

As the north-western Sydney council seeks permission to increase rates by an average of $171 a year, its elected officials are demanding transparency about how new offices originally costed at $144 million in 2023 are now set to cost $605 million.

The council is planning to build two separate administrative offices at opposite ends of its jurisdiction after it sold a huge swath of public land in Blacktown’s CBD, including its current offices, to Sydney developer Walker Corporation for $42 million in 2023.

Progress on the redevelopment is slow, and the council is renting its current offices back from Walker for at least seven-and-a-half years, with an option to extend to 10 years. Documents obtained by the Herald reveal the council will pay Walker more than $2 million each year in rent, with prescribed annual increases resulting in payment of more than $25 million over a decade.

It effectively means the developer will be out of pocket $17 million for the 20,625-square-metre site, which it plans to develop into a Parramatta Square-style plaza with offices, a private hospital and a medical research institute.

The sale, signed by former mayor Tony Bleasdale and entered into without a tender, eventually led to the resignations of two Labor councillors from the party, and has raised questions about the council’s transparency with the community over its decisions.

Before selling to Walker, the council planned to sell the land for about $90 million for the development of a Charlie Teo-led brain and spinal institute. Councillors were told the money would go towards the construction of a single office building in Blacktown for $144 million.

Double the buildings, quadruple the cost

When the councillors were briefed on the construction costs in 2022, they were told building two administration buildings instead of one would save money. Now, the council needs to find a way to plug a multimillion-dollar hole to deliver two buildings – and the councillors want to know how it happened.

“What, actually, I really still cannot comprehend is how, in the last three years, it has grown from $144 million to $605 million,” Carol Israel, one of the councillors who left Labor over the issue, said at a council meeting in late February.

“I was told if we build one building it will be more costly than if we build two … so that’s one thing that I still cannot comprehend.”

A spokesperson for Blacktown City Council said the two price points reflected “different stages of the project, different scopes and different costs”. They said the $144 million figure “was prepared at a very early concept stage when the project scope proposal was narrower”, and did not consider “site-specific costs”.

The $605 million spend, which includes accounting for capital costs, interest expenses and a small contingency, will cover two administration centres: one in Blacktown’s revitalised CBD, and the second in Rooty Hill.

The construction would be partly funded by the rate increase, the spokesperson said, as well as a “broader funding approach” that includes long-term financial planning, some rent from investment buildings, asset sales, limited use of internal reserves, and financing arrangements appropriate to major capital works.

“The new buildings are being designed to reflect contemporary local government: open, transparent and accessible,” they said.

“Key elements will be open to the public, including bookable community spaces and highly programmable areas suitable for exhibitions, performances, workshops and meetings. They are civic spaces, not simply offices.”

‘Transparency issues’ emerge

Liberal councillor Peter Camilleri successfully pushed for a review of the budgeting process at the meeting, saying most of the discussions about the sale of the land and the redevelopment projects were held in confidential sessions.

“This is the community’s asset, and they have a right to know how we make decisions,” he told councillors at last month’s meeting.

Labor MP for Blacktown Stephen Bali, who previously served as the council’s mayor, said he had concerns about the transparency of council spending.

“Transparency issues have emerged in either [the] council’s failure to provide sufficient information on transactions or vast amounts of information being dealt with in confidential meetings,” he wrote in a letter to the council about its proposed rate increase.

“Traditionally, people of Blacktown City did not actively speak out or undertake mass protests. But silence must not be considered as acceptance for either the [rate rise] or how well the administration is performing.”

Walker declined to comment.

The Sydney Morning Herald has a bureau in the heart of Parramatta. Email parramatta@smh.com.au with news tips.