Council sending the wrong signals about doing business

There was a chance for DEC to be prime venue for a national league team, says

THE Derwent Entertainment Centre, or the DEC as it’s known, had a chance to be a prime sporting venue for a national league team. But the Glenorchy City Council has made certain that isn’t the case.

The council’s negotiating skills with a consortium representing the Southern Huskies, a basketball team seeking a licence in the National Basketball League, were not only found to be wanting but sent a signal that doing business in that part of the world is downright difficult.

Last week the council’s Mayor Kristie Johnston announced that the council would not accept a bid by the consortium to buy the DEC as a going concern.

The Mayor’s media release of October 30 was odd to say the least. While she criticised the consortium, known as HydraPlay, for what she said was a “totally inadequate” offer she admitted that “establishing a realistic valuation for the property is a challenge, with significant differences in the specialist advice [the Council] has already received.”

Ms Johnston says the Council will “test the market” to see if it can flog off the DEC to someone else.

She rubbed salt into the wounds of HydraPlay by noting that it was free to bid. The idea that there will be a horde of bidders for what is a 1980s recreational centre which hosts a few ageing rock stars each year is fanciful.

The council has tried to offload the DEC in the recent past because it’s a millstone around the ratepayers’ necks.

One has to feel for the HydraPlay consortium in its dealing with the Glenorchy City Council.

It all started well but the failure of the council to be fully transparent with the consortium over the issue of how much the DEC is worth was extraordinary.

On June 28 this year Ms Johnston wrote to the consortium and told it that the council liked its unsolicited bid for the DEC so much it had given approval for her and her general manager to continue discussions “with [HydraPlay] towards development of a Heads of Agreement for the sale”, subject to further Council consideration. The timetable the Mayor set out was aggressive with the final sale agreement to be signed on August 27. But having been enthusiastic in June, Mayor Johnston appears to have got cold feet in July. She told the consortium on July 6 that the matter would be considered in a closed section of the council meeting on July 9 and she would be in touch the next day to let them know how it went.

Having heard nothing, on July 11 HydraPlay made inquiries of the council about the meeting.

The response was cryptic. Ms Johnston left a phone message saying that further information would be required but she did not say what that further information might be. So frustrated was the consortium about the silence and delay that its managing director Justin Hickey sent an email to Ms Johnston on July 19 asking whether the council would sign the Heads of Agreement as Ms Johnston said it would in her letter of June 28.

The Council and Ms Johnston’s stonewalling appears to be because it got valuation advice which disagreed with the offer put by

the consortium. One would have thought that prior to setting an aggressive sale timetable a vendor would have some idea of the value of its property.

Ms Johnston and the valuer engaged by her council met with the consortium and its valuer on July 27.

Given the valuations were a long way apart one would have thought it would be prudent for the council to release its valuation report to the consortium so its valuer could inform himself and advise his client. But the council refused to do this.

Even without the valuation report from the council however, the consortium’s valuer was able to glean enough information from the council’s expert to make this forthright observation. He said the council’s valuation approach was “divorced of any reality to its true current market value”.

Shortly after this meeting of valuers Ms Johnston wrote to Mr Hickey and told him he would not be getting the council’s valuation report and that another review commissioned by the council agreed with the council valuer. But having made a song and dance about the secret valuation reports bizarrely Ms Johnston said on August 21 that the valuation was obtained for “accounting” purposes only.

Ms Johnston likes to portray herself as a populist mayor and she gets a dream run in the media.

But what is clear from the DEC saga is that when it comes to doing business with her Council Ms Johnston and those advising her have a mountain to climb.

The DEC saga also raises the question as to whether a mayor should appoint a committee of experts to handle negotiations and recommend to the council, rather than the Mayor being knee-deep in the transaction.

The idea that there will be a horde of bidders for what is a 1980s recreational centre which hosts a few ageing rock stars each year is fanciful.

Hobart barrister Greg Barns is a human rights lawyer and was an adviser to state and federal Liberal governments.