Barangaroo: Public works in doubt. Photo: Brett Hemmings
A lost court battle over Barangaroo has left the Baird government with a budget shortfall that could potentially reach $500 million. Either taxpayers or developers may be asked to foot the bill.
The failed challenge to developer Lend Lease has raised concern that the public has copped a raw deal on the privatisation of valuable land. The Barangaroo site is one of the last harbourside parcels that can be developed.
It raises the prospect that about half of $1 billion worth of public works at Barangaroo will be paid for by the state. This reneges on a promise by the previous Labor government. It could also mean the works, which include public space, walkways and parks, will be curtailed to fit a smaller budget.
On Thursday, the NSW Court of Appeal found in favour of Lend Lease in the long-running contractual dispute by rejecting an appeal by the state-run Barangaroo Development Authority.
It follows a battle in the NSW Supreme Court over the method used to value two commercial towers at south Barangaroo, which will dictate how much the government receives from the development. It is understood the decision puts in doubt up to $500 million in "value share payments" that would have flowed to the government.
In 2010, the Labor government led by Kristina Keneally announced that Barangaroo's headland park, and other infrastructure, would have "no cost to taxpayers" and would, instead, be funded by commercial development at the southern end of the site.
Contributions by developers were billed as compensation to the public for allowing controversial private development on prime state-owned land. On Thursday, a spokesman for Premier Mike Baird would not say if the works would be funded from the public purse, or reduced in scope.
Taxpayers will also have to pay Lend Lease's legal costs of tens of thousands of dollars.
On Thursday, outgoing Barangaroo Development Authority chief executive John Tabart said the authority was reviewing the decision, which he said was disappointing.
Barangaroo would still give NSW "significant economic, social and long-term financial benefits", Mr Tabart said, adding that the headland park, the waterfront promenade and the first commercial tower would open in the next year.
Urban Taskforce chief executive Chris Johnson said developers should not be asked to pay more to build at Barangaroo, and the government should curtail its public works if necessary. There is speculation the government may try to recoup funds through developer charges at central Barangaroo.
Greens MP David Shoebridge said a developer levy could be applied across the site to fill the "huge black hole for the funding of public works".
"The government needs to commit to the completion of all public works, and that it will be at zero cost to taxpayers, and … paid for by developers," he said.
John Stammers, a solicitor at Sydney law firm Holman Webb and a property and finance specialist, said "when you overlay complicated development agreements on valuation principles, there is a lot of scope for disagreement and different interpretations".