Valuation dispute poses threat to $1b return from Barangaroo
The vision … an impression of the Barangaroo headland park.
A PROMISE that $1 billion in spending at Barangaroo would be returned to taxpayers is in jeopardy after a dispute over how much the state government will receive from the project.
Lend Lease filed a claim in the NSW Supreme Court on Thursday after a months-long disagreement with the government's Barangaroo Delivery Authority over how the land should be valued once building at Barangaroo South is complete.
The government had promised that a $1 billion investment in public space at the site, including a much-touted naturalistic headland, would be paid for by returns from the commercial precinct. If the court rules in Lend Lease's favour, the government is unlikely to fully recoup the funds.
The chief executive of the Barangaroo Delivery Authority, John Tabart, described the disagreement as "very serious".
"We have for several months been having good-faith discussions with Lend Lease to resolve the issues, but that has been without result," he said.
"We are acting in the best interests of the NSW government to ensure that payments due to the state under the [contract] are met.''
A report by the NSW Auditor-General released last year showed the government is expected to spend $1 billion at Barangaroo over 15 years, to be recouped in revenue.
It includes developing the headland park, championed by the former prime minister Paul Keating, relocating a cruise terminal to White Bay, remediation and infrastructure.
Payments from Lend Lease were expected to largely cover the cost of the works.
The contract with Lend Lease, known as a project development agreement, was signed in March 2010 after the developer won the bid for the $6 billion project.
It allows Lend Lease to develop commercial, retail and residential buildings at Barangaroo South.
In exchange, the government would be paid in two ways: a series of fixed payments over eight years, and "the potential to share in the project's financial success through additional value payments".
Those payments would be calculated based on land values at Barangaroo South once the project was complete, and after Lend Lease's profit and the fixed payments were subtracted. The remainder would be evenly split by the two parties.
However Fairfax Media understands that Lend Lease's favoured method of valuing the land would lead to a much diminished return to taxpayers, meaning the $1 billion investment may not be fully recouped.
Lend Lease has so far paid three of nine fixed payments to the government, totalling $154 million.
In a statement, a Lend Lease spokeswoman said the company was seeking "legal clarification on the land valuation methodology" contained in the contract for development at Barangaroo South.
"Both parties agree this is the best way to obtain a resolution on this matter," she said.
A spokeswoman for the Barangaroo Delivery Authority said the formal dispute resolution process outlined in the agreement allowed for the parties to seek a court ruling if they could not resolve matters themselves.
Mr Tabart said the court action would not have an impact on construction work at Barangaroo, which is under way. The first commercial buildings and the headland park are due to open in 2015.
He did not comment on whether the dispute would affect talks on relocation of the controversial hotel and casino, saying only that negotiations were continuing.
Under an approved plan, the hotel is situated on a pier jutting into Sydney Harbour. However the Premier, Barry O'Farrell, has called for it to be relocated.
A spokesman for Mr O'Farrell declined to comment on the court matter.