Hamilton City Council stands to lose about $2.5 million on the Garden Place underground carpark, despite spending $3.5 million on reconfiguring it.
The loss will come as no surprise to councillors who were warned in June that work on the carpark, which includes reducing the number of entrances from two to one, would cost the city money.
The city council bought the carpark in 2009 for $9 million, funded by an interest-only loan as a core part of the planned $3.7 million Garden Place upgrade aimed at revitalising the city's heart. At the time of purchase, the council had agreed to sell it on to Kiwi Income Property Holdings.
But according to confidential documents, a heads of agreement signed on October 2009 required the council to sell the former Downtown Carpark to Kiwi Income Property Holdings at a price to be established by an independent valuer.
A recent valuation shows that the carpark is steadily declining and in the past year decreased from $7 million to $6.5 million and the sale agreement must be completed by September 2013.
Work on the carpark is underway and includes closing the Alexandra Place access and creating the main and only entrance from Worley Place.
The report was presented to the council in June so it could become familiar with it. The council was told the physical work being carried out to create a shared pedestrian/vehicle link between Alexandra St and Worley Place would increase operating costs and decrease the number of carparks.
However, the report justified the reduction in the sale price at the cost of achieving the council's strategic objectives for the Garden Place/Ward St West precinct and greater CBD. The parties agreed the carpark would be aimed at shoppers, rather than commuters, and the pricing would reflect that.
The revitalisation of the Garden Place carpark, and its ultimate acquisition by Kiwi, was seen as being "critical" to the upgrade of the CBD.
As part of the deal with Kiwi in 2009 the council also agreed to a 999-year lease for the land known as Ward St West, which is to be converted from a road to a pedestrian area.