The multi-million dollar Victoria on the River buildings bought by Hamilton City Council last year have cost ratepayers almost $100,000 in the first year of owning them.
Councillors who spoke to the Herald are now shocked as they claim they had been assured the buildings would be cost neutral and cover all the costs.
The figures, released to the Herald under the Local Government and Official Information Act response, claim the properties are cash positive from an operating perspective bringing in $214,397.84 in the 12 months from September last year - but do not include the $305,030 paid in interest on $6.49 million.
The buildings earned $278,77.54 in rent in the past year plus $32,450.90 in recovered operating expenditure such as rates, common-area electricity, common area cleaning, repairs and maintenance, compliance and legal costs and the cost of an asbestos survey.
But the council had to pay $96,832 for the remaining operating expenditure not covered by tenants as well as $305,030 in interest on the $6.49 million loan, leaving it $96,832.62 in the red. There's also the additional cost of council overheads such as staff administering the buildings, which it was unable to provide a breakdown for.
Under former mayor Andrew King's leadership, the council paid $6.49m in September last year for the five properties between 242-266 Victoria St, which was well above the $4.3m independent market valuation.
Hamilton City Council general manager of city growth Jen Baird said when discussing buying the properties councillors had been told in a report that operating revenue and costs did not include the cost of borrowing because they were dealt with separately.
However, she admitted that while staff had attempted to explain the difference, it would appear there remained confusion around how it worked.
Councillor and new chair of the finance committee Rob Pascoe felt staff had broken their promise to councillors that the properties would be cash neutral including interest and council overheads as he specifically recalled asking about this at the time and being told they would.
He said the buildings, which he never wanted to buy, would only keep costing ratepayers as it was unlikely tenants would renew their leases when they expired when they knew the future of the buildings were uncertain.
Councillor Dave Macpherson, who supported buying the buildings, said it had also been his impression that the properties would be cost neutral including the interest owed on the loan.
Given the properties were costing ratepayers each year council needed to make a decision about what to do with them quite quickly, he said.
"You can't leave that going as a bleeding sore for three years."
Deputy mayor Geoff Taylor said when they had been assured owning the buildings would be cost neutral he had expected it to include borrowing.
"Despite that I think owning the property will be a good investment in the long term as we work alongside businesses to open up Victoria St to the river."
Hamilton City Council mayor Paula Southgate said she had been opposed to buying the properties and had been aware of what the implications would be for ratepayers.
But the council now owned them and needed to make a decision about whether they played a role in its great plans for the river, she said.
Hamilton Residents and Ratepayers Association president Raymond Mudford said the average annual rate from 32 ratepayers was now being spent solely on covering the shortfall on those buildings.
"Is this a sound policy from council when clearly we are now hearing it's making losses, those losses will continue and get worse which means ratepayers are funding something of which there is no plan and that's really unacceptable."
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