Hamilton ratepayers cover $100,000 plus shortfall on $6.49m Victoria St buildings for a second year

Hamilton ratepayers will have to cover a $100,000 plus shortfall on the council-owned Victoria St buildings after the rental income dropped significantly this year. Photo / Nikki Preston

Hamilton ratepayers have had to fork out more than $100,000 to cover the shortfall for the controversial multi-million dollar Victoria on the River buildings for a second year.

The latest figures, released to the Herald under the Local Government and Official Information Act, claim the properties are cash positive from an operating perspective bringing in $96,125.57 in the 12 months from September last year - half of what they bought in the previous year.

But the operating expenditure does not include the $203,786 in interest paid on the $6.49 million loan, leaving ratepayers with a $107,660.43 hole for the buildings which were bought by the council in 2018 as a "strategic move".

There had been talks under former mayor Andrew King about bowling the buildings and expanding the Victoria on the River Park between the soon-to-be built Waikato Regional Theatre and the existing park.

But mayor Paula Southgate said those ratepayer-funded architectural plans had been shelved and were not being considered by the new council as part of what can be done from the Victoria on the River park to the Waikato Museum.

While Southgate had been against buying the buildings or the legacy they had left them in terms of debt and some sub-standard properties - she said she now had to look forward and see how they could do something positive with the site.

There were some really good ideas being discussed which would make up the long term plan and included possibly developing a new much-needed hotel and also building a pedestrian cycle bridge linking the back of the museum to Parana Park, she said.

"Long-term we have to decide do we use them as a mix of commercial buildings, hospitality, retail and whatever or do we go through the process we are bound by with the sale and purchase agreement."

The operating profit received in the council's second year of ownership of the five buildings bought as a strategic investment in September 2018 has more than halved with $96,125.57 received in the second year compared to $214,397.82 in the first year.

This is due to council giving its tenants rental relief during Covid-19, refurbishments on an upstairs residential flat deemed unfit for use last year and a fire in the front kitchen at Naughty Naan in July, a council spokesperson said.

The council lost rent from 250 Victoria St while the building was being repaired from the fire and is also still looking for a commercial tenant for the newly renovated upstairs area at 260. The ground floor of 266, previously rented by Victoria Dentists, is also empty.

The shortfall would have been higher if it hadn't been for lower interest rates which have saved the council about $100,000.

There are also additional costs such as the council overheads, such as staff administering the buildings, which the council is unable to provide a breakdown for.

Council's finance committee chairman Rob Pascoe, who voted against purchasing the buildings, said it showed that the original promise from staff they would be cash neutral including interest was incorrect and in the second year it had not got any better.

"I really think it was one of the worse decisions in the last term and I don't think that there are many councillors around the table that would disagree with me... Nobody has ever said to me boy that was really good buying, either the price or the decision."

Pascoe said the buildings couldn't be left ticking along and the council needed to make a decision about them.

But deputy mayor Geoff Taylor, who voted to buy the buildings, said the buildings were a great investment as they gave council control over some properties in a key strategic location.

"We can either turn the city to face the river or leave it to chance for 100 years and be disappointed.... The deal wasn't perfect but I think the city will ultimately get a great result."

If the council does not develop some of the properties by 2028, then it is contractually obliged to offer two back to the previous vendor.