North Melbourne Recreation Reserve Funding Update

FINANCE, CORPORATE SERVICES AND Agenda item 5.7 GOVERNANCE COMMITTEE REPORT COVER SHEET

9 September 2003 NORTH MELBOURNE RECREATION RESERVE FUNDING UPDATE

Division City Assets & Services

Presenter Vince Haining, Group Manager Parks and Recreation

Purpose

The purpose of this report is to:

• provide to Council a funding options plan for the proposed redevelopment at North Melbourne Recreation Reserve (“Land”);

• seek agreement to the final design proposal following further consultation; and

• recommend to Council that it agree to the surrender of the current lease granted to the North Melbourne Football Social Club Ltd over the Land and enter into a new lease with the North Melbourne Football Club Ltd for the Land subject to the necessary statutory processes.

Finance

The total cost of the proposed option for consideration is $4.95 million which includes provision of $0.25 million for landscaping around the site. It is proposed that this will be funded by the Council Works Program over 3 years. $0.5 million has been allocated from the Council Works budget for 2003/04. The contract for the works will require a further report to the Finance Corporate Services and Governance Committee as the capital funds to complete the project will require a budget pre-commitment over a 2- year period.

Legal

Council is Committee of Management of the Land pursuant to the North Melbourne Lands Act 1966 (“NML Act”).

Pursuant to section 6 of the NML Act, the Council in its capacity as Committee of Management of the Land, is entitled to grant a lease of the whole or part of the Land for defined purposes including sport and recreation. In the case of the current Lease of the Land, the NML Act does not restrict the power of the Council to agree to its surrender. As the new lease will exceed 3 years, pursuant to section 6(2) of the NML Act, such new lease will require the approval of the Governor in Council. As the new lease will also exceed 10 years, section 190(3)(b) of the Local Government Act 1989 (“LGA”) requires public notice of the proposed lease and a public submission process in accordance with section 223 of the LGA.

Sustainability

Council has resolved to maintain the grandstand on the Land. Agreement to this proposal would restore a facility of local significance, enhance the amenity, improve the facilities available and return some areas to parkland. Connected and Accessible City

City Plan 2010 Strategic Direction 1.7 commits Council to:

“Recognise and protect the significant heritage features and biodiversity of the City’s parks,” and

“Manage all City parkland to provide a mix of active and passive recreation facilities.”

Innovative and Vital Business City.

There is no significant sustainability impact.

Inclusive and Engaging City.

Strategic Direction 3.5, commits Council to:

“Protect, value and respect the cultural, natural heritage and built form of the City and its diverse neighbourhood,” and

“Provide and maintain a variety of quality parklands and informal public spaces to meet the passive and active recreational needs of the community.”

Environmentally Responsible City.

There is no significant sustainability impact.

City Plan 2010 further identifies the issues relating to the reserve redevelopments in its local areas including:

“Protect and enhance the urban character and heritage features of North and West Melbourne; and

Support the local residential community through the retention and maintenance of North Melbourne residential character and amenity.”

Recommendation

That the Finance, Corporate Services and Governance Committee recommend that Council:

• agree to the North Melbourne Recreation Reserve ("Land") being redeveloped in accordance with Option 2 being the option set out in clause 7.2 of this Report;

• agree to the surrender of the current lease over the Land dated 21 December 1993 granted to the North Melbourne Football Social Club Ltd and other existing rights over the Land;

• subject to the processes specified in sections 190(4) and 223 of the Local Government Act 1989 (“the Act”), pursuant to section 6 of the North Melbourne Lands Act 1966 (“NML Act”) resolve to grant a lease of the Land to the North Melbourne Football Club Ltd (“NMFC”), subject to the provisions of the NML Act, including the approval of the new lease by the Governor in Council, and on the following terms and conditions:

½ a term of 15 years with a commencing rental of $136,000.00 per annum plus GST;

½ the NMFC will be responsible for the payment of all rates, taxes, charges, levies and GST during the term of the new lease and any additional taxes or charges that may be introduced during the term; ½ the NMFC will be required to provide ongoing maintenance of the oval and to maintain the turf table and outfield to a standard suitable for district level cricket;

½ the NMFC will be required to allow community access and use of facilities by way of an auditable bookings system with use to be reported annually to Council and actively managed to ensure ongoing availability;

½ the NMFC will be required to play at least one third of its games in Melbourne for the duration of the term of the new lease;

½ such other terms and conditions as may be required by the Manager Governance Services including but not limited to the method of rental increase, if any, during the term of the new lease;

• that in accordance with sections 190(3)(b) and 223 of the Act give notice of Council’s intention to grant the proposed lease by public notice in The Age newspaper;

• that in accordance with Sections 223 and 86 of the Act to appoint a committee to be known as the North Melbourne Recreation Reserve Committee consisting of the Group Manager Parks and Recreation, Manager Facilities Management and the Manager Governance Services, or the persons from time to time acting in those positions, and by instrument of delegation sealed by the Council to delegate to that Committee its powers, duties and functions to hear any submissions in relation to the proposed lease at a meeting to be held on Friday 14 November 2003, commencing at 3.00pm at the Melbourne Town Hall Administration Building, and to report, with recommendations, to the Council;

• that pursuant to Section 223(3) of the Act to authorise the Manager Governance Services to carry out administrative procedures necessary to enable the Council to carry out its functions under that section; and

• by instrument of delegation sealed by the Council pursuant to Section 98(1) of the Act to delegate to the Chief Executive Officer, or the person from time to time acting in that position, its powers, duties and functions:

½ to negotiate and agree final terms and conditions of the proposed redevelopment detailed in paragraph 7.2 of this Report and in Attachment 1 - Option 2 attached to this Report;

½ to negotiate and agree the final terms of the surrender of the current lease granted to the North Melbourne Football Social Club Ltd and any other existing rights over the Land (if any); and

½ if no submissions are received in accordance with Section 223(1)(b) of the Act, to negotiate and agree the final terms of the new lease to the NMFC,

½ to affix the Common Seal of the Council to the surrender of lease, new lease and sign such other documents and take such other actions as are required to give effect to the agreed redevelopment and the matters the subject of this resolution;

½ to do all things ancillary and incidental to the above; and

• pursuant to section 98 (3) of the Local Government Act 1989 authorise the instrument of delegation referred to above, to empower the Chief Executive Officer or the person from time to time acting in that position, to delegate such power, duty or function of the Council delegated to him to a member of the Council staff. FINANCE, CORPORATE SERVICES AND Agenda item 5.7 GOVERNANCE COMMITTEE REPORT

9 September 2003 NORTH MELBOURNE RECREATION RESERVE FUNDING UPDATE

Division City Assets & Services

Presenter Vince Haining, Group Manager Parks and Recreation

Purpose

1. The purpose of this report is to:

1.1 provide to Council a funding options plan for the proposed redevelopment at North Melbourne Recreation Reserve;

1.2 seek agreement to the final design proposal following further consultation; and

1.3 recommend to Council that it agree to the surrender of the current lease granted to the North Melbourne Football Social Club Ltd over the Land and enter into a new lease with the North Melbourne Football Club Ltd for the Land.

Background

2. Council is Committee of Management under the North Melbourne Lands Act 1966 (“NML Act”) for the land referred to as the North Melbourne Recreation Reserve (Arden St) (“Land”). Pursuant to the NML Act, in 1992 Council entered into Lease and Licence arrangements with the North Melbourne Football Social Club ("the Social Club") for the use of the premises (part of Grandstand), the Social Club Rooms and the Oval areas of the Land.

3. The lease, in part, provides for the Social Club to allow use of the playing area and facilities for the purposes of Cricket and Football. The lease also requires the Social Club to establish a reserve management committee comprising two representatives each from the Social Club, Football Club and Cricket Club.

4. In December 2002 the ECCD Committee resolved that a further report be presented to the Finance, Corporate Services and Governance Committee. The ECCD Committee resolved to;

• “note the options under consideration;

• endorse the development of a Funding Option Plan for presentation to the February 2003 cycle; and

• request that initial consultation be undertaken with relevant community and other stakeholder groups of the options contained within the Report and that the outcomes from those consultations be reported in the February report.”

5. Councillors and senior staff have met regularly with Club representatives since the December 2002 ECCD meeting, to advance resolution of the above matters. Issues

6. There is a long history of design/use options on the redevelopment of the Land including two prior proposals from previous NMFC administrations and one proposal from Council based upon extensive community input. All options highlight use of the Grandstand (which Council has determined to retain), for football club use with (possible) community use components depending on any shared funding arrangements.

7. The development options for the Land presented to the Environment, Community and Cultural Development Committee in December 2002 were:

7.1 the 1998 proposal which involved construction of a new joint use facility on the corner of Fogarty and Arden Streets, removal of the old social club buildings and demolition of the Grandstand.

7.2 refurbishment of the Grandstand (ground and mezzanine floors) to permit multiple sports use (ground floor) and dedicated space on the mezzanine floor for North Melbourne Football Club football department use (See Attachment 1 “Option 2”). This option would allow for the removal of the social clubrooms and the return of that area to parkland. An estimate of $4.7 million had been received for this option.

7.3 refurbishment of the Grandstand (ground and mezzanine floors) to permit multiple sports use (ground floor) and retention of the Social club for football administration. In this option the mezzanine floor would undergo a minimalist fit out. The mezzanine floor would be available for community use. The estimated cost of this option is $3.5 million; and

7.4 refurbishment of the Grandstand to enable on going use for spectators and internal structure compliance with relevant statutory and building code requirements. Existing change rooms, toilets and useable spaces beneath the grandstand would be refurbished to a standard consistent with Council’s community sporting pavilions. An estimate of $1.7 million has been received for this option.

8. The project will need to be funded from Council’s Works Program over the following three years as follows:

Financial Year Funding ($M)

2003/04 $0.50 (proj 03PR050N) 2004/05 $3.00 2005/06 $1.45 Total $4.95

9. The following potential sources of funding were also examined as part of the proposal analysis:

10. Council’s heritage fund (Grandstand preservation). Quantity surveyor estimates indicate that the works required to ensure the preservation option of the grandstand are in the order of $1.0 million. Discussions with the Group Manager, Sustainable Development and Statutory Services indicate that funds available are limited and are generally applied to projects of a much smaller scope; and

10.1 Public Open Space Reserve. Funding from this source has been examined, however as the scope of work is primarily building works this project would not conform to the requirements under the relevant Act, and therefore no funding is available. 10.2 Municipal Asset As the funding is required for a municipal asset that generates benefits to the community, the use of investment funds is not substantiated. This is consistent with similar projects such as the refurbishment and redevelopment of the Richmond Football Club facilities located at Punt Road Oval in Yarra Park.

11. The option of continuing “as is” will require Council to expend funds to meet its fundamental landlord responsibilities and to achieve occupational health and safety standards. To enable the preservation and usage of the grandstand together with repairs to the structures’ internal facilities, will result in an unavoidable cost of approximately $1.7 million. This amount will enable usage to a standard consistent with Council’s community sporting pavilions. (As per 7.4 above).

12. As the project relates to major refurbishment works, the allocation is proposed to be made from Council’s New Works program. Council has included an allocation to its programs in each year of its 3-year financial plan. An amount of $0.5 million has been allocated from the 2003/04 Council Works budget for the project and the remaining $4.45 million will require funding to be sourced from the program, over the following two years.

13. North Melbourne Football Club has indicated a funding preference to contribute through rental/lease fees over a 15-year tenancy agreement rather than through any up front capital contribution. The current annual lease rental is $36,220 per annum. North Melbourne Football Club also maintains the Arden Street oval and the district standard turf wicket table, utilised by the North Melbourne Cricket Club. The Club has advised that the annual cost of maintaining this asset is in the order of $60,000 per year.

14. The proposed lease would consist of $136,000 (GST exclusive) annual rental payments and NMFC continuing the maintenance of the grounds, at an estimated cost of $60,000 per annum. This would generate an additional annual cash value of $100,000 compared to the existing lease. The new annual return is consistent with rentals applicable to other major assets on crown land (such as the Carlton Football Social Club).

15. In order for any new funding arrangements to be implemented North Melbourne Football Social Club would be required to surrender all existing lease and licence arrangements. A new leasing arrangement with the North Melbourne Football Club is proposed.

16. The existing assets have a value in the asset register of $947,000 for the football club / grandstand and $414,000 for the social club. The proposed demolition of the football club building and social club assets will require the write off (non-cash) of the residual value of the asset. As the grandstand is to be refurbished, only the value of the football club building will be written off. The residual value of the football club building will be less than $947,000, as this is a combined figure, however at this stage, the residual value has not been ascertained.

Benefits of Redevelopment

17. The long term benefits from the proposed redevelopment include:

17.1 the refurbishment of a largely derelict parkland available for use by the growing residential population;

17.2 the acquisition of up to 8,144 square metres of new parkland arising as a consequence of the demolition of the administrative buildings and various ancillary structures and new landscaping (removal of the social club will be the subject of further discussion with the club). – Refer to Attachment 2

17.3 the preservation of a locally significant asset and icon within the community; 17.4 the provision of a multi-purpose sport and recreation facility capable of a diversified use into the future;

17.5 the capital city benefits of the retention of an AFL Club within the municipality;

17.6 demonstrated council support for both capital city and community level sport.

Outcomes from Community Consultation

18. Previous extensive community consultation has favoured redevelopment of this Reserve and its facilities. More recently discussions have occurred with the North and West Melbourne Association. The Association’s position is that:

“The North Melbourne Recreation Reserve is North and West Melbourne’s only major sporting ground. It is most important that the Reserve be wholly retained as a sport/recreation/leisure facility in our community. This is particularly so given the increasing residential population in the area and projected further increases under State Government policy. Council’s many policies (eg North West 2010, Sports Policy 2006, Recreation & Leisure Strategy) seek to increase and enhance sporting and recreation opportunities for local communities.”

19. The Association has also provided a number of key issues related to the future development of the Reserve. Theses include:

19.1 retention of the grandstand as a facility of local heritage significance;

19.2 restoration of the grandstand to accommodate the operational requirements of the North Melbourne Football Club;

19.3 use of the reserve for a diverse range of recreational and leisure activities;

19.4 retention of any buildings other than the grandstand should be subject to additional community consultation

19.5 no parking on the reserve

19.6 any redevelopment to consider ESD principles and initiatives

Analysis of Options and Associated Financial Arrangements

20. All redevelopment options considered (Refer section 6 of Report) have advantages and disadvantages. Only option 7.2 above will result in retention of the grandstand, a return of parkland (by way of removal of the Football Administration buildings) and meet the essential criteria for use by an AFL club.

21. Further to the December ECCD meeting where options were advised and further work was requested on costings, a modified proposal has now been developed (see Attachment 1 “Option 2”). This proposal provides for all the advantages and benefits of section 7.2 (refurbishment of grandstand, fit out of mezzanine level and removal of all other site buildings) but minimises the costs associated with foundation and “piling” works which were originally included. This is achieved by moving the lift structure inside the grandstand structure and minimising the reception area. It also provides for landscaping costs related to all areas in the Reserve affected by works, (the original refurbishment only applied to the immediate grandstand area and social clubroom).

22. This proposed development option (Attachment 1 – “Option 2”) remains at a total cost of $4.95 million, is inclusive of landscaping works, and is therefore recommended for approval because; 22.1 It achieves the best outcome for the community through increased available parkland and it meets all the requirements of the North Melbourne Football Club.

22.2 It will result in a locally significant heritage asset being retained and refurbished.

22.3 It provides for ongoing shared use of these assets into the future.

23. Special conditions to be incorporated into the proposed lease would include:

23.1 A requirement for NMFC (Kangaroos) to continue to play at least a third of their games in Melbourne.

23.2 A requirement for continuing community access and use of facilities by way of an auditable bookings system with use to be reported annually to Council and actively managed to ensure ongoing availability.

23.3 A requirement to continue to maintain the oval and to maintain the turf table and outfield to a standard suitable for district level cricket. (These costs are estimated at $60,000 per year).

Current and Prospective Community Use

24. The Land is currently used by the North Melbourne Cricket Club for district grade cricket. It is also used for AFL Auskick clinics and other informal usage by community groups. There are some options for additional use of the Land for passive and active recreational purposes. These include location of seasonal sports club at the Land during winter season, incorporation of holiday program activity via the North Melbourne Pool, facilitating community usage of the meeting room space and using the Active Melbourne programs to develop formal activity at the Land.

Relationship of this Proposal to Joint Funding Principles for New Sports Facilities

25. In February 2001 Council adopted a policy entitled Joint Funding Principles for New Sports Facilities in Parkland. That report specifically referred to the need for the refurbishment of the North Melbourne Recreation Reserve Grandstand and surrounded facilities. The Committee Report outlined to a number of community benefits as part of any partnership funding arrangement, including;

25.1 Providing new or upgraded facilities in the short term that otherwise would not be affordable for many years;

25.2 Providing places designated for community use supported by a bookings arrangement which promotes usage;

25.3 Providing and delivering clearly identifiable leisure and recreation activities which address both the immediate needs of residents and promote leisure and sport activities which have a long term future;

25.4 New or enhancement of existing opportunities for participation by a broad range of the community; and

25.5 Maximising existing infrastructure use and the avoidance of new investment in assets which would otherwise by relatively under utilised.

26. The proposal to redevelop Arden St is consistent with the required embedded benefit outcomes of the funding principles which require Council to consider triple bottom line contributions, incorporate community usage into any leasing agreements and ensure a return on Councils investments. Relation to Council Policy

27. The City of Melbourne North West 2010 Local Plan in its Strategic Direction 16 – Facility Development and Programs advocates:

“to plan for a diverse range of Facilities that are safe, accessible and well used by the local community.” Specifically to, “conduct an audit of community spaces to evaluate the diversity of spaces available and investigate the capacity of existing facilities to adapt to changing needs, including: examine the potential of the North Melbourne Recreation Reserve as a community recreation resource, including future program partnerships and initiatives with sporting and other user groups.”

28. Strategic Direction 18 Planning and Development of Open Spaces:

“supports long-term planning processes for the North Melbourne Recreation Reserve.”

29. Council’s draft Towards 2006 – City of Melbourne Sports Policy” identifies actions which:

“Plan for sporting facilities for community participation and use, and continue research to ensure that initiatives match community needs and sporting trends.”

Government Relations

30. Ongoing discussions with the Department of Sustainability and Environment have continued as part of this process. Formal processes will be required to proceed with amendments to leasing arrangements.

Recommendation

31. That the Finance, Corporate Services and Governance Committee recommend that Council:

31.1 agree to the North Melbourne Recreation Reserve ("Land") being redeveloped in accordance with Option 2 being the option set out in clause 7.2 of this Report;

31.2 agree to the surrender of the current lease over the Land dated 21 December 1993 granted to the North Melbourne Football Social Club Ltd and other existing rights over the Land;

31.3 subject to the processes specified in sections 190(4) and 223 of the Local Government Act 1989 (“the Act”), pursuant to section 6 of the North Melbourne Lands Act 1966 (“NML Act”) resolve to grant a lease of the Land to the North Melbourne Football Club Ltd (“NMFC”), subject to the provisions of the NML Act, including the approval of the new lease by the Governor in Council, and on the following terms and conditions:

31.3.1 a term of 15 years with a commencing rental of $136,000.00 per annum plus GST;

31.3.2 the NMFC will be responsible for the payment of all rates, taxes, charges, levies and GST during the term of the new lease and any additional taxes or charges that may be introduced during the term;

31.3.3 the NMFC will be required to provide ongoing maintenance of the oval and to maintain the turf table and outfield to a standard suitable for district level cricket;

31.3.4 the NMFC will be required to allow community access and use of facilities by way of an auditable bookings system with use to be reported annually to Council and actively managed to ensure ongoing availability; 31.3.5 the NMFC will be required to play at least one third of its games in Melbourne for the duration of the term of the new lease;

31.3.6 such other terms and conditions as may be required by the Manager Governance Services including but not limited to the method of rental increase, if any, during the term of the new lease;

31.4 that in accordance with sections 190(3)(b) and 223 of the Act give notice of Council’s intention to grant the proposed lease by public notice in The Age newspaper;

31.5 that in accordance with Sections 223 and 86 of the Act to appoint a committee to be known as the North Melbourne Recreation Reserve Committee consisting of the Group Manager Parks and Recreation, Manager Facilities Management and the Manager Governance Services, or the persons from time to time acting in those positions, and by instrument of delegation sealed by the Council to delegate to that Committee its powers, duties and functions to hear any submissions in relation to the proposed lease at a meeting to be held on Friday 14 November 2003, commencing at 3.00pm at the Melbourne Town Hall Administration Building, and to report, with recommendations, to the Council;

31.6 that pursuant to Section 223(3) of the Act to authorise the Manager Governance Services to carry out administrative procedures necessary to enable the Council to carry out its functions under that section; and

31.7 by instrument of delegation sealed by the Council pursuant to Section 98(1) of the Act to delegate to the Chief Executive Officer, or the person from time to time acting in that position, its powers, duties and functions:

31.7.1 to negotiate and agree final terms and conditions of the proposed redevelopment detailed in paragraph 7.2 of this Report and in Attachment 1 - Option 2 attached to this Report;

31.7.2 to negotiate and agree the final terms of the surrender of the current lease granted to the North Melbourne Football Social Club Ltd and any other existing rights over the Land (if any); and

31.7.3 if no submissions are received in accordance with Section 223(1)(b) of the Act, to negotiate and agree the final terms of the new lease to the NMFC,

31.7.4 to affix the Common Seal of the Council to the surrender of lease, new lease and sign such other documents and take such other actions as are required to give effect to the agreed redevelopment and the matters the subject of this resolution;

31.7.5 to do all things ancillary and incidental to the above; and

31.8 pursuant to section 98 (3) of the Local Government Act 1989 authorise the instrument of delegation referred to above, to empower the Chief Executive Officer or the person from time to time acting in that position, to delegate such power, duty or function of the Council delegated to him to a member of the Council staff.

Agenda Item 5.7 Finance, Corporate Services and Governance Committee 9 September 2003

FINANCE ATTACHMENT

NORTH MELBOURNE RECREATION RESERVE FUNDING OPTIONS PLAN

Funding of $500,000 has been included in the 2003/04 budget for North Melbourne Grandstand Redevelopment works (03PR050N). Any additional funding will need to be subject to the normal budget processes.

Joseph Groher Manager Financial Service Agenda Item 5.7 Finance, Corporate Services & Governance Committee 9 September 2003

LEGAL ATTACHMENT

NORTH MELBOURNE RECREATION RESERVE FUNDING OPTIONS PLAN

Council is Committee of Management of the Land pursuant to the North Melbourne Lands Act 1966 (“NML Act”).

As the new lease will exceed 3 years, pursuant to section 6(2) of the NML Act, such new lease will require the approval of the Governor in Council.

As the new lease will also exceed 10 years, section 190(3)(b) of the Local Government Act 1989 (“LGA”) requires public notice of the proposed lease and a public submission process in accordance with section 223 of the LGA.

Kim Wood Acting Manager Governance Services