Is our council sitting on a gold mine?

A suggestion that the council sell its HQ at Barkes Corner has come up during the current election campaign, with the idea that it could replace the office and have some millions left over.

It is an idea worth exploring, so I’ve done a little bit of digging. Sadly, I did not find any gold.

Barkes Corner sits in Tauranga City so the council pays rates to that council of $167,000 this year. Paying rates to another council surely grates everyone’s gears, especially when that city levies very high rates on commercial properties.

So, if council sold Barkes Corner what would it raise, bearing in mind the buildings are several decades old, specialised and, unfortunately, do leak a bit?

The thesis is that the rateable value of the property is nearly $21 million so council could sell for somwhere around that, but that is not the right figure to look at. Whoever bought the site would buy it for redevelopment.

It is a big property. Maybe not big enough as a site for Tauranga’s planned new hospital but it could take a lot of terrace housing, for example, as it is close to the city and has strong public transport links.

NZTA wants some of it for when they redevelop the roundabout, but they have made it clear they just want a small slice off the corner.

As the only likely buyer for the rest would be a developer, I asked a couple of them how they would value a site like this, with buildings on it. I made sure I did not lead them in any direction. I really wanted to know what they would say unprompted.

Both said they would base their price on the value of the land, less the demolition costs for the building.

The official land valuation for Barkes Corner is $8.58 million. The market value may differ a bit, but it would be somewhere around that.

Demolition costs are less clear but the developers both suggested the thick end of a million dollars, leaving a net return to council of less than $8 million.

The simple fact is that this would not yield enough to build a new HQ anywhere else. Council would have to go into debt to build a new HQ, and the servicing of that debt would be way more than the annual rates bill.

As well, there are some other issues that also need to be worked out first. With the council’s waters operations being separated out, we don’t yet know how much smaller the council will get in the next couple of years.

So, to my mind, the council has more urgent priorities to look at.

One suggestion was that the new HQ could be in Te Puke but, frankly, I think Te Puke people would like their traffic woes fixed ahead of having a shiny new council building erected in the town, with associated debt costs added to their rates bills.