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Gillman: The final insult?

Opinion

Another chapter in the Gillman debacle has ended, with the deal to sell the land falling over yesterday. But even as this end-point was reached, the State Government demonstrated it has learned little from this sorry chapter in public stewardship, writes David Washington.

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The Gillman deal finally dropped dead yesterday, with its proponents, Adelaide Capital Partners, failing to meet the deadline to stump up the first payment on the former Multi Function Polis land near Port Adelaide.

As has been the case from the very beginning, the Government’s senior leaders apparently fail to comprehend why the nature of the deal caused so much angst in segments of the South Australian community, and attracted the negative attention of the courts and the Independent Commissioner Against Corruption, to name a few of its detractors.

In Premier Jay Weatherill’s mind, the Gillman idea – to turn the land into an “oil and gas hub” – was a plucky proposal by a group of “young entrepreneurs”, who had to battle against vested interests to turn their dream into reality.

The plan certainly caused consternation among competing businesses, because it would have allowed ACP to corner the market in cheap waste disposal. The land in question, relatively close to the city, needs vast amounts of fill in order to be made ready for industrial use.

But beyond competing interests, what makes this a truly sorry chapter in governance is the following: the market was never tested about the land’s value; the decision-making process was found to be serious flawed; and the Government could never prove that the deal was a good one for the taxpayer.

The reality for South Australians is that the deal has cost us millions of dollars, countless wasted hours at the highest levels of government, and, it seems likely, at least some damage to our reputation.

The Government’s two key arguments for the deal it struck – that the sale price represented good value, and that it will create jobs – were first blown apart by comprehensive reviews by outsiders, including a Supreme Court judgement, and then an ICAC inquiry.

And, this week, reality has exposed it as a mirage.

Now, the State Government will do what critics – including long-gone members of the Renewal SA board – argued it should have done a long time ago: place the land on the open market.

To briefly recap, in December 2013 – with a state election campaign looming – the Government announced that it had offloaded the old MFP land at Gillman to ACP for $100 million, in a deal that would create an “oil and gas hub” and 6000 jobs.

The deal immediately soured, with about half of the board of Renewal SA resigning because the Government had agreed to sell the land without going to market.

In the following months, good work by local media – including an extensive investigation by InDaily – discovered some truths which had previously been hidden: the depth of board members’ concerns (including its initial rejection of the deal), and the fact (despite initial government denials) that there had been significant other private interest in the Gillman land.

Since then there’s been a parliamentary inquiry, a major legal case, a revamp of the way the Government deals with so-called “unsolicited” bids and an ICAC investigation, none of which reflected well on the process that was undertaken.

Like a real estate agent low-balling a property as a ‘fixer upper’, Weatherill has signalled to the market that the land isn’t worth much at all.

The Government has been scathing of journalists and others who have questioned the deal, despite the fact that the above-mentioned external examinations of the deal  have raised serious questions about the process involved.

In his forensic report, Independent Commissioner Against Corruption Bruce Lander revealed how members of the Renewal SA board – almost to the exclusion of everyone else, including the agency’s management, and the political leadership of this state – understood the risks in selling the land without a contemporary valuation and without testing the market.

New Renewal SA boss John Hanlon, who wasn’t involved in the original deal, told Lander this: “There is not benefit to the state in all of this.”

Clearing the board of any wrong-doing, Lander said that Renewal SA management’s practices resulted in a “substantial mismanagement of public resources”.

While clearing Premier Jay Weatherill and senior minister Tom Koutsantonis of maladministration, Lander made it clear that the deal over which they presided was likely to come to nothing.

Lander, presciently, did not believe ACP’s staged plan for the land would go ahead, nor could he conclude it represented good value.

“I cannot say that the Option Deed represents a good or bad transaction from the State’s and (Renewal SA’s) points of view,” his report says.

“I suspect it will not be favourable unless all three Options are exercised and the transaction represents value.

“I also suspect that ACP will not exercise all three Options even if it settles on the Stage 1 Settlement Date. I do not know if the Option Deed represents value because there is no current valuation.”

What happened yesterday provides an extraordinary epilogue to the saga – a final (I hope) insult to the state’s injury.

Weatherill has long argued the price to be paid for the land by ACP was a great deal.

And he’s likely to now be proven correct because, after everything that has happened over the past four years, what will the land now be worth?

Weatherill said yesterday he was “disappointed but not surprised” by the outcome, saying the project had “sailed into significant headwinds from external forces since it was first announced”.

“This was an ambitious project… what we received was an unsolicited bid … to turn (Gillman) into employment land,” Weatherill he said.

“[ACP] told us that they wouldn’t be a bidder in a competitive process.

“We gave them every opportunity [but] we’ve seen the halving of the oil price which has had an effect on the ambition for an oil and gas hub [so] we’re now the proud owners of some swamp.”

Like a real estate agent low-balling a property as a “fixer upper”, Weatherill has signalled to the market that the land isn’t worth much at all.

InDaily asked Weatherill whether his comments would affect the sale price, and the Government responded: “It is expected that the suitability of land for various uses will be assessed by companies as they develop their responses to the forthcoming market process.”

That alone seems an extraordinary response (and his deputy John Rau doubled down today, saying the fact that ACP didn’t settle on the deal proved that it wasn’t sold the land at a bargain basement price – effectively telling the market that ACP had offered ‘overs’).

But there’s more.

In the time that has passed since ACP was given exclusive rights to the land, South Australia’s long-awaited mining boom dissipated, the oil price has tanked, and there isn’t a shortage of industrial land in the metropolitan area (the Holden site alone, shortly to be freed up, will soak up much demand).

The original masterplan study, by Tonkin Consulting in 2012, envisaged remediation (fill, transport and stormwater works), followed by a staged release of parcels of land for a variety of industrial uses.

Given the amount of fill to be generated by Government projects in the next few years – the old RAH site, the Festival Plaza, South Road works and the like – would it be prudent to follow the original business plan?

Well, no. Because Renewal SA has recently gained its own license to receive fill.

The Government told InDaily today: “Renewal SA owns significant low-lying land at East Grand Trunkway which has been licensed to receive fill”.

“Note that some fill from that Government projects will also be used to build up the road corridor for the Northern Connector project.”

In other words, even the first commercial possibility for Gillman – to be used as a landfill in preparation for industrial use – is being undercut by the Government itself.

After all the twists and turns, the final insult, however, might not be the land being offloaded for next to nothing.

The final insult might be that most of us just don’t care that much about this issue: it’s too complicated, too messy, too disconnected from our daily striving to keep our jobs and get ahead, to register high on our list of concerns.

It might have been bravado, but John Rau declared today: “I don’t believe it has done any damage to the Government.”

If true, that will be extraordinary.

David Washington is the editor of InDaily.

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