The audit report into four Land Development Agency's purchases for the City to the Lake project epitomises the problem of complacency and of cliques. It will be no surprise to anyone in the private sector that business is about contacts and connections. But this is not how things are supposed to operate in government. The auditor's report suggests a government land agency that operates in both worlds, and has allowed some of those mores of private business practice to infiltrate and contaminate the way it does business with public money.
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Agency head David Dawes is, according to those who know him well and over a long time, a man of considerable integrity. He's also likeable, has a humble air, and inspires loyalty. All of which might strike you as odd in the context of auditor Maxine Cooper's report, which makes it clear that he led or directed so many of the transactions at issue.
But it is perhaps easier to understand when you consider that David Dawes is a creature of the private sector, where he owned real estate agencies, car yards, service stations and a speedway, until persuaded into the public service by Jon Stanhope in 2007.
Stanhope spoke very highly of Dawes in a profile by reporter John Thistleton late last year. "The fact he is as straight as the day is long," Stanhope said. "David always said what he thought and what he meant, there's nothing tricky or duplicitous, he is straight, he talks straight, says what he thinks, he doesn't engage in games, nothing devious about him, what you see is what you get."
Stanhope was attracted to Dawes's track record in housing, his energy and his negotiating skills. Those negotiating skills, the ability to get a job done, is something that politicians, so often stymied by the deadweight of the public service, desperately want. They might also have made Dawes an uneasy fit in the public sector.
As an aside here, while the auditor clearly traces many decisions and actions to Dawes, few decisions and none of import or with the political implications of the City to the Lake project, are made without ministerial input. While Dawes stood and told the media a week ago that the decisions were his, it is improbable that Andrew Barr wasn't well briefed throughout.
Dawes's time in the private sector has left him with myriad connections, which have also been raised in questions about the Land Development Agency's dealings with the private sector.
A number of findings in the audit report raise eyebrows, including payments for land that went well beyond valuation, but also the extent of the informal relationship between Colliers International and the agency.
Last year, the Liberals' Alistair Coe – who has done much to uncover the land deals at Glebe Park and West Basin – pushed legislation through the ACT parliament requiring the government to publish all payments it makes above $25,000 on a monthly register.
The notifiable invoices register shows that Colliers is by far the biggest beneficiary of real-estate fees, making $2.63 million in agents' commissions from the Land Development Agency in the 14 months since (including GST). No others come near. The Independent Property Group is second on the list, making $630,000.
Asked about the payments, the agency provided slightly different figures and excluding GST. Colliers had made $2.54 million since July 2015 and Independent Property $760,000, with a total $4.13 million in agents fees in the period.
But an agency spokesman said it was not accurate to look at 14 months in isolation. He provided figures for previous years, showing Colliers was paid $1.3 million and Independent $1.2 million of a total $3.95 million in 2014-15. Payments were more evenly spread in 2013-14, although Colliers still received most, getting $1.6 million of $5.3 million in agents fees.
The agency said w ork went to members of the pre-approved panel on factors such as "specialist knowledge required for the project, previous allocations, past performance and resourcing capabilities", with quotes sought from "one or more agents" and a "value for money" decision made.
Whichever way you calculate it, Colliers' work for the agency and the ACT government more generally is undeniably lucrative. Colliers was also in charge of the Fluffy valuations. And Colliers appears to be the Land Development Agency's go-to guy.
It was Colliers that valued the Tradies' land behind the Dickson pool at well over $3 million, enabling the Land Development Agency to justify $3.9 million for the block which houses the ACT headquarters of the construction union. The purchase was part of a land swap in which the Tradies will pay $3.2 million in the next year or two for the carpark outside its club in the Dickson shopping centre. It is a puzzling transaction, not least for the value ascribed to the CFMEU block.
The audit report said the Colliers principal was involved in an informal mentoring arrangement for Dawes's former deputy, when Dawes asked the principal to meet his then deputy twice a month to mentor him on the property sector, something that was done free of charge.
Colliers played a role in two of the City to the Lake purchases investigated by the auditor.
In the Glebe Park purchase, where Barry Morris and Graham Potts were paid $3.8 million (plus GST) for their land, the agency used advice from Colliers as justification. The Land Development Agency had a 2014 valuation from Opteon, which put the land at about $1 million. But the auditor says Opteon was asked to value the land "as is" when it would have been more appropriate to value it for "highest and best use". The owners were not happy with the valuation and the issue lay dormant until April 2015 when the agency wanted it resolved so it could push ahead with a bid to Infrastructure Australia for funding for the realignment of Parkes Way. Until the stormwater pond was moved from Parkes Way, the section of land between Parkes Way and Constitution Avenue could not be squared off, maximising its value, and the Parkes Way plans could not be finalised. So Dawes asked his then deputy to go to the Colliers principal for advice.
The Colliers principal provided a document setting out possible values - $3.75 million if the land was used for serviced apartments, which the zoning allowed, and $4.2 million if it was used for residential units, which the zoning did not allow. That document has disappeared from the agency's records. A week later, the Colliers principal wrote another two-pager recommending $3.6-$3.8 million on the basis of residential development. This time, he said the site permitted residential use. The agency paid $3.8 million.
Both documents were provided free of charge by Colliers. While judging the Colliers figure was closer to market value than the Opteon figure, the auditor said neither of the Colliers documents were valuations and both amounted simply to unsupported opinions. They nevertheless formed the basis of negotiations between the agency's then deputy (acting on instructions from Dawes) and the landowners, in a negotiation arranged by the Colliers principal – an arrangement questioned by the auditor who said it was not clear why the principal of Colliers should have arranged a negotiation meeting on its premises.
The auditor also pointed to "manipulated" valuation advice, after Coe made a freedom of information request for the Glebe Park valuations in 2015. The first two-page advice was not on the agency's records so not produced for Coe. When it couldn't locate the second two-pager, the agency asked Colliers to send a copy, which Colliers did, with the offer, "If you want it changed to say valuation advice I can change its title."
The title was duly changed, with the senior agency officer involved in this exchange since "counselled" in April this year, but nevertheless now in a more senior position, as an agency executive, according to the audit report.
Colliers also played a part in the paddle-boat valuation. Early in 2105, two valuations (not from Colliers) put the value of Pat Seears' head lease at $50,000 and $100,000. In November that year, Colliers was once again brought in, asked to value the lease. It said the lease was worth $438,000, plus a premium of $500,000, by way of compensation, to a total of $900,000 to $1 million. Pat Seears was paid $1 million. The auditor's report says the Colliers advice contained anomalies, and the figure lacked evidence, methodology and justification.
There was no explanation for the compensation figure. Another of the anomalies was a comparison that Colliers made to two Yarralumla lakeside blocks which sold for $1042 a square metre and $1387 a square metre. Colliers judged the Seears lease more valuable and pegged it at $3000 a square metre. It then used a rate of $4000 a square metre in its calculation of value, for reasons that are not explained. Given the large disparity between the Yarralumla values and the amount picked for the Seears block, the auditor judged the comparison was rendered "almost meaningless".
Pat Seears' bother, Jim Seears, ran the boat hire business in a sublease (which appears to have never been authorised) to his brother. Colliers appears to have played no part in valuing his business. Three valuers put the business at $270,000 to $279,000. He was paid $575,000, a figure quite different from the valuations but nowhere near the disparity in the case of his brother. For Jim Seears, it was his job and livelihood. It was a similar situation for Mr Spokes bike hire, where again Colliers was not involved. Jillian Edwards and Martin Shanahan, who both earned their livelihoods from their bike business, were paid $1.1 million for their bike business. Three valuers (the same three as in the Jim Seears case) put the value at $600,000-$700,000.
The lasting impression from all of this is that Colliers - whose former managing director and long-time employee Jim Shonk is on the board of the Land Development Agency - has operated as a sounding board for the agency in an informal relationship as well as a lucrative one, where problems are fixed and negotiations are progressed. This might work in the private sector, but the public sector demands something very much more transparent.
