Late Reports Agenda of Ordinary Council Meeting

Ordinary Council Meeting Agenda 17 March 2020

11 Community & Business Services

11.6 Draft City Property Management Framework and new Property Management Policy

TRIM Ref: D19/183510

Authors: Karen Balm, Senior Community Partner

Meluka Bancroft, Executive Manager Corporate Strategy and Governance

Authoriser: Virginia Miltrup, Executive Director Community & Business Services

Attachments: 1. Property Management Framework ⇩

2. Draft Property Management Framework Policy ⇩

3. Council Policy No. 1.2.1 - Terms of Leases ⇩

4. List of City properties ⇩

5. Community Benefit Matrix ⇩

6. Five year forecasted financials ⇩

Recommendation:

That Council:

1. NOTES the draft Property Management Framework, at Attachment 1;

2. RECEIVES the draft policy – ‘Property Management Policy’ at Attachment 2;

3. AUTHORISES the Chief Executive Officer to provide local public notice of the new Policy in Recommendation 2 above and invite public comments for a period of at least 21 days; and

4. NOTES that at the conclusion of the public notice period any submissions received would be presented to Council for consideration.

Purpose of Report:

To seek Council’s authorisation to seek public feedback on the City’s Property Management Framework and the new Property Management Policy, which replaces the City’s Policy 1.1.1 – Terms of Leases (Attachment 3).

Background:

· The City currently has lease/licence arrangements with a range of not-for-profit community organisations, sport and recreation clubs, government agencies and commercial entities. These arrangements were based on the City’s existing Policy No. 1.2.1 – Terms of Leases (Leasing Policy).

· The City has experienced issues in administering the Leasing Policy as it provides little clarity on the terms of the lease arrangement, and potential variations of those terms based upon the type of organisation, type of activity, or value to the community.

Details:

· The City has prepared a Property Management Framework (Attachment 2) to ensure any City property that is leased or licenced is managed in a consistent, fair and transparent manner, along with providing an equitable methodology for calculating lease and licence charges.

· Historically there has been no rationale or strategy behind the assignment of leases and licences. The current Leasing Policy has been inadequate and simply states that:

· Any new lease granted by the Council shall usually be limited to a five year period and any option to renew shall usually be limited to no more than a ten year period; and

· Council may consider longer periods where the Council is of the opinion that there is a benefit or merit for providing a longer lease term.

The City has completed a comprehensive review of existing leases, and reviewed the application of the Policy to those leases.

Review of current leases and licenses

There are currently 41 leases or licenses (Attachment 4) to organisations for community (13), sport and recreation (17), government and commercial (11) purposes. The current annual rental income from these arrangements is approximately $1,294,005.49 with government leases alone totalling $728,637.33.

The City does not currently make a clear distinction between commercial and community leases. Defined terms are broadly the same across both categories of leases, with the main difference being that rent is traditionally higher for commercial properties.

Under current arrangements, the City has a range of lease fees from community leases (peppercorn rent) to commercial (e.g. Telstra who pay $27,500 per annum). When determining the applicable lease fees for club or community groups, the City considers:

· The group’s capacity to create an income from the premises;

· Likely community benefit; and

· Community need for the facility.

There is some disparity across the community agreements for example, Leederville Tennis Club pays $1.00 per annum whereas other Tennis Clubs are averaging around $1,155.44 per annum.

Until recently, existing leases were silent with respect to fair wear and tear, and made no provision for repair and maintenance responsibilities. Where a club or community group has built their premises and occupied the premises since construction, the City’s approach has been for the club or community group to be responsible for the repair and maintenance, with a nominal rent payable.

Management of lease obligations and responsibilities has led to lessee dissatisfaction, resulting in a reluctance and/or financial inability to pay associated costs. Additionally this occasionally results in groups refusing to enter into new agreements. The main lease terms in dispute are the:

· Emergency Services Levy;

· Building insurance premiums;

· Annual RCD (residual current device), smoke alarm and emergency exit light testing;

· Biannual fire appliance testing;

· Annual termite treatments;

· Quarterly rodent treatments;

· Security and alarm call outs;

· General maintenance;

· Repair and replacement due to fair wear and tear;

· Bore replacement; and

· Structural maintenance works and upgrades.

Industry Standards

Research across the Local Government sector has identified that there are a wide range of approaches and options applied to leases. However, there is a consistent theme of:

· Providing a fair and equitable outcome for community organisations and sporting clubs;

· Delivering a balance between revenue and community value for government organisations; and

· Providing market competitive conditions for commercial enterprises.

Property Management Framework

The City recommends that the existing Terms of Leases Policy is repealed and replaced by a Property Management Framework (Framework), at Attachment 1, and a supporting Property Management Policy, at Attachment 2. The Framework aims to:

· Meet growing community needs and to maximise community benefit by prioritising City owned and managed properties for use where occupancy arrangements include co-location, shared-use and highest community utilisation;

· Meet the Strategic Community Plan’s objectives of ‘Connected Community’ and ‘Thriving Places’ by making City owned and managed properties primarily available for local not-for-profit organisations, community groups and other community purposes;

· Ensure transparency and equity by recognising all financial and in-kind subsidisation by the City where City owned and managed properties are used to meet community needs;

· Ensure sustainable management of City owned and managed property by requiring effective asset management and demonstrated sound financial management; and

· Identifying specific City owned and managed properties that can be made available for commercial activities, supporting income generation and encouraging a sustainable asset management portfolio at aggregate level.

The Framework provides:

· Definitions of occupancy agreement types;

· Tenancy fee methodology;

· Annual Property Management reporting;

· Leasing incentives for small community groups, sporting clubs and community groups and organisations;

· Four tenant classifications with accompanying lease terms;

· Clarity of both tenant and City responsibilities within the lease.

To assist the City in monitoring the financial viability of clubs and community groups, they will be required to complete an annual health check which includes:

· Provision of an annual report or audited financial statements;

· Current contact details and responsibilities of office bearers;

· Certificate of Currency (Public Liability Insurance);

· A breakdown of the membership base including young people, seniors, and social members; and

· Postcodes of all registered members.

Community groups with leases that have recently expired are on short-term leasing arrangements pending the adoption of this Framework.

The proposed Framework will provide clear direction to the City on matters that require Council discretion.

The City requires a policy statement to govern the overarching objectives of the Framework. This policy establishes the parameters within which the Property Management Framework and other administrative processes operate. The proposed Property Management Policy will also replace Policy 1.2.1 – Terms of Leases, which is to be repealed by Council.

Implementation

The City will discuss the draft Property Management Framework with community groups and sporting clubs within categories one and two, and will discuss the implementation process on a case by case basis, in order to address any specific concerns.

In addition, the City will develop a Frequently Asked Questions document to assist community groups and sporting clubs with the implementation of the new Framework.

The transition of community groups and sporting clubs to the new Framework will be undertaken in three phases. It will take many years to complete the process given the longest tenure arrangements continue until 30 September 2041.

It is the City’s intention to initially transition the eight (8) groups who are currently on a month-to-month lease, with the remaining fourteen (14) sporting clubs and groups transitioning as their leases expire.

Consultation/Advertising:

The City has held discussions with all community groups and sporting clubs within categories 1 and 2 who hold a lease or licence. Feedback from these groups has been reviewed and considered and (where appropriate) incorporated within the Framework. Notably the following has been amended following community feedback:

· Inclusion of an assessment criteria within the Community Benefit Matrix, which is used to determine the subsidy level applied (Attachment 5);

· Removal of the assessment criteria relating to funding; and

· Defining capital upgrades and cap renewals.

Commercial entities and government agencies will be informed of the Framework during the negotiation of lease renewal.

In accordance with the City’s Policy 4.1.1 – ‘Adoption and Review of Policies’, public notice of the new policy will be provided for a period exceeding 21 days in the following ways:

· On the City’s website; and

· In the local newspapers; and.

· On the notice board at the City’s Administration and Library and Local History Centre.

Risk Management Implications:

Low: There is a low risk to Council considering adoption of a new Property Management Framework and supporting policy.

Legal/Policy:

Section 2.7(2)(b) of the Act provides Council with the power to determine policies.

City’s Policy 4.1.1 – ‘Adoption and Review of Policies’ sets out the process for repealing and adopting policies.

Strategic Implications:

This is in keeping with the City’s Strategic Community Plan 2018-2028:

Connected Community

Our community facilities and spaces are well known and well used.

Thriving Places

Our physical assets are efficiently and effectively managed and maintained.

Innovative and Accountable

We are open and accountable to an engaged community.

SUSTAINABILITY IMPLICATIONS:

Nil

Financial/Budget Implications:

Under the proposed model, the City will generate an additional $7,903.36 in the first year and a total of $42,090.97 over a five year period. Category one – small community groups have a financial benefit within this framework. The framework also allows for a maximum subsidy of 50% for category one groups and up to 25% subsidy for category two groups (Attachment 6)

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Ordinary Council Meeting Agenda 17 March 2020

12 Chief Executive Officer

12.14 Lease of Community Building at Woodville Reserve, 10 Farmer Street, North Perth - Ethnic Community Council of WA Inc.

Attachments: 1. Calendar of proposed use ⇩

2. Comparison of Expressions of Interest ⇩

Recommendation:

That Council:

1. NOTES that the current condition of the community building adjacent to the tennis clubrooms at Woodville Reserve, 10 Farmer Street, North Perth (Premises) is poor and therefore continued use of the Premises beyond 2021/22 will not be possible, as the building will either be demolished or repurposed, based on the recommendations of the Woodville Reserve Masterplan.

2. APPROVES a lease of the Premises to the Ethnic Communities Council of WA Incorporated (ECC), subject to the approval of the Minister for Lands, and on the following key terms:

2.1 Term: one year;

2.2 Option term: 3 x one year options at City’s sole discretion;

2.3 Lease fee: $4,386 (excluding GST), which includes a 15% community benefit rebate, indexed at CPI (if option exercised);

2.4 Outgoings: payable by ECC, includes utilities, Emergency Services Levy (ESL) and rubbish/recycling bin charges;

2.5 Public liability: ECC to effect and maintain current public liability insurance of not less than $20,000,000 (per claim);

2.6 Condition: provided in ‘as is, where is’ condition. The City will not undertake any capital or renewal works during the term of the lease, which includes repairing or replacing any fixtures or fittings at the end of their life;

2.7 Building insurance: payable by the City, excess on any claim payable by ECC;

2.8 Maintenance/repairs: responsibilty of ECC, this includes keeping the Premises interior and exterior clean and tidy and repairing or replacing any fittings or fixtures if required (but excluding the air-conditioning system and oven);

2.9 Capital upgrades: City will not undertake capital or renewal works; and

2.10 Damage to Premises: in the event the Premises is damaged so it becomes unfit for use the City may at its discretion terminate the lease, and no compensation will be payable to the tenant.

3. Subject to final satisfactory negotiations being carried out between ECC and the Chief Executive Officer, AUTHORISES the Mayor and Chief Executive Officer to affix the common seal and execute the lease in recommendation 2. above; and

4. NOTES Transition Town Vincent’s proposal to use the Premises at certain times, as detailed in Attachments 1 and 2, and REJECTS this proposal as Transition Town Vincent does not have the financial capacity to comply with the proposed licence terms as set out in the City’s draft Property Management Framework.

Purpose of Report:

To consider the expressions of interest for the future use of the vacant brick community building adjacent to the tennis clubrooms at Woodville Reserve, 10 Farmer Street, North Perth (Premises) in the context of the current condition of the Premises and the development of the Woodville Reserve Masterplan (Masterplan).

Background:

The City leases the portion of Woodville Reserve, 10 Farmer Street, North Perth (Woodville Reserve) comprising the Premises for a term of 999 years from the Crown pursuant to a lease dated 13 June 1925. Pursuant to sections 41 and 47 of the Land Administration Act 1997 (LAA) and the City’s lease, Woodville Reserve is a Class A reserve specified as ‘solely for the purpose of recreation’. Pursuant to section 18 of the LAA, the Minister for Lands’ consent and approval will be required for any lease or licence of Woodville Reserve.

The Premises was leased to the Multicultural Services Centre Western Australia (MSCWA) from 1 April 2004 until 26 June 2019 and is currently vacant.

The Premises building is old (Administration estimates it is at least 40 years old) and is in a condition consistent with its age. No significant capital renewal or improvement works have been undertaken by Administration. Paint work on the exterior of the Premises is in poor condition and wood work is exposed to the elements.

In late 2019, the City invited expressions of interest for a community group to lease/licence the Premises in its current condition. Three community groups submitted proposals.

Administration met with each of the prospective tenants to discuss their proposed use and the licence terms, which would be based on the City’s draft Property Management Framework. A summary and comparison of:

· each prospective tenant’s original proposal to use the Premises and proposed lease/licence terms; and

· further information provided by each prospective tenant following meetings with Administration,

is at Attachment 2.

Details:

Prospective tenants

In accordance with the principles of the draft Property Management Framework, Administration encourages the co-location of community groups at its facilities.

The key details of each prospective tenants proposed use and occupation of the Premises is as follows:

Ethnic Communities Council WA (ECC):

· proposed use: as a community centre/hub for activities, group meetings and events;

· occupation of premises: ECC is willing to use the Premises in conjunction with another tenant;

Transition Town Vincent (TTV):

· proposed use: primarily to house TTV’s tool library, other uses include group meetings, demonstrations and workshops, annual soup kitchens and monthly movie nights;

· occupation of premises: TTV would prefer a licence arrangement to use the Premises during certain times (Saturdays, Monday evenings, Tuesdays, Thursdays and twice annually on a Wednesday night) and is willing to share use of the Premises with another tenant; and

Wadjak Northside Aboriginal Community Group (WN):

· proposed use: community centre and hub for WN activities and support groups, use of the kitchen for food handling or barista courses; and

· occupation of premises: WN requires exclusive use and possession of the Premises.

The prospective tenants provided the following justification for their use of the Premises:

· WN expressed the wish to set up a long-term presence within the City. Administration is supportive of this as it meets the objectives of the City’s Reconciliation Action Plan. However, as WN requires exclusive use and possession of the Premises, it may be difficult to accommodate WN at Woodville Reserve following completion of the Masterplan. Administration is investigating alternative premises/locations within the City for WN’s use.

· ECC is willing to accommodate shared use with another tenant. ECC (which is affiliated with the prior tenant, MSCWA) already has a presence within the City at 20 View Street, North Perth.

· TTV expressed the most flexibility in terms of sharing use with another tenant and the times TTV might use the Premises. It is Administration’s opinion that TTV’s proposed primary use of the Premises as a tool library (and subsequently branching out to include other small community groups) is more likely to facilitate interaction with other tenants already located at Woodville Reserve – particularly the Vincent Men’s Shed and North Perth Community Garden.

Woodville Reserve Masterplan

The development of the Masterplan is listed in the Corporate Business Plan for 2020/21. It is anticipated the recommendations of the Masterplan would be implemented in the following two to three years (2021/22 and 2022/23).

As stated above, the Premises is in a condition consistent with its age. The Premises is structurally sound and the prospective tenants are aware that no capital work or renewal of the Premises will occur during the term of a lease or licence.

Administration notes that if the Premises is to be retained in the medium term, extensive capital works will be necessary within 12-18 months. Administration estimates the costs of such works to be between $130,000.00 and $150,000.00.

Due to the age and current condition of the buildings at Woodville Reserve, Administration recommends that the current buildings, including the Premises, be consolidated, through a combination of removal and renovation.

TTV and ECC have been advised that there is no guarantee that the Masterplan would recommend that the prospective tenant be accommodated at Woodville Reserve.

As WN requires exclusive use of the Premises and wishes to set up a long-term centre within the City, Administration considers that WN is not an ideal tenant for the Premises in its current state. Administration has discussed this with WN and is considering alternative locations/premises available for use by WN. In addition, Administration understands that WN currently does not have the ability to meet the financial obligations of a lease or licence of the Premises in accordance with the terms set by the draft Property Management Framework.

Administration proposed a shared licence of the Premises between TTV and ECC and informed each group that, due to the Masterplan:

· the City will not be undertaking any capital upgrades or renewals to the Premises during the licence term; and

· while the City will endeavour to find space for the tenants at Woodville Reserve following the completion of the Masterplan, there is no guarantee that the Masterplan would recommend either tenant be accommodated at Woodville Reserve in the future.

ECC confirmed that the proposed licence terms where acceptable to it. However, TTV has since responded that it is not able to comply with the proposed licence terms, in particular the proposed licence fee (even with a community rebate). The proposed licence fee for TTV was $2,580 (excl. GST) which, with a 25% rebate, would be $1,930 (excl. GST). TTV requested that the licence fee be waived. This does not align with the draft Property Management Framework and on that basis Administration recommends that a lease is granted to ECC. ECC, at its discretion, may choose to make the Premises available for use by TTV for meetings and storage.

Consultation with ECC

Administration has contacted ECC to inquire whether it would be interested in a lease of the Premises with ECC as the sole tenant. ECC has confirmed that they would be agreeable to a lease of the Premises on the terms as set out in Recommendation 2.

ECC also asked for confirmation that they would not be responsible for the cost of replacing the air-conditioning or the oven at the Premises should either item cease operating during the licence term. Administration has confirmed this is acceptable, however, the City will also not guarantee it will replace either item should any problems occur.

Consultation/Advertising:

The proposed lease to ECC does not require public notice, in accordance with section 3.58 (Disposal of property) of the Local Government Act 1995, as ECC has cultural and recreational purposes and members do not receive any pecuniary profit. As a result, the exemption under Regulation 30(2)(b) of the Local Government (Functions and General) Regulations 1996 applies.

Legal/Policy:

Regulations 30(2)(b) of the Local Government (Functions and General) Regulations 1996:

‘(2) A disposition of land is an exempt disposition if —

(b) the land is disposed of to a body, whether incorporated or not —

(i) the objects of which are of a charitable, benevolent, religious, cultural, educational, recreational, sporting or other like nature; and

(ii) the members of which are not entitled or permitted to receive any pecuniary profit from the body’s transactions…’

The proposed lease terms align with the City’s draft Property Management Framework for a Category 2 tenant.

Risk Management Implications:

Low: It is low risk for Council to consider a lease for a community building.

Strategic Implications:

This is in keeping with the City’s Strategic Community Plan 2018-2028:

Connected Community

Our community facilities and spaces are well known and well used.

Thriving Places

Our physical assets are efficiently and effectively managed and maintained.

SUSTAINABILITY IMPLICATIONS:

Nil.

Financial/Budget Implications:

The proposed rent is $5,160 per annum excluding GST. ECC is eligible for the community benefit rebate of 15%, which means the annual rent payable is $4,386 excluding GST. Utilities, ESL and bin charges associated with the Premises will also be recouped from ECC.

Ordinary Council Meeting Agenda 17 March 2020

12.15 Lease of 245 Vincent Street, Leederville to Town Team Movement

Attachments: Nil

Recommendation:

That Council:

1. APPROVES a lease of 245 Vincent Street, Leederville (Premises) to the Town Team Movement Ltd (TTM) on the following key terms:

1.1 Term: 6 months with two 6 month option terms (at City’s discretion);

1.2 Rent: $1,327.04 incl. GST (includes a 12% community benefit rebate), indexed by CPI (if option term exercised);

1.3 Outgoings: utilities, statutory compliance costs, pest inspections, Emergency Services Levy (ESL) and rubbish/recycling bin charges payable by TTM;

1.4 Insurance: TTM to effect and maintain public liability insurance of no less than $20 million per claim;

1.5 Condition: Premises is provided ‘as is, where is’. City will not undertake any capital or renewal works during the term of the lease, which includes repairing or replacing any fixtures or fittings at the end of their life;

1.6 Repairs: TTM is responsible for minor repairs and maintenance of the Premises;

1.7 Upgrade: City responsible for roofing, mechanical services and main structures of the Premises. Work to be undertaken at the City’s discretion;

1.8 Damage: if the Premises is damaged so it is unfit for use, the City may at its discretion terminate the lease, and no compensation will be payable;

1.9 Termination: by either party, subject to one months’ written notice;

1.10 Shared use: shared use/hire of the facilities for a fee (in accordance with the City’s Schedule of Fees and Charges as amended from time to time), sub-leasing of any part of the Premises only to occur with the City’s consent; and

1.11 Approvals: TTM to obtain any relevant development approval prior to commencing use of the property, noting that the City granting this lease provides no warranty that development approval would be granted by the City; and

2. Subject to final satisfactory negotiations being carried out between the TTM and the Chief Executive Officer, AUTHORISES the Mayor and Chief Executive Officer to affix the common seal and execute the lease in Recommendation 1. above.

Purpose of Report:

To consider the proposed lease of 245 Vincent Street, Leederville to the Town Team Movement Ltd (TTM).

Background:

245 Vincent Street has been vacant since January 2019.

The TTM is seeking use of a community building for administrative purposes, meetings and community meetings and activities.

The TTM is a not-for-profit company that operates across Australia to support, connect, promote and inspire Town Teams around Australia and New Zealand. The TTM’s purpose is to empower communities and create better places in the following ways:

· Inspire active citizenship

· Build connected, resilient communities and better places

· Support existing Town Teams by:

§ Helping them to organise, engage and empower their communities

§ Sharing knowledge, resources and best practices

§ Hosting networking and learning events

§ Assisting them to be financially sustainable

§ Promoting events and activities of Town Teams

§ Providing advice, support and mentorship

· Establish new Town Teams

· Work with and assist local governments with placemaking, community development and creating a positive, ‘can do’ culture.

Details:

245 Vincent Street is currently vacant and is suitable for the proposed use by TTM. The terms of the proposed use align with the City’s draft Property Management Framework, and include a 12 per cent community benefit rebate.

A term of 6 months with two 6 month option terms at the City’s sole discretion is recommended. The City is currently considering the future use of the property, and therefore would have the flexibility to enter into an alternative arrangement.

Consultation/Advertising:

The proposed lease to TTM does not require public notice, in accordance with section 3.58 (Disposal of property) of the Local Government Act 1995, as TTM has cultural and educational purposes and members do not receive any pecuniary profit. As a result, the exemption under Regulation 30(2)(b) of the Local Government (Functions and General) Regulations 1996 applies.

Legal/Policy:

Regulations 30(2)(b) of the Local Government (Functions and General) Regulations 1996:

‘(2) A disposition of land is an exempt disposition if —

(b) the land is disposed of to a body, whether incorporated or not —

(i) the objects of which are of a charitable, benevolent, religious, cultural, educational, recreational, sporting or other like nature; and

(ii) the members of which are not entitled or permitted to receive any pecuniary profit from the body’s transactions…’

The proposed lease terms align with the City’s draft Property Management Framework for a Category 2 tenant.

Risk Management Implications:

Low: It is low risk for Council to consider a lease for a community building.

Strategic Implications:

This is in keeping with the City’s Strategic Community Plan 2018-2028:

Connected Community

Our community facilities and spaces are well known and well used.

Thriving Places

We are recognised as a City that supports local and small business.

SUSTAINABILITY IMPLICATIONS:

Nil.

Financial/Budget Implications:

The proposed rent is $1,508 per annum excluding GST. TTM is eligible for the community benefit rebate of 12%, which means the annual rent payable is $1,327.04 excluding GST. Utilities, ESL and bin charges associated with the Premises will also be recouped from TTM.