Work on Stage 1 of the $50 million Crago Mill Precinct Project is ongoing. Photo: Yass Valley Council.
Further progress on a major Yass Valley development would create “unacceptable risk”, a report has found, as councillors consider alternative plans.
Stage 1 of the Crago Mill Precinct Project is underway, which covers the construction of a new administration building and a new library. The work is expected to be finished by October.
A proposed second stage would include knocking down the existing administrative building, refurbishing the historic Crago Mill and the construction of a new commercial building.
An external report commissioned by Yass Valley Council (YVC) has found that any movement on Stage 2 would constrain the council’s cash reserves and affect its financial stability, when compared to only completing Stage 1.
“Without securing additional grant funding, asset sales, or alternative financing, continuing with the full implementation of Stage 2, drawing, at a minimum, up to a further $11 million from the loan facility, is likely to erode council’s current financial position creating unacceptable risk,” the report found.
In its analysis, AEC Group modelled seven scenarios over a 40-year horizon and their impact on the council’s 10-year financial situation.
To do this, they adjusted the council’s Long Term Financial Plan (LTFP) by removing any elements of Stage 2, so there was a ‘base’ for the different scenarios.
The report also assumed a 6.32 per cent borrowing interest rate, as well as estimated construction costs and operating expenditure.
Moving ahead with Stage 2 as planned was found to have the largest deterioration to the council’s financial situation, with YVC’s operating results forecast to decline by more than $1 million in 2027.
“[The impact of each] of the development stages slightly improves over the 10 year projection due to interest decreasing … however maintenance costs are expected to impact from 2032 onwards which further deteriorates the operating position,” the report states.
“It should be noted that repayment of the loan principal is not reported in the operating result, but is reflected in the statement of cashflows and as interest may decrease, and [an] increased amount is made in the repayment of the loan principal, therefore the cash position is not improved.”
Any progress on Stage 2 would also risk the council’s projected closing cash position.
“Assuming that council’s internal reserve balances remain consistent … all project scenarios project an unacceptable negative unrestricted cash position with the scenarios that have further [development] resulting in a greater unacceptable result.”
Selling the land (considered in two of the scenarios) was found to mitigate the financial impact but not completely avoid negative effects from proceeding with Stage 2.
Meanwhile, AEC Group advised that deferring Stage 2 for a time (such as the five or 10 years considered in the modelling) would give the council more flexibility.
However, the modelling didn’t factor in the use of the site during a deferral period because of concerns around land use conflict.
The awarded contract for the precinct’s construction was broken into two stages. Image: Yass Valley Council.
At their upcoming meeting, councillors are expected to receive the report and consider backing down from the redevelopment of the historic Crago Mill building and their plans to build new commercial premises.
According to the proposal in council documents, the council would instead demolish the existing administrative building and consider seeking funding to cover work on the historic Crago Mill building.
YVC staff would investigate subdividing and potentially selling the area set aside for the new commercial building.
This plan also includes $900,000 being set aside for “beautification” of open space at the site, fencing and structural and heritage assessments for the Crago Mill building.
Council documents also state that YVC has submitted a partnership grant application, which could be affected by stepping away from Stage 2.
This is in addition to $50 million in loans taken out for the project, with the NSW Office of Local Government raising concerns about whether the council could repay them in late 2024.
Further information on the Crago Mill Precinct is available on council’s website.
Yass Valley Council is set to receive the external review and discuss its next steps for the project at its meeting on Thursday (25 September). The council agenda and the review are also available online.
