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Government losing hundreds of millions in Defence leases.



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MEDIA RELEASE

Senator Chris Evans Labor Senator for Western Australia Shadow Minister for Defence

1 May 2003

GOVERNMENT LOSING HUNDREDS OF MILLIONS IN DEFENCE LEASES

Figures released by Labor show that the Howard Government will lose hundreds of millions of taxpayers’ dollars in selling and then leasing back a number of Defence properties.

Taxpayers will have to pay hundreds of millions of dollars in additional costs over the next twenty years to use buildings they had previously owned.

Over the past two years, the Howard Government has sold a number of major Defence properties in Sydney, Melbourne, Wollongong and Canberra for around $400 million in total.

Because of these sales, Defence is now locked into long-term leases under which it will have to pay $1 billion in rent for the properties. (See attached table)

The imminent sale of Defence Headquarters at Russell in Canberra, as well as other major Defence establishments across Australia will see the total cost of Defence leases escalate well beyond the $1 billion mark.

This is despite an Audit Office report in 2001, which warned the Government against the long-term cost of such sale and leaseback arrangements. That report found that in most cases the Government is losing money on the deal after only eleven years of a twenty-year lease.

The massive sell-off is nothing more than a desperate attempt by the Government to prop up its budget bottom line.

It was revealed last year that the Howard Government wanted to rush through $700 million of Defence property sales this financial year. But that target is a long way from being achieved, with only $180,000 worth of property being sold between July 2002 and March 2003.

Labor demands that the Government call an immediate halt to its costly sale and leaseback program until an independent audit of the program examines the long-term viability of each project.

For comment: Chris Evans 0419 983 593 Tim Friedrich 0408 577 617

COST OF DEFENCE PROPERTY SALE AND LEASEBACK ARRANGEMENTS

Campbell Park Defence Plaza, Defence Plaza, Hydrographic Office

NSDC Moorebank Offices, Canberra 270 Pitt Street, Sydney 655 Bourke Street, Melbourne 8 Station Street, Wollongong Total ($m annual rent) ($m annual rent) ($m annual rent) ($m annual rent) ($m annual rent) ($m annual rent)

Year 1 14.000 7.917 8.622 4.169 1.051 35.759

Year 2 14.420 8.155 8.880 4.294 1.082 36.832

Year 3 14.853 8.400 9.147 4.423 1.115 37.937

Year 4 15.298 8.652 9.421 4.556 1.148 39.075

Year 5 15.757 8.911 9.704 4.692 1.183 40.247

Year 6 16.230 9.179 9.995 4.833 1.218 41.455

Year 7 16.717 9.454 10.295 4.978 1.255 42.698

Year 8 17.218 9.738 10.604 5.127 1.292 43.979

Year 9 17.735 10.030 10.922 5.281 1.331 45.299

Year 10 18.267 10.331 11.249 5.440 1.371 46.658

Total cost after 10 years $160.494 $90.765 $98.839 $47.794 $12.048 $409.940

Year 11 18.815 10.640 11.587 5.603 1.412 48.057

Year 12 19.379 10.960 11.935 5.771 1.455 49.499

Year 13 19.961 11.288 12.293 5.944 1.498 50.984

Year 14 20.559 11.627 12.661 6.122 1.543 52.514

Year 15 21.176 11.976 13.041 6.306 1.590 54.089

Year 16 21.812 12.335 13.432 6.495 1.637 55.712

Year 17 22.466 12.705 13.835 6.690 1.686 57.383

Year 18 23.140 13.086 14.250 6.891 1.737 59.105

Year 19 23.834 13.479 14.678 7.098 1.789 60.878

Year 20 24.549 13.883 15.118 7.311 1.843 62.704

Total cost under lease $376.185 $212.746 $231.670 $112.026 $28.239 $960.865

Sale price $185.000 $80.000 $85.118 $40.010 $7.260 $397.388

Net loss $191.185 $132.746 $146.552 $72.016 $20.979 $563.477

N otes 1. 'NSDC' is the National Storage and Distribution Centre 2. Annual rent figures are sourced from Defence responses to Questions on Notice

3. Annual rent figures in this table are indexed by 3 per cent each year (as per the NSDC Moorebank arrangement) 4. Sale prices for NSDC Moorebank and Campbell Park are estimates based on media reports, other sale prices are sourced from De fence responses to Questions on Notice