Hepburn Shire Council has decided to not proceed with final construction works of the Hepburn Hub at The Rex project and will instead sell the historic building. In a split decision, Councillors Hewitt, Henderson, Hood and Simpson voted to abandon the project. Councillors Drylie, Bray and Halliday voted to retain the project.

In 2016 Council consulted widely  about creating a community Hub at the Town Hall to fix office accommodation for staff and improve services for the community.

But in a sudden and unexpected change of direction, Council instead bought the Rex in Vincent Street for $6.3 million  – a price now widely considered too high.

This left the highly successful and strongly supported Cinema group without their home in the historic Rex building which was originally built as a cinema.

Following negotiations with Council, a community auditorium suitable as a Cinema was included in the Rex plans along with relocation of the library and new office space for Council staff. This was the plan for the Hub.

Problems with the Rex Hub project began almost straight away. Council tried to keep the cost of renovation down below $1 million as an ‘owner-builder’ in order to avoid the necessity of obtaining a planning permit. However, costs blew out massively and forced a major rethink that brought the project to a halt as the substantial problems of renovating an historic building became apparent.

CEO Aaron Van Egmont departed under a cloud in May 2018 and the interim CEO, Bruce Lucas, initiated an internal audit into the Rex project. This led to an external audit by Crowe Horwath and eventually to an investigation by the Victorian Local Government Inspectorate. The LGI investigation, which started in June 2019, has still not been completed.

Hutchinson’s Builder was appointed in December 2020 to complete the works with a fixed price contract over six times the original cost estimate. The builder was given notice to proceed with the works in January, 2021, but did not do so because they found conditions at the site differed from those expected. Protracted negotiations failed to resolve the dispute and Council and Hutchinson’s parted ways in July this year.

By this stage Mr King had left to take up the CEO position at Ballarat Council, a new Council had been elected and Bradley Thomas had been appointed CEO for Hepburn Shire.

Following another review and a quantity surveyor estimate of additional required works, the new Council agreed in June to further increase the project budget to $8.7 million and readvertise the tender. It is not clear what alternative options and costs were considered and the community was not consulted.

But this week Councillors were faced with further cost blow outs. The tenders came in higher than expected, the consultants fees were increased, and there were further costs associated with consultants and negotiations with the previous builder.

The recent tender process to complete the project received six tenderers and Council officers recommended Council award the construction contract to Harris HMC Interiors with a further increase in the project budget.

Officers asked Councillors to agree to a new budget of $9.7 million – a $1 million increase in four months and now more than 10 times the original estimate five years ago.

Added to that, Councillors were faced with prospect of further costs to change the heating from gas to electricity and to repair the facade of the building that were not included in the budget. Neither were costs for fitting out the building – furniture and equipment.

All up costs for completing the project would have come in at well over $10 million and the total cost of the Hub, including the purchase of the building would have been more than $16 million.

In a split vote, Councillors rejected the officer’s recommendation to award the contract and instead voted on an alternate motion to bring the Rex project to an end and look for alternatives for the library, Cinema and office accommodation.

Explaining the decision, new Mayor Cr Tim Drylie said, “Councillors thought deeply about this decision. It was not an easy one and we understand it will result in mixed feelings across our community.”

“While we recognise the value in creating a community hub and consolidation of our council offices, we ultimately decided that the best choice for the community is to discontinue the project, which now provides a clear direction for The Rex site.”

In particular, Council was concerned about the massive expenditure on the Rex in Daylesford when the Shire more generally faces very serious financial challenges in dealing the costs of recovering from COVID and the recent storm damage in an environment where rates are capped.

This leaves a series of questions that Council is now addressing, including the future of the Rex building, the library, the Cinema and office accommodation for staff.

Mr Drylie said, “Councillors have requested the Chief Executive Officer now undertake a public process to sell The Rex building, repay debt and undertake a planning project that will review possible solutions for staffing accommodation and community facilities that were to be included in the Hepburn Hub,” he said.

In response to questions about whether anyone will be held accountable for  the failure of the Rex project and the costs that have already been incurred, the CEO, Mr Thomas said, “At this stage it is not the intention to undertake any further independent review or report. Council will wait for the inspectorate report. A number of governance and financial improvements have already been put into place.”

The Inspectorate conducted their investigations in the middle of 2019. It is unlikely that any of the decisions made since then will be considered in their report.

Mr Thomas indicated that the purchase of The Rex building and other matters relating to the project remain under investigation by the Local Government Inspectorate. Council has cooperated fully with the Inspectorate and welcomes the findings of this review once the Inspectorate releases the report.

However, the scope, timing and purpose of the Inspectorate’s report is unclear. Mr Drylie expressed his disappointment that the report has not been released but said Council is bound by confidentiality requirements while it is an active investigation.

The Rex will now be sold and Mr Thomas said, “We will now go through a public process and that will really tell us what someone is prepared to pay for the Rex as it currently stands. It is not Council’s intention to do further work on the site.” He anticipated the Rex could be sold by the middle of next year.

Council will now start a new planning process to review possible solutions for staff accommodation and community facilities. Council will work with the Cinema Group on potential temporary and permanent solutions for the community cinema.

In a related agenda item at this week’s meeting, Council resolved, in a split decision, not to appoint the recommended Hepburn Hub at the Rex Project Reference Group. In speaking to the motion, Cr Henderson noted that there had not been any community consultation about the Rex project since its inception. It remains to be seen whether community consultation will be a part of the new planning process.