A loss of $5.7 million from the disastrously managed Rex project has now been declared formally by Council in their Annual Financial Statements for 2022/23. The Annual Statement will be considered by Council at its meeting next week.

The previous Council purchased the property for $6.3 million in 2016 and then spent $3 million refurbishing the site between 2016 and 2021 for a total expenditure of $9.4 million. Council sold the site in 2022 for $3.7 million – an overall cash loss of $5.7 million.

The Rex was purchased by Council to establish a community hub that was to house the Daylesford Library, a cinema, a café, reception services, accommodation for staff and public toilets. Following a series of major cost blow outs and poor planning decisions the newly elected Council halted the project in November 2021 and decided to sell the building.

The Rex was sold to the local Bromley and Comelli families late last year. Despite promises of exciting new plans for the historic building, apart from colourful hoardings, there has been little indication of the future for the building.

Significant concerns about potential corruption and misconduct associated with the original purchase of the Rex led to an investigation by the Local Government Inspectorate, which commenced more than four years ago. Despite repeated calls for the Inspectorate’s report to be released nothing has been forthcoming.

The decline in property value for the site over the six year period is in sharp contrast to the median house price in Hepburn Shire which more than doubled over the same period. Presumably, the Inspectorate Report, if it is ever released, will provide some explanation for what appears to have been a grossly exaggerated purchase price and some indication of who benefited from the sale.

The Mayor, Cr Hood has indicated that Council has implemented a range of measures to ensure the failings of the past are not repeated in future major projects.

At the time the Council abandoned the Rex project it indicated it would announce plans to address the library, cinema, reception and staff accommodation and public toilets which were to be included in the hub. Council has created a reserve fund of $2.14 million from the sale of the site to fund these facilities. However, almost two years later, no plans have been announced despite a Council resolution passed in December 2022 which was intended to prioritise planning and development of facilities. Cr Hood has indicated that initial planning is underway and he expects further announcements will be made later this year.

The Wombat Post invited comment from Council on a draft of this article. The Mayor requested that his response be published in full.

Council statement from Mayor Brian Hood

  1. The Hepburn Hub at The Rex project was a legacy project inherited from the previous Council.   Significant probity issues were identified by the management team which led to the project being paused and self-reported to government agencies and ultimately investigated by the Local Government Inspectorate (LGI).
  2.  A report accompanying the audited financial statements for 2022/23, to be considered at the October Council meeting, discloses that the building was purchased in 2016 for $6.345 million. The purchase was made by a previous councillor group, despite community consultation strongly recommending the project to provide community facilities should be based at Daylesford Town hall.
  3.  The current Council took the decision to cease the project and sell the building in November 2021 after taking into account a number of factors, including costs associated with the project mounting over many years, Council’s current and projected financial position, and serious construction issues with the building, and uncertainty around the proposed design delivering on some expected outcomes and meeting community needs. 
  4.  The decision to cease the project at the Rex and sell the building was taken after a further $3.037 million was spent in an endeavour to satisfactorily complete the project. The report accompanying the audited financial statements therefore discloses that the total expenditure on the project was $9.382 million. As reported earlier this year the building was sold for $3.735 million, which exceeds the 2023 valuation of $3.7 million. The cash loss for that project is $5.647 million.
  5.  The cash loss of $5.647 million has placed significant pressure on Council’s already constrained financial position.
  6.  Since self-reporting to the LGI, the current management team and councillor group have implemented a range of measures to ensure that the failings of the past are not repeated in future major projects, including stricter project management and governance protocols. Council has cooperated fully with the Inspectorate and continues to strongly and persistently advocate for the report to be finalised and released.
  7. The sale proceeds have enabled borrowings linked to the project of $1.5 million to be repaid and a reserve of $2.1 million created to partially fund the project to provide community facilities for Birch Ward, and much needed improvements to staff accommodation. Initial project planning into that project is underway, with a number of briefings already held between Councillors and officers.  We are expecting to have more details for the community later this year and can assure the community will have the opportunity to have input into this project at various stages.  Councillors and officers are working together on the project, taking the time to ensure it is well planned, and appropriate governance in in place at every stage to avoid failures of the past. 

Cr Brian Hood, Mayor of Hepburn Shire