The Harbour Trust’s Draft Leasing Policy (Policy) has been placed on public exhibition for review and comment. This Draft Policy is intended to replace the existing Harbour Trust Leasing Policy approved by the Board on 23 June 2017. I thank the Harbour Trust for the opportunity to make a submission on this Policy.
Download and read the Harbour Trust documents here >
PRELIMINARY OBSERVATION
I make the following comments as President of the Headland Preservation Group for and on behalf of the Group and not as a member of the Community Advisory Committee to the Trust. My tenure as a member of the CAC ended on 9 August 2022.
It is important the community and the CAC be involved in considerations and the drafting of any leasing policy. The Comprehensive Plan, a statutory plan under the Sydney Harbour Federation Trust Harbour Trust Act 2001 (Harbour Trust Act) provides that ‘during the preparation of management plans and supporting policies, the Trust will consult with (the Community Advisory Committee) where their core expertise or interest is a relevant consideration’ (Page 179).
Since the business of leasing Premises is core to the management of Harbour Trust lands, I consider that it is a relevant consideration for the CAC and suggest that the CAC must review and comment upon the Policy. This is a matter of due process and good governance.
Prior to the dissolution of the CAC on 9 August 2022, the Draft Leasing Policy was not tendered to the CAC for consideration. The Draft Leasing Policy was placed on public exhibition for 28 days expiring on 17 November 2022. To date the Harbour Trust has not formally constituted the CAC. As such the Harbour Trust has failed to consult with the previous and new CAC in respect of the Policy. This failure to comply with procedural steps as set out in the Comprehensive Plan puts into question the validity of this policy.
The following comments are made consistent with the headings set out in the Draft Leasing Policy.
POLICY INTRODUCTION
For the purposes of clarity paragraphs 5 & 6 should be amended to read:
‘Leases can only be granted for activities and uses consistent with the objects of the Harbour Trust Act and in accordance with the requirements of the Comprehensive Plan made under that Act and the desired outcomes detailed in the Plans of Management for each site.’
LEASING CATEGORIES
5.1. First Time Leasing Opportunities
What is a First Time Leasing Opportunity?
The definition of First Time Leasing Opportunity requires clarification.
Subsection 5.2.1 (b) states that a property will only be available for Subsequent Leasing Opportunity if ‘the use of the Premises has been previously offered to the market’. By implication this means that if a proposed use of the premises has not been offered to the market before it can only be offered for Competitive Application under First Time Leasing provisions. Subsection 5.1.1 should include this provision.
It is suggested that subsection 5.1.1 be amended as set out in italics below.
First Time Leasing Opportunity is defined as:
Leasing of premises that have never been made available for a lease by the Harbour Trust before, or
Leasing of premises where the Harbour Trust is proposing a use of the Premises which has not previously been offered to the market, or,
Leasing of premises that is vacant and not been offered to the market for a period in excess of 10 years.
Additional Provisions for renewals of long-term tenants
Subsections 5.3.7. and 5.3.8.
Subsections 5.3.7. and 5.3.8. require clarification.
For the purposes of clarity, the words ‘long-term tenant’ appearing in the heading and in subsection 5.3.8. should be defined. What is meant by a long term lease relevant to the Harbour Trust Act where the object of the Trust is to ‘protect, conserve and interpret... Trust land’? Is it 10 years, 20 years or 25 years?
The words ‘cumulative term’ in subsection 5.3.7. should also be defined to reflect the intention of s64A(3) of the Harbour Trust Act.
It is generally understood that in determining the term of a tenancy all the rights of the tenant under the leasing document are taken into account, such as options or special rights to extend or renew the lease.
On this basis, Subsection 5.3.7. is interpreted to mean that if any subsequent lease is entered into by a tenant, and the term of that new lease, taking account of options or special rights to extend or renew contained in that leasing document, exceeds the term of 25 years, then the Trust will call for applications for Subsequent Leasing Opportunities via the Competitive Application Process only. It is noted that the approval process for Leases longer than 25 years, and not longer than 35 years are also subject to the provisions contained in section 5.6. of the Policy.
On the other hand, if a tenancy of a term of 25 years has been successful, a new tenancy of a further term of 25 years (provided any option provisions, or special rights to extend or renew contained therein does not exceed 25 years) may be entered into under Subsequent Leasing Opportunity provisions. If the use is a continuing use, then subsequent leasing may be available via the Open Leasing Process (subsection 5.2.5).
For the purposes of clarity, it is suggested that subsections 5.3.7. and 5.3.8. should be re- drafted.
5.9. Short Term Leases
Subsection 5.9.1.
It is understood that the Harbour Trust seeks flexibility to have short term events and uses on its lands. It is difficult to balance the concept of flexibility with the need for procedural checks and balances. It is further understood that these ‘events’ or ‘uses’ are regulated by lease (a term defined in the Policy Introduction as including ‘lease or license’).
Under subsection 5.9.1 the Executive Director has the authority to approve ‘short-term uses’. The word ‘use’ in this paragraph is an inappropriate word in this context and should be replaced by the words, ’lease’.
Subsection 5.9.1 also provides that a lease for up to 12 months or less can be extended or renewed subject to Tenant Selection Committee (TSC) approval. The implication is that a short-term tenant may become a longer-term tenant without undergoing the usual open, transparent and competitive process.
For example, a 5-week concert series was recently held at North Head. This use was not aligned with either the Comprehensive Plan or the North Head Plan of Management. Both plans emphasise the values of the precinct as an environmental sanctuary, a place of retreat, contemplation and reflection, with a strong sense of Aboriginal history and ceremony. This concert series was approved by the Trust and is now touted to become an annual event. Under the proposed subsection 5.9.1 there is nothing to prevent the TSC from approving subsequent renewal or renewals of this lease without entering into an open, transparent and competitive process as required by the Comprehensive Plan. There may be a more compatible and appropriately aligned use for this space, but we will never know.
Page 49 of the Plan states: “The Trust will: develop a Leasing policy that is compatible with the goals and objectives of the Trust and offers leasing of premises through a publicly transparent and competitive process.”
Although the Harbour Trust needs discretion over short term leases, for the above reasons short term leases also require safeguards. It is suggested that the following provisos should be placed on short-term leases:
The use should be consistent with the objectives and outcomes in the Harbour Trust’s adopted plans.
The Executive Director should not have the authority to approve short term leases longer than a maximum term of 12 months.
All lease extensions or renewals under this subsection must comply with the Competitive Application Process for first time leasing provisions.
Subsection 5.9.2.
The intention of this subsection 5.9.2 is to give the Executive Director authority to approve ‘meanwhile uses’ of 3 years or less duration. The stated purpose is to provide utilisation of vacant Premises until they are brought into leasable stock or until redevelopment.
Whilst the purpose of this subsection is understood, the term ‘meanwhile uses’ lacks clarity. What is in fact being approved is a lease of 3 years or less duration. The subsection provides that these leases can be extended or renewed subject to TSC approval only.
On Harbour Trust sites including Middle Head, there are Premises which have now been vacant for over 20 years. There is no timeline to date as to when these many vacant Premises will be available as leasable stock or redeveloped. This means that leases utilising these premises of 3 years or less duration may be renewed many times over resulting in a long-term occupancy without a competitive or transparent process in place.
Again, subsection 5.9.2 does not accord with the requirements set out in the Comprehensive Plan for a leasing policy and is not in the public interest.
The Executive Director having authority to approve leases of 3 years or less duration for this purpose is not supported. The Executive Director having authority to approve leases that do not exceed 12 months for this purpose is supported subject to the proviso that any renewal of extension of lease should comply with First Time Leasing Opportunity provisions contained in subsections 5.1.1 - 5.1.10.
5.10 Unsolicited Proposals
Subsection 5.10.1 provides that the Harbour Trust may accept an unsolicited proposal ‘to lease, build and /or finance infrastructure, or provide goods and services’ on Harbour Trust land.
It is important, however, to note that Unsolicited Proposals are an exception to the rule and ‘will not’ be considered for First Time Leasing opportunities (subsection 5.10.9).
The reason given to accept an unsolicited proposal is to ‘defray costs to the government and public and stimulate and encourage investment and innovation’ .....for uses ‘which have unique and innovative attributes, such that others could not deliver with the same value- for-money and furthering of the Harbour Trust’s objectives’ (subsection 5.10.2.).
Unsolicited proposals risk proper process in leasing assessment. There are no safeguards and the test as to whether an unsolicited proposal meets the specified criteria in subsection 5.10.2 is subjective. The TSC does not provide independence in assessing ‘unique and innovative attributes’.
It is clear that one of the primary reasons for accepting an unsolicited proposal under this provision is a commercial one. Whilst it may be beneficial for the Harbour Trust to be self- funding, it was never a legislative requirement for the Harbour Trust to be so. It is not an Object (clause 6. SHFT Act 2001) that the Harbour Trust defray ‘the costs to the government and public and stimulate and encourage investment and innovation’. I suggest that it is wrong and inappropriate to make decisions on a monetary basis.
Clearly value judgements need to be made, however the primary reason for accepting an unsolicited proposal should be to accept a significantly unique use that delivers a significant strategic outcome which meets the Trust’s legislated objects and approved plans in a manner which could not be achieved by reasonably anticipated alternative proposals.
Subsection 5.10.2 should be deleted in its entirety and replaced by the following provisions contained in the 2017 Harbour Trust Leasing Policy.
The proposal must:
Meet the Harbour Trust’s standard Tenant Selection Criteria; and
The proponent is uniquely placed to deliver the proposal in a way that could not be achieved by another proponent. This may include delivery in private-public partnership with the Harbour Trust or government; and
The proposal is sufficiently unique to deliver a significant strategic outcome which meets the Harbour Trust’s legislated objects and approved plans in a manner which could not foreseeably be achieved by reasonably anticipated alternative proposals; and
The net benefits of the proposal, taking into account whole-of-life outcomes and consistency with wider Government priorities and plans, could not reasonably be expected to be exceeded by seeking proposals via a Competitive Applications or Open Leasing Process.
Where the Board directs the Harbour Trust to accept an unsolicited proposal, the proposal is deemed to be a high risk arrangement and the approval procedures of section 10.1 (High Risk Arrangements) will apply.
Subsection 5.10.7 provides that the Harbour Trust will engage community consultation for ‘larger scale Unsolicited Proposals’. It is acknowledged in the Draft Policy that ‘Larger scale’ is difficult to define. ‘Larger scale’ is however described as including but not limited to considerable works, alteration of a site’s existing use, or matters which may materially affect local residents. The words ‘considerable works’ and ‘materially affect’ however are subjective and vague and unless defined with greater clarity, the lack of certainty is not in the public interest.
Subsection 5.10.7 also provides that the Harbour Trust will ‘engage community consultation for larger scale Unsolicited Proposals’. Subsection 10.6 of the Sydney Harbour Federation Trust Leasing Protocols (Protocols) provides for ‘community consultation via the usual means’. Does this mean consultation with CAC and the wider community? Will the public be notified of the Unsolicited Proposal by way of media notification?
It is important that the wider community be consulted in these circumstances. This is in order to avoid community backlash against proposals which are not transparent or competitive and are considered by the community to be an inappropriate use of large areas or the whole of a site, such as occurred in response to the proposal by the Cockatoo Island Foundation for a private art island on the Cockatoo Island site.
Due to the difficulty in defining ‘larger scale Unsolicited Proposal’ it is suggested that it should be a requirement that the Harbour Trust engage wider community consultation, not limited to the CAC, for any Unsolicited Proposal for a lease of 12 months or more regardless of whether it is a ‘larger scale Unsolicited Proposal’ or not.
CONCLUSION
The concerns raised above require consideration and, in some cases, appropriate re-drafting. It is important to get the right balance to ensure that the Leasing Policy benefits the Trust and that it also has strong community support. This requires proper and meaningful consultation with the community and the CAC.
This submission is made for the purpose of achieving a good outcome for both the Harbour Trust and the community, and as such I would welcome the opportunity to review the final draft of the Leasing Policy prior to its submission to the Harbour Trust Board.
Jill L’Estrange
President
Headland Preservation Group
21 November 2022