Inquiry into the Government's management of the Powerhouse Museum and other museums and cultural projects in New South Wales

Submission from Tom Lockley

This submission addresses specifically Terms of Reference 1 (a) (vi) the use of proceeds from the proposed sale of the site at Ultimo.

#4 Finances

General comments

The consensus is that the destruction of the Powerhouse Museum will cost more than will be gained from sale of the site. Therefore the most economical use of the proceeds of the sale of the site would be to not seek them.

Financial experts in our email group have also commented on

1.     The amount of redaction, particularly of financial details, in the released Business Papers. This is typically explained by the catch-phrases cabinet in confidence and commercial in confidence. Our experts submit that legally, no financial arrangement for actual work on the sites can be entered into before the necessary preliminary investigations are complete. Thus there can be no commercial advantage gained by any potential commercial partner by knowing the estimates made. Similarly, in a democracy, people are certainly entitled to have enough financial detail available to indicate that the project makes financial sense.

2.     The ‘wooliness’ of the figures: there seems to be no major research behind many of the estimations. One ex-CEO of a major enterprise commented that the figures often seemed to be made up to meet a desired target rather than based on reality and proper research. Many forecasts of attendance and income were regarded as ‘heroic’[1].

A major financial investigation is not undertaken in this submission, partly because of our experts’ opinion of the documents provided. Only three other matters are briefly addressed:

1.     The initially announced financial arrangements.

The maximum value of the cleared site was estimated by a leading real estate expert, (January 16) at $250 million using comparison with other available sites[2]; the Government value is similar; (one estimate was $190 million).

Powerhouse Museum Alliance experts calculated the cost of removing and storing the material from Powerhouse Museum at at least $200 million and demolition costs about $10 million. Land alone at Parramatta cost $140 million so the project is notionally in debt already.

The amount realised from sale of site for development has since been reduced by commitments to maintain an arts presence at the Ultimo site so the initial finance arrangements are even more ridiculous.

The Government’s cost estimate for the new Parramatta building was about $1 billion in the so-called Final Business Case Summary, 2 July 2017 (p 7).

Mr Baird’s notion was backed up by the Deloitte document Building Western Sydney's Cultural Arts Economy (2015) sponsored by Sydney Business Chamber (Western Sydney) which supported the ‘move’ and stressed that the full sale proceeds of the existing Powerhouse site in Eastern Sydney being quarantined to establish the new Museum in Western Sydney — with any surpluses used to fund future Powerhouse Museum programs in Western Sydney. This ridiculously low estimate of the costs involved in moving the museum indicates the incompetence of both the Premier and of Deloitte in this matter.

2.     Inconsistency between the Design Brief and the published financial status of the project.

The financial arrangements as approved[3] in 2018 demonstrated a Benefit Cost Ratio of 1.02, in other words the benefits to be achieved by the project was only just above the costs. Leaving aside the ‘heroic’ estimates that many critics perceived in the quoted figures, the plans involved the erection of one, or even two, large towers on the Parramatta site[4].

Yet the Design Brief for the new museum at Parramatta proposed that the whole site was available and the winning design uses the whole site and also the site of the heritage buildings. A new Business Case is now overdue on its promised date, and it will be interesting to see how the Government resolves this inconsistency.

3.     Risk Profile of the Project[5]

The currently available documents do not include provision for dealing with the costs of civil disobedience and other direct methods of protest that will result if the Government does not take account of the current financial situation, the other compelling reasons for retention of the Powerhouse Museum as is where is and the anti-democratic measures utilised by the Government in pursuing this project. The opponents of the ‘move’ have almost completely exhausted every democratic means of suasion, and it is not unreasonable to expect that some methods of protest / direct action would be initiated.



[1] Our experts believe that the only way visitation can reach 2 million (Executive Summary, Gateway 2 Review 140217, page 32) is if counting includes café patrons, market partners etc as was done at Carriageworks. My own work at PHM indicates that a sizable proportion of overseas visitors are in Sydney for only a brief period (eg cruise ship stopovers), so the assumption that overseas visitation rate will only drop by 19% (New Western Sydney Musuem 23 Economic Appraisal, Attachment C page 44) is another very optimistic assumption

[2] For example, the block of land bounded by Fig, Wattle and Jones Street owned by Sydney Council, is larger, a similar distance from the CBD, overlooks Wentworth Park and could be purchased and decontaminated for around $120 million at the time of Mr Baird’s announcement. (knowledge from a confidential source)

[3] Final Business Case Summary: Powerhouse Museum in Western Sydney April 2018, Page 9

[4] Final Business Case: The New Museum in Western Sydney, January 2018, Page 34 ff and the supporting documents New Western Sydney Museum Development Options Assessment - Commercial Options Study and Residential Options Study.

[5] The Ultimo Presence Project: Ultimo investment Case, Johnstaff, page 74