Water authority’s risky $1bn property punt

One of Victoria’s statutory water authorities is seeking state government approval for a property development worth $1bn.

Water Minister Lisa Neville in May. Picture: AAP

One of Victoria’s statutory water authorities is seeking the Andrews government’s approval to engage in an unprecedented property development venture worth up to $1bn, which critics fear could expose the state’s taxpayers and water customers to financial risk.

In a confidential briefing note prepared for Water Minister Lisa Neville and seen by The Australian, Yarra Valley Water proposes to subdivide 740 hectares of land it owns at Beveridge, north of Melbourne, into up to 8,000 residential blocks.

Citing figures commissioned from consultancy firm Deloitte, YVW calculates a “participation model”, which would see it develop the land with a “suitable developer”, could reap between $515m and $1.003bn over five to 15 years, as opposed to selling the asset to a developer within the next seven years, which would return $220m.

Dubbed the “Hazelwynde Development Project”, the subdivision would take place in one of Australia’s most rapidly expanding growth corridors off the Hume Freeway, with Yarra Valley Water also asking the state government to build a $200m interchange off the freeway at Camerons Lane, 52km north of Melbourne’s CBD.

In the briefing note, YVW says it understands the Andrews government’s Department of Treasury and Finance “may be considering divesting the site”. “This is opposed by YVW,” the statutory authority says.

Detailing a clean, green vision for a suburb which would be home to 18,000 people by 2040, YVW says it has commissioned reports from several consulting firms including SGS Economics and Planning, Ratio Consultants, Energy Action and GHD Group.

Plans for the subdivision include an aim for it to be a “net positive renewable energy producer by 2050, with zero net greenhouse gas emissions”.

One source with knowledge of the plan told The Australian there was “concern throughout the bureaucracy” over the proposal, describing it as “reminiscent” of the Cain-Kirner Labor government’s Victorian Economic Development Corporation — a government-run venture capital fund which racked up losses estimated at more than $220m in today’s money.

“Anyone who lived through the Cain-Kirner period would understand why government agencies shouldn’t become large scale property developers,” the source said.

“The risk is not removed by it being associated with a water corporation. It’s just transferred in the first instance to the water ratepayers across more than 30 per cent of Melbourne.”

State opposition water spokeswoman Steph Ryan said property development was not the “core business” of a water authority.

“Considering that water prices have doubled as a consequence of projects like the desalination plant and the north-south pipeline, water authorities need to remain focused on their core business of delivering water at the lowest possible cost to customers,” Ms Ryan said.

Opposition planning spokesman Tim Smith urged the Andrews government to reject the “crazy idea”.

“They are not property developers. They’re a water authority. I’m not convinced what they are proposing will not expose the taxpayer to significant risk,” Mr Smith said.

A spokeswoman for YVW said the land would become surplus to their needs in 2023.

“We’ve been exploring whether additional value could be achieved for the community through a sustainable residential development, in partnership with the development sector, that responds to current and future economic and environmental challenges,” the spokeswoman said.

“The project is in its early, conceptual stages.

“We are consulting widely with planning authorities, local government and the state government in developing a potential vision for this land.

“Any directions regarding the future of the land will be made based on achieving the greatest benefit for our customers and the broader community.”

Ms Neville said no decision had yet been made about the land.

“Any decision will prioritise the best interests of Yarra Valley Water customers and the broader community,” she said.“It’s not unprecedented for water corporations to work closely with private developers to better utilise surplus land in consultation with their customers and local communities.”

The development is part of the Beveridge North West Precinct Structure Plan which has been on public exhibition and is due to be sent to an independent planning panel in July.