Reconnecting the city with Northbridge by sinking the central rail

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             BUSINESS PLAN

            FOR THE PROPOSED

        NORTHBRIDGE LINK PROJECT



Reconnecting the city with Northbridge
   by sinking the central rail lines




                June 2005
                                                       City of Perth Business plan for Northbridge Link Project


EXECUTIVE SUMMARY
The State Government through its contractors is building the New Metropolitan Rail
City (NMRC) railway line through the centre of Perth. It forms part of the South
West Metropolitan Rail project which will deliver a new rail line from Mandurah to
Perth and upgrades to Clarkson. The project will substantially improve access to
the city and provides an opportunity to improve the city’s economic, social and
cultural vitality.

The NMRC line will be sunk underground from the Narrows Bridge to Lake Street;
however the current construction contract does not include sinking all the rail lines
between the city and Northbridge. The existing rail lines have been a significant
barrier between the city and Northbridge for over 100 years and leaving the NMRC
and Fremantle lines on the surface will retain the barrier.

The City of Perth (the City) considers that the removal of the railway barrier is a top
priority. It would create a large inner city redevelopment site and transform an
under-utilised and blighted area; it will also bring social, economic and
environmental advantages that will substantially enhance the capital city’s status.
This opportunity must be maximised.

Although it will be a costly project, the City considers there is a realistic opportunity
to sink the rail lines by redeveloping and selling the central rail reserve land which
would in part generate funds to pay for the sinking.

Furthermore the central rail land (bounded by Wellington Street, the Horseshoe
Bridge, Roe Street and the Mitchell Freeway - see Fig. 1 - has significant potential
as an inner city redevelopment project. By sinking the rail lines an area of 10.12
hectares could be made available for redevelopment with two major advantages.
Firstly to provide an opportunity to remove the rail barrier and rejoin the city with
Northbridge. Secondly to set the scene for inner city revitalisation. This is expected
to bring substantial benefits to the city including:

•      inner city redevelopment and added vitality
•      creation of more rateable land and potentially some increased land values
•      additional public open spaces
•      new opportunities for the establishment of businesses and residences
•      improved public transport facilities
•      increased opportunities for city visitation

A joint committee of the City of Perth and the State Government closely investigated
the possibilities and consequently the Premier on 21 January 2005 announced that
the State Government would proceed with the Northbridge Link Project stating that it
would see the Perth-to-Fremantle line sunk to Lake Street. He invited the City of
Perth to become involved.




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                                                       City of Perth Business plan for Northbridge Link Project


The Council has given detailed consideration to the proposal and the City of Perth’s
financial capacity, resources and skills and carefully weighed up how it could be
responsibly involved in this project. It is most appropriate to make a capped
financial contribution and provide a portion of Council owned land towards the
project. The State Government has offered state funding and land to realise the
project and has requested the East Perth Redevelopment Authority (EPRA) to be
responsible for the delivery of the project with Council involvement. The benefits of
this option would be:

•      The Council’s objectives would be achieved
•      The Council can set its level of contribution providing financial certainty
•      The project would be carried out by the EPRA which has significant and
       redevelopment experience
•      Council can play a significant role in the planning and redevelopment of the
       area

The Council has made detailed resolution reflecting the above; the resolution is
contained in this report.

The Council’s resolution is subject to negotiations and a number of conditions which
need to be considered by the State Government and the EPRA. Consequently the
details of the proposed project scope as described in this Business Plan, including
financial matters, is subject to adjustment. The resolution however means the
Council’s financial contribution will be capped as reflected in this Business Plan.

This project is an exciting and significant opportunity for the future of Perth and for
Western Australia and deserves strong support.




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                                                       City of Perth Business plan for Northbridge Link Project




PUBLIC COMMENTS INVITED

Business Plan
Section 3.59 of the Local Government Act requires that a Business Plan is to be
prepared for this project and is to be available for public inspection and submissions.
The Act requires the Business Plan to be advertised for six weeks. The Council
must also consider the submissions. This is required before the Council enters into
a formal and binding agreement with the State Government on the project.

Section 3.59 states that:

The Business Plan is to include an overall assessment of the major trading
undertaking or major land transaction and is to include details of:

1.     its expected effect on the provision of facilities and services by the local
       government
2.     its expected effect on other persons providing facilities and services in the
       district
3.     its expected financial effect on the local government
4.     its expected effect on matters referred to in the local government’s forward
       plan
5.     the ability of the local government to manage the undertaking or the
       performance of the transaction; and
6.     any other matter prescribed for the purposes of this subsection

This Business Plan is being advertised for public comment for a period of 42 days
from Saturday 25 June 2005. Comments on the Business Plan are invited; written
submissions should be made to the City by COB Friday 5 August 2005.

Submissions should be mailed to:

         The Chief Executive Officer
         City of Perth
         27 St George’s Terrace
         PERTH WA 6000

or emailed to

         john_bruning@cityofperth.wa.gov.au

Inquiries can be made to John Bruning Co-ordinator City Projects (9461 3141) or Ian
Berry Manager Finance (9461 3456).




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                                                       City of Perth Business plan for Northbridge Link Project


PROJECT HISTORY
The central rail reserve has been used for railway purposes since 1881 when the
Fremantle-Guildford rail line was opened. The area was also used as a marshalling
yard. In the past there have been many proposals to underground the lines and
remove the marshalling yards. Whilst many of the marshalling facilities have been
removed, costs and technical issues have precluded the undergrounding of the
lines. During the1990s the Perth to Joondalup rail line was added. Today much of
the land is under-utilised and aesthetically unattractive. The central rail reserve is
also a physical barrier between the city and Northbridge. Vehicle and pedestrian
connections are very limited and connections have to take vehicles and pedestrians
over the lines. Consequently Northbridge has a tenuous relationship with the city
centre.

The history and present condition of the central rail reserve are well documented. A
good overview of this is provided in the City’s publication Realising a New Vision for
Perth published by the City of Perth, February 2003.

Part of the State Government’s current South West Metropolitan Rail (SWMR)
project includes a 1670 metre twin bore rail tunnel section through the city between
the Narrows Bridge, and Lake Street west of the Perth Central Station.

The State Government appointed Perth City Rail Advisory Committee published its
report Coming to a New Vision for Perth in May 2002. Responding to earlier ideas,
the Committee referred to an urban redevelopment opportunity for the central rail
reserve (pages 46 – 51). It indicated that this could be effected by sinking all the
lines between the Perth Central Station and Lake Street or, as a second option, to
Milligan Street. Cost estimates to sink the lines were included.

The Perth Urban Rail Development Supplementary Master Plan August 2002
contains similar suggestions.

The current SWMR project contract, however, does not include the above
possibilities. Whilst some of the existing rail lines will be removed, a section of the
SWMR line and the Fremantle line will remain on the surface leaving them as a
major barrier.

Initial plans
Since the State Government announced the plans for the SWMR project the City
has examined the possibility of sinking the lines. The City commissioned a series of
technical studies to examine all aspects of sinking the lines and the possibilities of
redeveloping the land. These studies examined, town planning, transport, financial
and economic issues.

An initial vision for the redevelopment of the central rail land was prepared by the
City. Realising a New Vision for Perth, published February 2003, sets down planning
principles and possibilities for redevelopment after the lines are sunk. Further
options were examined as a result of financial and other considerations. Feasibility
studies indicate that more land needs to be set aside for redevelopment sites than
the vision indicates so that more of the project costs can be recouped.


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                                                       City of Perth Business plan for Northbridge Link Project




Joint Council / State Government Committee
The Council and the State Government formed the Northbridge Link Committee
which was mandated to identify a feasible method of sinking the rail lines. A
Memorandum of Understanding between the City and the State Government was
adopted which included the following objectives:

2.1 To sink underground an agreed length of railway tracks between the
    Horseshoe Bridge and Mitchell Freeway and to transfer land to the City

2.2 To achieve the shared vision of connecting Northbridge with the Perth central
    business district to create a mixed use precinct and civic place befitting a
    capital city

Lake Street Option identified

Two initial options were examined in detail, being
• to sink the rail lines between the Perth Central Station and the Mitchell Freeway
  Milligan Street, and
• to sink the rail lines between the Perth Central Station and Milligan Street

 Both options however proved to be too costly. The Northbridge Link Committee,
then examined the option of sinking the lines to just west of Lake street and
redevelopment over the rail lines to the Mitchell Freeway. This would effectively
remove the barrier between the Perth Central Station and the Mitchell Freeway.

A number of redevelopment options for the project were assessed in detail against a
number of key planning, construction and value-for-money criteria. The Northbridge
Link Committee considered that Option 2B, which sinks the rail lines to a portal just
west of Lake/King Street and includes a new underground bus station, represents
the best option but has a net shortfall after redevelopment of $35m in 2004 dollars
(or $50m escalated).

The options were also the subject of a Triple Bottom Line (TBL) assessment which
analysed the projects economic, social and environmental impacts. Discounting
Option 1 (the Milligan Street option which is not financially feasible) Option 2B
provided the highest TBL rating.

This option, which is considerably more affordable than the other options, comprises
the current proposal.

Planning Guidelines
The WA Planning Commission, after consulting stakeholders and the public,
adopted the “Central Railway Precinct Guidelines” dated February 2004 for the
central rail land. These guidelines need to form the basis for redevelopment in the
area.




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                                                       City of Perth Business plan for Northbridge Link Project


PROJECT PURPOSE AND BENEFITS
The purpose of the Northbridge Link Project project is to realise a long held desire to
sink the railway lines between the City and Northbridge. Sinking the lines and
building over them will make it possible to re-establish vehicle and pedestrian links
between the two areas. It will also set the stage for a significant urban
redevelopment project in the city.

The project will address a number of strategic issues including:

1.     Improve vehicular movement in the city
2.     Create inner city redevelopment
3.     Create more rateable land, increase surrounding land values and rates
4.     Contribute towards a more livable, sustainable and safer city
5.     Create a new location for major businesses
6.     Assist in the efficient provision of public transport facilities
7.     Provide appropriate parking facilities
8.     Increases the critical mass of the CBD


Project benefits
The project is expected to bring substantial benefits including the:-

1. removal of a major barrier in the city by sinking underground or building over the
   railway tracks between the Horseshoe Bridge and the Mitchell Freeway;
2. creation of the new vehicle, pedestrian and cycle links between central city,
   Northbridge and beyond;
3. creation of a mixed use, transit oriented precinct and public spaces befitting a
   capital city and complementing Northbridge and the city centre;
4. increase in city vitality by adding residential, public, retail, commercial and
   recreation activities;
5. construction of a range of housing accommodation and broaden the CBD
   residential community;
6. establishment of new businesses;
7. enlargement of the employment pool in the city in the short term during
   construction and in the long term by new development;
8. additional rates income for the City by the creation of rateable land and
   increasing the value of surrounding properties;
9. preservation of train corridors, retains the bus station function and increases
   public transport usage;
10. increase in short and long term economic activity, jobs and investment in the
   city;
11. incorporation of new parking facilities;
12. improvement of public safety in the area; and
13. remediation of derelict / unused land.


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                                                       City of Perth Business plan for Northbridge Link Project




PROJECT DETAILS
On 21 January 2005 the Premier announced the Northbridge Link Project stating
that it would see the Perth-to-Fremantle line sunk to Lake Street. On 26 April 2005
the Minister for Planning and Infrastructure gave the City of Perth a briefing on the
project. In a letter dated 18 February 2005 the Minister advised as follows regarding
the Northbridge Link Project:

       “As you are aware, the Premier announced on 21 January 2005 that the Gallop
       Government had committed itself to deliver the proposal, in co-operation with
       the City of Perth. Under the proposal considered by Cabinet, works at the
       freeway end of the project could start as early as October this year and the
       sinking of the rail completed by 2010. William Street would be reconnected as
       an at-grade pedestrian crossing with some capacity for use by taxis and CAT
       buses, but with general traffic remaining on the Horseshoe bridge. The area
       bounded by the Horseshoe bridge would be retained as public open space.
       The Perth-to-Fremantle would [be] sunk to Lake Street, where the new
       Mandurah line would also emerge, by 2010.

       The proposal provides for both lines to emerge west of an at-grade traffic
       connection between King and Lake Streets. The costing includes the cost for
       the Mandurah-to-Clarkson tunnel portal to be relocated west of the future
       King/Lake street road, which will run through at grade from Roe Street to
       Wellington Street, without any detectable rise or bump.

       To the west of King and Lake Street, the railway would be capped. Buildings to
       be constructed over the line would be encouraged to have activated street
       frontages onto Roe Street and would provide regular access over the line. The
       redevelopment plans allow for but are not dependant upon proposals to
       redevelop the Entertainment Centre. The ageing Wellington Street bus station
       - currently the gateway to the city for about 10,000 people each day - would
       also be replaced with a modern, airport-style underground station by 2011.

       It is proposed that the project would be best managed by EPRA which has a
       strong track record in urban renewal and extensive experience in managing
       high profile projects. (EPRA’s role has since been confirmed by the Minister.)

       Once the precinct is developed and after revenue from land sales are taken
       into account, it is estimated that the net cost of the project will be $50million (in
       2005 dollars). Our proposal is that the State Government and the City of Perth
       will make equal cash contributions to cover this shortfall. That contribution
       would be staged over the life of the project. The Government will, of course,
       be contributing its interests in land within the precinct, with an estimated value
       of $30million, and it will ask the City of Perth to do the same in respect of any
       interests it has in the affected land.

       The Government believes that the proposal is workable and affordable.”




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                                                       City of Perth Business plan for Northbridge Link Project


The East Perth Redevelopment Authority (EPRA) has provided further details which
include a further description of the project, a Business Case and an Indicative
Development Plan (IDP). The project area is shown in Fig 1 and the IDP in Fig 2.
The Public Transport Authority has also provided a plan showing the proposed rail
tunnel design concept. (This document are available at the City of Perth for
inspection). The EPRA Business Case identifies the following Triple Bottom Line
(TBL) benefits of the project:

Economic
• Potential economic impact $700 - $800 million
• Estimated 500 short term jobs during construction
• Between 1,500 – 2,000 direct and indirect long term jobs
• Over 100,000m2 of commercial and retail investment
• Over 2,400 residential units

Social
• Increased public safety
• Affordable housing 240 – 360 units
• New public spaces
• Transit oriented development outcomes

Environmental
• Increased public transport patronage
• Remediation of derelict / unused land
• New infrastructure
• New built-form performance standards

As the EPRA Business Case indicates, six redevelopment options for the project
were assessed in detail against a number of key planning, construction and value-
for-money criteria. The Northbridge Link Committee considered that Option 2B,
including a new underground bus station, represents the best option but has a net
shortfall after redevelopment of $35m in 2004 dollars or $50m escalated. Option 2B
sinks the rail lines to a portal just west of Lake/King Street and includes a new
underground bus station.

The six options were also the subject of a Triple Bottom Line (TBL) assessment
which analysed the project’s economic, social and environmental impacts.
Discounting Option 1 (the Milligan Street option which the NLC considered not to be
financially feasible) Option 2B provided the highest TBL rating.




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                                                       City of Perth Business plan for Northbridge Link Project


Program of works
EPRA’s documents includes a redevelopment / land sales program which in
summary is:

Item                                                          Program (to be revised)
Redevelopment of land between Milligan                        Oct 2005 – Sep 2006
Street and Freeway (stage 1)
Rail tunnel and other infrastructure                          Jul 2006 – Mar 2008
New bus station                                               Jan 2008 – Sep 2009
Redevelopment of land between William                         Apr 2008 – Dec 2009
Street and Lake/King Streets
Redevelopment of land between Milligan                        Apr 2008 – Dec 2009
Street and Freeway (stage 2)
Redevelopment       of    land     between                    Apr 2010 – Jun 2011
Lake/King Streets and Milligan Street
Land sales                                                    Oct 2006 – Apr 2020

BUS STATION REDEVELOPMENT
In preparation for the demolition and redevelopment of the existing Wellington Street
bus station, temporary bus stops will be created along Wellington and William
Streets for the southern bus services and along Roe Street for the northern bus
services.

COUNCIL CONTRIBUTION
EPRA has advised that the project will not be viable without a contribution by the
City of Perth of $25million in 2004 dollars plus the Council’s Lot 1192 Wellington
Street at no cost. EPRA also requests that the $25million be indexed to the date of
payment.

PROJECT IMPLEMENTATION
Once the Council has given its support for the project, EPRA in conjunction with the
City of Perth, intends to prepare a Master Plan for the precinct which will address
town planning, urban design and redevelopment matters in more detail. At the
same time plans will be further developed for the proposed underground bus station
and rail infrastructure. EPRA requested that a new Memorandum of Understanding
(MOU) be drawn up to reflect the current project proposal. The new MOU would
cover roles, responsibilities, financial, land and other delivery matters agreed
between the parties.

EPRA has invited the City to discuss the role and composition of an EPRA project
committee and City of Perth participation.

Land ownership
All the Government land to be utilised for this project is crown land controlled by a
number of State Government instrumentalities. The City currently has a lease over
lot 1191 Wellington Street on which it operates a public fee paying carpark. The
City also has a lease over Lot 1192 Wellington Street for 99 years.




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                                                       City of Perth Business plan for Northbridge Link Project


PROJECT ANALYSIS
The City has studied the State Government’s proposal.

The proposed project, although not worked out in all details, is in the interest of the
good government of the city and will assist in working towards realising the Council's
objectives and vision for the area which is to:-

1. realise a long held desire by previous Councils to sink the railway lines between
   the City and Northbridge
2. re-establish vehicle and pedestrian links between the two areas and redevelop
   the central railway land.

In principle Council decision
An indication from the Council of support for the project, by advertising a Business
Plan, will enable the State Government, EPRA and the City to prepare further details
for the project so that a final decision can be made at a later date. This requires the
Council to make a decision in principle whether it is willing to contribute $25million
(which EPRA requests to be at November 2004 value and indexed) as well as forgo
its lease of Lot 1192 Wellington Street by making it available to EPRA for
redevelopment. A decision in principle can be subject to a number of conditions to
be addressed over coming months. A final decision can then be made. This would
allow the following aspects of the project to be addressed in more detail:

Program for Council’s payments
It would be appropriate for the Council to tie its $25m contribution to a specific
project outcome. As the sinking of the rail lines is critical to the entire project, it
would be appropriate for the contribution to be tied to that element.

Legal Agreement
A Project Legal Agreement, which is more appropriate than a Memorandum of
Understanding, will be drawn up to identify the roles and responsibilities of the
project partners being the State Government and the City of Perth. The proposed
contents of this document are recommended in Schedule 1 and should also address
the conditions listed in this report’s recommendation.

Master Planning
A Master Plan for the Northbridge Link Project will be prepared having regard to the
IDP and the Central Railway Precinct Guidelines adopted for the area. The Master
Plan will address rail infrastructure design, bus station design and planning for the
redevelopment. It is considered that the Master Plan should include a high level of
public amenity and open space for the project area. It is envisaged that the Council
will be represented on a project committee which will oversee the preparation of the
plan. The Master Plan will provide the basis for a new Town Planning Scheme for
the project area.

Lot 1192
The City, Multiplex and the State Government have drawn up respectively the
Wellington Street Carpark Lease and the Centre Carpark Turnkey Agreement.


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                                                       City of Perth Business plan for Northbridge Link Project


Under these agreements the City has received Lot 1192 Wellington Street under a
99 year lease following the completion of the PCEC car park with the Council paying
$6.5million for the transaction. The City also has air rights over the land which would
allow the redevelopment of site over the carpark and potentially provide further
income to the City. This provides the land with a greater value than just a carpark.
This land, and its development potential, is now required for the Northbridge Link
Project redevelopment. The Minister and EPRA have made it very clear that Lot
1192 must be to handed over by the Council free of cost.

Future Carparking
The project area is likely to require at least one multi-deck carpark to support the
proposed residential and commercial activities. It is appropriate that the City
requires, as a condition on the project, the first option to purchase any land set aside
for carparking purposes at a future date. The long term commuter carparking
licence associated with Lot 1192 could be held over by the City for this purpose.

FINANCIAL IMPLICATIONS:
The Northbridge Link represents a considerable project investment by the City,
second only to the purchase of the leasehold interest in the Perth Convention
Exhibition Centre car park for $45,180,000 last year.

A contribution of $25million (in November 2004 dollars) is intended, plus the release
of leasehold land in the form of the undeveloped Wellington Street car park (lot
1192). Lot 1192 was purchased on a 99 year leasehold basis in July 2004 at a cost
of $6,498,500. The leasehold has been amortised and the book value at 30 June
2005 will be $6,432,859.

It is assumed that these contributions are total and final. The City does not carry
any risk on this project and the legal agreement to be entered into will require the
State Government to deliver certain outcomes within a laid down time related
framework, ensuring that the project from the City of Perth’s viewpoint is risk free.

An element of risk which the City continues to be exposed to relates to future rates
revenues from properties in the Northbridge Link precinct. Delays in construction of
the project within timelines forecast by EPRA will translate to delays in bringing on
the new rate stream.

It is preferable that the City have sound information to make its investment decision
prior to committing funds. Information supplied by EPRA is conceptual with limited
detail. The business plan formulated by EPRA is very much an outline for a project
of such major importance. However, the plan has survived Expenditure Review
Committee, State Treasury and Cabinet scrutiny and as the risk is primarily being
borne by the State and its agencies, a decision with the focus on community and
environmental benefits can be considered.

The City has restored its financial strength following its restructure. This has been
achieved by restraining expenditure, passing tight budgets, and building up its
reserves, primarily in the area of asset enhancement and replacement. It is of great
importance that the City remains financially responsible and that no single project
holds back its overall development.


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                                                       City of Perth Business plan for Northbridge Link Project


Cost of Northbridge Link

                                                                 November 04 $            Escalated $
                                                                   (millions)              (millions)
Revenue – Proceeds from sale of land                                              133.0       251.47
parcels A, B, and C
Contract Works Costs of developing                                                46.98
parcels for sale
Public Art                                                                         0.47
Professional Fees                                                                  5.69
Non Construction Costs                                                             0.95
EPRA Administration                                                                2.37
Project Contingency (2.5%)                                                         1.41
Marketing Costs                                                                    5.03
Rail Sink                                                                         70.50
Bus Station                                                                       36.00
Total Costs                                                                  169.40           209.70
Northbridge Link (Deficit) Surplus                                         $(36.40)           $41.77
EPRA risks assessed costs of capital -                                                        $49.32
deficit

The difference between the deficit in today’s dollars and the surplus over the term of
the project is brought about by escalation of costs at 6% and concentrated in the
first five years of the project, and revenue from land sales escalated at 7% and
spread from late 2006 right out until 2020. These assumptions have been provided
by EPRA.

The costs above do not include interest. With costs having been assumed by EPRA
to occur in the initial period of the contract and revenue being spread over fifteen
years, the project does not become cash flow positive until 2017.


Interest and Risk

To take account of interest through discounted cash flow methodology, EPRA have
utilised a rate of 5.97% being the cost to EPRA of Treasury funds as at November
2004.

Additionally, as the price for taking all development and construction risk on the
project, EPRA have applied the high risk discount rate of 7% to the project. This
factor has been assessed by EPRA and the Department of Treasury and Finance.

With the application of a total rate of 12.97% over the life of the project, the surplus
of $41.77million becomes a deficit of $49.32million. No account is taken in these


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                                                       City of Perth Business plan for Northbridge Link Project


calculation of an up front or early contribution by the City, which would keep the
project cash flow positive to 2007/08 and substantially improve the deficit of
$49.32million.

With a project of this nature, the application of the rate of 12.97% at Treasury’s
highest risk level can be considered appropriate. Additionally, it should be noted
that projections have been calculated at conservative levels and that substantial
contingencies have been disclosed beyond these levels in the form of a 2.5% overall
project contingency and a 12.5% contingency in the construction costs.

In addition, the long term escalation factor on construction costs normally utilised by
EPRA is 3% (as advised by their staff). On this project 6% has been utilised. It
should be borne in mind that Perth construction costs escalated by 15% in 2004.
This was an exceptional increase and long term trends should be restored over the
life of the project. It should be noted that the escalation of 7% utilised by EPRA in
terms of land values is reasonable but that 12.2% was achieved during the window
of opportunity covered by the Subiaco Redevelopment project. It should be noted
that special factors may have applied during this period.

The information supplied by EPRA from the financial perspective is preliminary.
Requests for additional information have met with a limited response and it is clear
that much work on the financial detail of the project remains to be done by EPRA
and State agencies.

It is clear that the major risk on the project is to be carried by the State Government
and its agencies. However, together with the conservative approach taken in
arriving at a projected deficit of $49.32million, the contribution by the City will
substantially alleviate the cost of that risk.

The extent of the contribution by the City cannot be justified in terms of being an
equitable contribution to the overall cost of the project, as sufficient information as to
the scope of costs has not been provided or calculated. However, the land
contribution by the State, whilst not forgetting the intended contribution of Lot 1192
by the City, is significant and greatly offsets this conclusion.

The City’s contribution can be justified financially by recognising that the project will
transform an under-utilised tract of currently non-rateable land in the centre of the
City into a vibrant link and vital area in its own right, contributing financially to the
rate base directly and indirectly through the enhancement of property values in
adjacent areas.

It should be remembered that the State Government will benefit directly from this
project in terms of the construction of a new bus station at a cost of $36million in
2008/09. Deferral of this part of the project to match with the revenue profile of the
feasibility would considerably improve cash flows and the cost of interest inherent.
The State Government will also receive stamp duties and land tax on that part of the
development onsold.




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                                                       City of Perth Business plan for Northbridge Link Project


Timing of Contribution

With a long term project of this nature, especially where revenue and positive cash
flow are generated after the bulk of expenditure has occurred, the timing of the
contribution by the City of Perth is of paramount importance to the viability of the
project.

The problem from the City of Perth’s viewpoint is that EPRA have introduced a
penalty which impacts more heavily the longer the City delays its contribution. As
previously stated, the 6% escalation factor desired by EPRA is above the long term
norm for the construction index and more than twice the CPI average so it is
obviously in the City’s interest to change this level or make the contribution at an
earlier point.

The impact of contributions on the City are illustrated below.

Option 1 One off contribution – November 2005                                                  25,000,000
             Escalation 6% with quarterly rests                                                 1,142,000
             Total contribution                                                                26,142,000
             EPRA risk assessed cost of capital - deficit                                    (49,320,000)
             Revised surplus with City of Perth Option 1
             contribution NPV at 12.97%                                                      (26,360,000)

Option 2 One off contribution – August 2006                                                    25,000,000
             (at time of commencement of railway design)
             Escalation 6% with quarterly rests                                                 2,336,000
                                                                                               27,336,000
                     EPRA risk assessed cost of capital - deficit                            (49,320,000)
                     Revised deficit with City of Perth Option 2
                     contribution NPV at 12.97%                                              (27,500,000)

Option 3 Three contributions (preferred)
             Contribution 1 – August 2006                                                       8,333,333
             Escalation 6% with quarterly rests                                                 1,056,667
                                                                                                9,390,000
                     Contribution 2 – August 2007                                               8,333,333
                     Escalation 6% with quarterly rests                                         1,626,667
                                                                                                9,960,000
                     Contribution 3 – August 2008                                               8,333,333
                     Escalation 6% with quarterly rests                                         2,236,667
                                                                                               10,570,000
                     Total Perth contributions                                                 29,920,000
                     EPRA risk assessed cost of capital – deficit                            (49,320,000)
                     Revised situation with City of Perth Option 3
                     contribution NPV of 12.97%                                              (28,900,000)

The above Option 3 is preferred as it fits in most closely with the forecast period of
intensive rail construction and with City of Perth cash flow profile. Note that the
cash profile does not preclude other options.



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                                                       City of Perth Business plan for Northbridge Link Project




This assessment is focussed on cash contributions and cashflow. It is noted that
the State Government is releasing substantially more land than the City into the
project, albeit gaining the benefit of a new bus station.

Milestones
The City will be making its financial contribution prior to the completion of either the
sinking of the railway or the development of substantial rateable property generating
rateable income. The legal agreement to be entered into will safeguard the City’s
interests in this respect.

Funding
The City has rebuilt its reserves since the 1995 restructure.

The Asset Enhancement Reserve is projected in 2005/06 budget to accumulate to
$55.2million at 30 June 2006. It is envisaged that this would be the prime source of
funding for the Northbridge Link Project. The depletion of this reserve would have
some impact on other projects the City may consider after the 2005/06 budget year
and it is preferable that funding from this reserve be augmented by sourcing a lesser
amount of funding from rates or other recurrent income in years 2006/07 onwards.

The purpose of the Asset Enhancement Reserve would have to be extended to
allow contributions to a project which, while resulting in the creation of future assets
for the City in terms of roads, drainage, and park infrastructure and an increase in
the future ratebase of the City, would not be under the financial control of the City in
its construction phase. This resultant change or extension in purpose would be
advertised as part of the Northbridge Link business plan.

Any contribution to this project in financial year 2005/2006 would diminish the
interest earned forecast in the budget.

Wellington Street car park
Financial implications flow from the requirement to contribute Lot 1192 the leasehold
of which was purchased from Multiplex in July 2004 in a State Government
engineered deal to ensure the viability of the Perth Convention Exhibition Centre
construction.

The City has not been granted the opportunity to develop and raise parking revenue
from the 300 bay licence granted as part of the previous involvement. The
development of this car park was vital to the early viability of the PCEC car park and
the Wellington Street demise will delay a cash flow positive result from PCEC car
park.

A separate report will be submitted to the Council in due course dealing with the
financial impact of the loss of the City’s parking income from Lot 1192 as expressed
in the PCEC Business Case.

Future rates income
EPRA commissioned an external report on the likely future impact on rates revenue
if the Northbridge Link land development project were to realise its full potential.


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                                                       City of Perth Business plan for Northbridge Link Project




The report concludes that City of Perth will obtain a financial benefit from the project
and will have the option of funding extra services or reducing rates as a result. Note
that servicing new properties and infrastructure has a direct cost to the City.

Because of the EPRA plans being very conceptual at this stage, revenue and costs
have not been quantified.

Summary of financial analysis
In terms of financial prudence the Business Case and the accompanying information
received from EPRA have been examined. The cash contribution of $25million by
the Council is reasonable, but timing of payments and conditions associated with
payment of the instalments need to be finalised. The requirement to contribute the
Lot 1192 leasehold can be more difficult to see as reasonable from a financial
perspective, since it was purchased for parking in July 2004 to facilitate the Perth
Convention and Exhibition Centre development. However, the requirement is
counterbalanced by the State Government contributing its land and bearing the
entire project risk for a new inner city development and construction project. The
Council bears the risk of delays to the generation of rates income if the project is
delayed. On the basis of the information and the analysis, and taking a long term
view, the project’s benefits outweigh the costs.

Figures quoted in this report are exclusive of GST.




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                                                       City of Perth Business plan for Northbridge Link Project


Council resolution
In order to progress the project the Council on 21 June 2005 resolved as follows:


That:-

1.     the Council recognises there is currently an opportunity to realise a long held
       goal to sink the railway lines, re-establish links between the city and
       Northbridge and redevelop the central railway land. This opportunity can be
       progressed with a contribution by the City of Perth towards the proposed
       Northbridge Link Project as proposed by the State Government;

2.     the Council further recognises that in the interests of the good government of
       the city the pursuit of the opportunity detailed in part 1 above is highly desirable
       as the project will deliver significant benefits to the city and its stakeholders;

3.     the State Government be advised that the Council, despite having limited
       resources, is willing to contribute towards the Northbridge Link Project while
       continuing to provide adequate services as required under the Local
       Government Act 1995;

4.     in response to the letter dated 18 February 2005 from the Minister for Planning
       and Infrastructure and the letter dated 30 April 2005 with attachments from the
       East Perth Redevelopment Authority (EPRA), the State Government be
       advised that the Council agrees to advertise a Business Plan (as attached) to
       support the Northbridge Link Project, the key components of the Business Plan
       being:-

       4.1       a contribution by the Council of $25 million (excluding GST) in
                 November 2004 dollar value; this contribution will be indexed to the
                 times of the payment(s) but not increased;

       4.2       foregoing its 99 year lease of Lot 1192 Wellington Street to enable the
                 State Government to make Lot 1192 available for redevelopment;

       4.3       the Council carrying no risk for any element of the project;

5.     the Council, when giving further consideration to participating in the
       Northbridge Link Project following the advertising of the Business Plan and
       considering public submissions, will consider a number of conditions including
       the following:-

       5.1       extension of the South West Metropolitan Rail Mandurah to Clarkson rail
                 tunnel underground from east of Lake Street to just west of Lake Street
                 and under grounding the Fremantle line from the Perth Central Station
                 to just west of Lake Street as generally shown on PTA Drawing New
                 MetroRail City Project – Base Case Ultimate lowering – Fremantle line
                 No 01-C-11-0001;




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                                                       City of Perth Business plan for Northbridge Link Project


       5.2       the detailed design and specifications of all rail infrastructure associated
                 with part 5.1 above being to a standard so that urban redevelopment, as
                 referred to in parts 5.4 and 5.5 below, can occur over the tunnels and
                 that train noise and vibration are within acceptable limits;

       5.3       all the central rail land, as identified in [Fig 1], being made available for
                 the proposed redevelopment;

       5.4       the redevelopment be done generally in accordance with the Central
                 Railway Precinct Guidelines adopted for the area by the WA Planning
                 Commission and the Indicative Development Plan (IDP) as submitted by
                 the East Perth Redevelopment Authority;

       5.5       the Indicative Development Plan to be further developed into a Master
                 Plan which is to be approved by the Council; the Master Plan is to
                 include a high level of public amenity and open space for the project
                 area;

       5.6       the Council paying its financial contribution in instalments to be
                 determined but tied to the construction of the rail tunnel infrastructure;

       5.7       the Council being provided 3,000m² of freehold land at no cost to build a
                 multi-deck car park within the Northbridge Link Project area with the
                 costs for the structure attributable to the Council. The land must have
                 street frontage and be located such that access is effective, and visible
                 from Wellington Street;

       5.8       the State Government providing the City of Perth first option on any
                 other land set aside for off-street parking;




6.     in the event of the project proceeding, the Council will require the State
       Government to enter into a Project Legal Agreement with the City of Perth
       incorporating appropriate issues such as those identified in [Schedule 1] and
       the following:-

       6.1       the State Government will:-

                 6.1.1      contribute to the project the central railway land as identified in
                            [Fig 1];
                 6.1.2      prepare a Master Plan and a flexible Town Planning Scheme;
                 6.1.3      accept the City as a formal participant in the project and accept
                            its close involvement through a Project Committee (including at
                            least two City of Perth Elected Members) in all aspects of the
                            project to ensure the City’s objectives and requirements are
                            implemented;



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                                                       City of Perth Business plan for Northbridge Link Project


                 6.1.4      carry out appropriate public and stakeholder consultation;
                 6.1.5      deliver the project which includes the construction of the rail
                            tunnel infrastructure, a new underground bus station and the
                            redevelopment of the project area as described in the letter
                            dated 18 February 2005 from the Minister for Planning and
                            Infrastructure;
                 6.1.6      take financial responsibility for the project taking into account
                            the City’s contribution;
                 6.1.7      receive a sum of money from the City according to an agreed
                            payment schedule and retain Lot 1192 Wellington Street in
                            return for sinking the railway lines and redeveloping the central
                            railway land;
                 6.1.8      agree to complete the project within a timeframe to be
                            determined by the parties;
                 6.1.9      agree a hand over program and process for roads and public
                            spaces in a manner to the satisfaction of the City;
                 6.1.10 arrange the transfer of planning powers for the project area to
                        the City when the redevelopment is completed;
                 6.1.11 commit to other relevant matters arising from parts 5.1 to 5.7
                        above;

       6.2       the City will:-

                 6.2.1      make a contribution of $25 million (excluding GST) in November
                            2004 value;
                 6.2.2      forego its 99 year lease of Lot 1192 Wellington Street to enable
                            the State Government to make Lot 1192 available for the
                            Northbridge Link Project;
                 6.2.3      be a formal participant in the project and be closely involved in
                            all aspects of the project to ensure its objectives and
                            requirements are implemented;
                 6.2.4      set a schedule of payments which will be linked to the
                            construction of the rail tunnel and other rail infrastructure;
                 6.2.5      set down its requirements in relation to the hand over of roads
                            and public spaces;
                 6.2.6      set down its requirements for the transfer of planning powers to
                            the Council following the completion of development in the
                            project area;
                 6.2.7      receive rates income from new lots upon their creation;
                 6.2.8      not be involved in further financial or other contributions, project
                            risk or be responsible for further costs other than that mentioned
                            in part 4 above;




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                                                       City of Perth Business plan for Northbridge Link Project


7.     the Council supports the proposed EPRA boundary extension for the
       “Northbridge Link Precinct” as described by Minister in a letter dated 17 May
       2005 and accompanying plan subject to:-

       7.1       Wellington and Roe Streets not being included in the boundary
                 extension due to the strategic and regional importance of these streets;

       7.2       the area not extending east beyond the eastern edge of the Horseshoe
                 Bridge on the basis that the Cultural Centre is now within EPRA’s area
                 and provides the necessary contiguity for a boundary extension;

8.     the Northbridge Link Project Business Plan referred to in part 4 above will be
       advertised for six weeks in accordance with section 3.59 of the Local
       Government Act 1995;

9.     the State Government be advised that it is imperative to locate the proposed
       Multipurpose Indoor Entertainment and Sports Stadium on the Northbridge
       Link land or alternatively on the Perth Entertainment Centre site on the basis
       that it would significantly contribute towards the Northbridge Link Project and
       because this location is highly accessible via regional public and private
       transport and in the event the State Government failing to do so, the Council
       reconsider the amount of its contribution to the project;

10. the Council advertises its intention to extend the purpose of the Asset
    Enhancement Reserve to permit a contribution towards the Northbridge Link
    Project to the State Government on the grounds that it will enhance the future
    assets of the City;

11. the City and the State Government enter into a Memorandum of Understanding
    for rent relief for the Entertainment Centre Car park by an amount equivalent to
    300 car parking bays effective from 1 January 2005 and operative until the land
    is required for development as part of the Northbridge Link Project.




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                                                       City of Perth Business plan for Northbridge Link Project




OTHER ISSUES
Entertainment Centre
The Entertainment Centre site is not included in the Northbridge Link Project area as
it is privately owned. Even though the Northbridge Link Indicative Development Plan
is a preliminary conceptual plan, it is sufficiently robust and flexible to allow for
various potential future uses of the Perth Entertainment Centre land, and the
integration of the (re)development of that land and Northbridge Link Project.

The State Government is currently considering the development of the proposed
Multipurpose Indoor Entertainment and Sports Stadium. The Government should be
strongly encouraged to locate the proposed facility on the Perth Entertainment
Centre site on the basis that it would significantly contribute towards the Northbridge
Link Project. Furthermore a facility such as this one requires high accessibility via
regional public and private transport routes which this location has.

Project program
The program to take the project forward is included in Schedule 2. It is expected
that the project will be fully approved by the parties with the Project Agreement in
place by the end of 2005 with construction commencing in 2006.




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                                                       City of Perth Business plan for Northbridge Link Project


ALIGNMENT TO LEGISLATION OR CORPORATE PLANS

Local Government Act
The Local Government Act allows the City to contribute financially to projects such
as these. Section 3.1 of the Act states that a local government is to provide for the
good government of persons in its district. Section 3.59 of the Local Government Act
sets down the requirements for projects such as this one. Details are mentioned
earlier in this document.

Strategic Plan
The project meets a number of elements in the City’s Strategic Plan and Annual
Plan. These are listed below.

STRATEGIC PLAN
Key Result Area:                       City leadership
Strategy:                              To consult and communicate on plans for the city with all
                                       stakeholders and to create partnerships with other
                                       spheres of government, the community and ratepayers to
                                       achieve the vision of the city.
Key Result Area:                       Smart city
Strategy:                              to investigate and plan how the City will maximise the
                                       advantages to be gained from significant developments,
                                       decisions and events impacting on the City.
2004/05 Annual Plan:                   Target the following organisations to improve relationship.
                                       East Perth Redevelopment Authority
                                       Central Railway Land:
                                       Lead the achievement of a solution for connecting the
                                       CBD and Northbridge
                                       Influence the development outcome on the Central
                                       Railway Land

The proposed Northbridge Link Project legal agreement anticipates the preparation
of a Town Planning Scheme for the area. A Town Planning Scheme, or suitable
amendments to the City Planning Scheme, will provide a statutory base for
appropriate uses and development of the area.

Previous key Council decisions

The project aligns with key Council decisions.                            These in summary include the
following:

•      The Council initiates a redevelopment plan for the central railway reserve and
       invites the (Department of) Transport and the Western Australian Government
       Railways to join this project; sinking the railway line be included as an option in
       the study; (Council decision on 12 December 2000)

•      That the Minister for Planning and Infrastructure be requested to work with the
       City of Perth and developers to examine the potential for non-State
       Government funding for the extension of the railway tunnel and the sinking of
       the Fremantle rail line. (Council decision on 10 September 2002)


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                                                       City of Perth Business plan for Northbridge Link Project




•      That the Council, in furtherance of achieving its long held objective of creating
       a holistic and comprehensive plan to re-unite Northbridge with the city,
       requests that State Government:
       1.   Sinks all the rail lines and agree to the creation of a vibrant city precinct
            between the city and Northbridge ;
       2.   accepts responsibility for the undergrounding of both the railway lines
       3.   that the Council becomes a financial member of the partnership or
            alliance involved in any land transactions. (Council decision on 24
            September 2002)

•      Meets with the Minister Planning and Infrastructure to discuss the possibility of
       an equal partnership, to raise the necessary non-government funding
       (including private investment) to underground the rail lines from the Perth City
       Railway Station to the Freeway; this exploration shall be based upon the
       proposition that if the City, having itself explored and agreed to a decision to
       make a substantial contribution to the cost of undergrounding the two railway
       lines ask the Government for its agreement on:

       1.      undergrounding the rail lines subject only to non-government finance;

       2.      establishing a joint fundraising committee or agency in partnership with
               the City of Perth;

       3.      vesting in the City of Perth the central railway land commensurate with
               the City’s financial contribution to the project;

       Should the State Government agree to these ideas, the Council will consider
       making a significant, whether in whole or part, contribution to the
       undergrounding of the two railways in return for an appropriate vesting of the
       land in the City of Perth. (Council decision on 26 November 2002)


•      That the Council adopts the Memorandum of Understanding between the City
       of Perth and the State of Western Australia dated 11 November 2003. (Council
       decision on 18 November 2003)

•      The Council advises the State Government that the Council is willing to
       consider contributing towards sinking the railway lines and redevelopment of
       the central railway land between the city and Northbridge by making a
       contribution of between $29million to $35million and foregoing its contractual
       entitlement to a lease of Lot 1192 Wellington Street for a term lease of 99
       years, subject to conditions (Council decision on 10 February 2004).

•      Council considered a price for a variation to the current rail contract to sink all
       the rail lines from the Perth Station to Milligan Street. Council:
       1. acknowledged that the price far exceeded the estimated price, putting it
          beyond the Council’s financial capacity to support this option;




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                                                       City of Perth Business plan for Northbridge Link Project


       2. agreed that the Northbridge Link Committee (NLC) should continue its work
          identify and evaluate the planning options to link the City and Northbridge
          (Council decision on 1 June 2004)




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                                                       City of Perth Business plan for Northbridge Link Project


EXPECTED EFFECTS OF THE PROJECT

Expected effect on the provision of City services and facilities

The proposed project will result in new facilities such as roads and public open
space which are expected to become the City’s assets. The other effects are
discussed in the Financial Implications section of this report.

Expected effect on other persons providing services and facilities
The State Government, the current owner of the affected land, can continue to use
the land for transport purposes. It is proposed that the rail and bus operations on
the site will continue with the possibility of a new and upgraded bus station. Public
utility services will be accommodated to ensure that service authorities can continue
to provide services.

The WA Planning Commission (WAPC) adopted the Central Railway Precinct
Guidelines for the area. The project will give effect to these Guidelines where
appropriate.




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                                                       City of Perth Business plan for Northbridge Link Project


SCHEDULE 1

HEADINGS FOR NORTHBRIDGE LINK PROJECT LEGAL AGREEMENT

Parties to the Agreement
State Government and City of Perth

Objectives
Provide ground level pedestrian and traffic links between the central city and
Northbridge by sinking the rail lines
Development of vibrant mixed use precinct

Intention of the parties
Consultation and co-operation on project planning, design and implementation
City to contribute funds and land
State Government to design and construct rail infrastructure
State Government to contribute funds and land free of cost to project
State Government to rezone land for redevelopment
EPRA to redevelop land

The Land
Land description
Title / reserve details

Planning
Preparation of a Master Plan and Town Planning Scheme based on IDP
Future of MRS reserve for Milligan / Fitzgerald Street

STATE GOVERNMENT

Land
Acknowledges current state of the land
Provides land

Statutory matters
Prepare town planning scheme which accords with the IDP and Guidelines
Meets all statutory requirements for development of land
Transfer of planning powers to Council after completion of project

Redevelopment
Project coordination and implementation
Development and financial risk
Project program

Rail infrastructure
Prepares design, calls tenders, administers construction of rail infrastructure and
bus station
Carries out above in a timely manner and agreed method
Identifies land requirements for construction phase
Provides a program and completion for this work


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                                                       City of Perth Business plan for Northbridge Link Project


Identifies requirements for rail operations

Other
City of Perth participant in the project
Public consultation
Hand-over of assets to City of Perth
Other matters as agreed between the parties

Provision of funding

CITY OF PERTH

Contributes $25m (capped) plus lot 1192
Sets down a schedule of payments linked to rail tunnel works
Retains jurisdiction over Roe and Wellington Streets in relation to traffic functions
Participates in project committees at executive and technical levels
Requirements for hand over of assets and planning powers
Receives rates income from new lots
Carries no risk

Project Executive Steering committee
Membership including City of Perth
Mandate including roles, responsibilities and project scope
Modus operandi
Provides regular project update reports to the Council

Project Technical advisory Group
Membership including City of Perth
Mandate including roles, responsibilities and project scope
Modus operandi

Dispute resolution




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   SCHEDULE 2.            Northbridge Link Project - Project Program - Phase 1

Task                       Who       May         Jun          July        Aug      Sep   Oct   Nov   Dec
Assess project proposal    CoP
Prepare Council report     CoP
Council decision in        CoP
principle
Comments on new            CoP
EPRA boundaries
Advertise      Council     CoP
Business Plan
Negotiate details with     CoP
Government (1)
Receive final proposal     CoP
from Government
Prepare Council report     CoP
Council makes final        CoP
decision (2)
Govt makes final           SG
decision (3)
Master Planning           SG/CoP
Sign      Project         SG/CoP
Agreement
Commence Project           SG


   Notes
   1. Project Legal Agreement covering roles, responsibilities and project scope
   2. Adoption of
      • Council contribution towards project
      • Business Plan
      • Final Project Legal Agreement
   3. Adoption of
      • Contribution towards project
      • Final Project Legal Agreement
                                                                                                     City of Perth Business plan for Northbridge Link Project




                                                                         Fig 1. Definition of Land




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                                                                                          City of Perth Business plan for Northbridge Link Project




                                                                                  FIG 2



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Description: Reconnecting the city with Northbridge by sinking the central rail ...