How Valuer-General got mine’s value so wrong
Thursday, 7th March, 2013
The NSW Valuer-General forgot to include nearly $200 million worth infrastructure at Perilya's Southern Operations in its land valuation, it has emerged.
The state Valuer-General's report into Perilya's Broken Hill mine site, sighted by the BDT yesterday, showed $195 million worth of capital costs wasn't deducted from the company's total costs.
The revelation comes as the first public hearing of an inquiry into the land valuation system in NSW took place at the Council Chambers yesterday.
It comes after the Land and Environment court found the NSW Valuer-General had overvalued Perilya's South Mine by $16 million.
It's now asking for nearly $7 million in overpaid rates back from Broken Hill City Council, who would need to take out a loan if it was forced to foot the bill.
The BDT learned yesterday, however, that the court found while the Valuer-General took into account income from the mine, it failed to include capital works costs associated with extracting minerals.
Capital expenditure on infrastructure that will get resources out of the ground should have been deducted, thus making the value of their land lower.
Yesterday Liberal MP and chairman of the parliamentary committee into land valuations, Matt Kean toured the Perilya site with MP's Scot MacDonald and Clayton Barr. Both the Chinese-owned company's mill and winder buildings, which are easily visible from a fair distance, were missed in the valuation.
"The committee is concerned about how the Valuer- General could have got this so materially wrong," Mr Kean told the BDT yesterday.
"Today we saw what appeared to be obvious examples of things that should have been considered when undertaking the evaluation."
Mayor Wincen Cuy yesterday told the hearing it was hard to believe the Valuer- General could make such an error in its valuation.
"We've gone from $20.9 million to 4.9 million," Mayor Cuy said.
Cr Cuy, Acting general manager Kate O'Neill and Chief Financial Officer Tim Drew gave testimonies at yesterday's hearing.
Mr Drew argued Council could be left $14.9 million in debt if every mining company in the city successfully challenged its land values.
"That's more than one year's worth of rate revenue," Mr Drew said.
"We cannot afford to absorb $14.9 million is lost rate revenue".
It emerged that while the Council pays $49,000 to the Valuer-General to value land, there was no formal contract.
The council also hadn't been told by the Valuer-General about Perilya's objection to its land value for more than two years.
Mayor Cuy said they only found out on October 26 - a week after Perilya won its appeal - by Perilya itself.
"Unless we got that we probably wouldn't still know."
Mr Drew also called for an annual review into valuations instead of the current threeyear period, saying it should come into effect "as soon as possible".
Executive Officer of Regional Development Australia Far West, Michael Williams and former councillor Ray Steer, who campaigned against a rate increase, also made testimonies.
This was followed by Chamber of Commerce president Paul Seager and executive officer Dennis Roach who told the inquiry businesses were often too "scared" to lodge appeals because of concerns about costs and complex paperwork.