Please note: this is an archived news article release
This article was published on Wednesday, 21 February, 2018. The information contained within may be out of date or inaccurate. News articles and media releases older than 60 days are archived for future reference.
Posted on Wednesday 21st of February, 2018,
Greater Shepparton City Council last night endorsed a proposal to use capital works funds rather than take out a loan for the building of the new Shepparton Art Museum with a new estimate of $39.9m for the project.
Two cost reviews during the detailed design phase have revealed that to build to the current budget would result in the new SAM building having limited functionality and requiring further future investment to be operational. The project is consistent with the 2014 business case, competition guidelines and awarded design; there have been no changes to the business case concepts for the project.
The Functional Design Option estimate for the new Shepparton Art Museum project is $39.9m; previous costings were $34.5m. This is an increase of $5.35m. The SAM project was endorsed in May 2015 under the provision that Council would undertake a loan of $10m to fund the project. Financial modelling indicates the project can be funded through existing cash reserves rather than a loan.
Council’s contribution increase to $5.35m in upfront capital would be partially offset by an estimated $4.23m savings in loan interest expense.
The Business Case is four years old and during that period construction costs have risen greater than inflation (4 per cent predicted for this financial year). Environmental systems for art museums are complex and tailored for the building which has increased the project costs.
This is a significant building for Greater Shepparton and in order to have the functionality required for an international standard art museum there is no ability to compromise on design and fit out.
The tender for construction will go out in August 2018 and there is a contingency built into the $39.9m project budget to allow for variations, which is standard practice for any construction project.
While the increase is within accepted parameters for Council, to fund the increase, additional measures to potentially offset this financial risk will be explored such as selected grants for components of the project and changes to the SAM Foundation Capital Works/Trust contribution breakdown.
The 2018/2019 financial year project bid process will not be affected by the SAM capital requirements.
Background information
At the 19 May 2015 Ordinary Council meeting, Council agreed to:
Funding achieved
Successful funding applications from:
Funding in progress
Timelines*
April 2017: Council resolved to appoint Denton Corker Marshal Architects to prepare the necessary detailed design based on the project objectives adopted by Council.
September 2017: SAM site incorporated planning amendment approved
February 2018: Demolition works commence
March 2018: Detail design completed
August 2018: Construction design completed
Late 2018: Build commences
September 2020: Project completion
(*timelines subject to change)
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