Ready. Aim. Flop. Berejeklian’s $5.5m gun club grant a disaster

NSW’s Wagga Wagga would become a “blazing star of the southern universe” thanks to millions in taxpayer grants, disgraced former state MP Daryl Maguire told Gladys Berejiklian in an intercepted telephone conversation. The reality is more crash and burn. Anthony Klan investigates.

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ANTHONY KLAN

The $5.5 million Wagga Wagga gun club “function centre” project at the heart of the probe that felled Gladys Berejiklian as NSW Premier has turned out to be a taxpayer disaster — and even a financial albatross for the club itself.

None of the major conferences flagged in an “updated business plan”— used to get the highly-contentious grant over the line — has materialised in the five years since the 1000-person function centre opened its doors.

Analysis of the Australian Clay Targets Association’s annual reports show that since opening in early 2018, the sprawling, 2,200 sqm facility has notched-up $823,793 in depreciation.

That’s more than double the entire revenue the facility has brought in over the five years — before deducting any costs.

“The facility has notched up twice as much in much in depreciation than its entire revenue”

The $5.5m grant to build the facility is at the centre of the NSW Independent Commission Against Corruption’s Operation Keppel probe, which saw Berejiklian resign in 2018, but which is yet to report.

Pursued heavily by former NSW MP Daryl Maguire and allegedly pushed by Berejiklian, first as NSW Treasurer and then as Premier, the “fast-tracked” gun club grant was unusual on many fronts, the ICAC has been told.

It was later revealed the pair had been in a secret relationship from about 2015 to 2020.

The director of the NSW Office of Sport Michael Toohey has said business case — prepared by consultancy GHD at taxpayer expense — was “deficient” and “flimsy”, with “imaginative” claims of community benefit.

The project did not meet the “NSW Government’s own standards and policies”.

Former NSW Sport executive director Paul Doorn has said his department didn’t consider the project “stacked up” – and he was “surprised” to hear it had been approved.

Nigel Blunden, a senior advisor to then NSW Premier Mike Baird, summed up his thoughts in an email to Baird in late 2017: “sometimes you gotta say WTF”. His recommendation: “oppose”.

An in-depth review of the project five years on shows those concerns were well placed.

Better times: ACTA function centre official opening 2018. (L-R) Then CEO Tony Turner, then president Robert Nugent, patron Kate Hull, then Wagga Wagga mayor Greg Conkey, NSW MP Wes Fang. Source: Wes Fang

The project was to create “up to 91 FTE (full-time equivalent) and 86 resident jobs”; deliver over $2m a year to the local economy; and provide “international promotion of the City of Wagga Wagga, regional Australia and Australia as a whole”.

It was to host four 400-person conferences and two 800-person conferences each year.

Instead, demand for the facility has been so low that the project’s not only a woeful deal for the NSW taxpayer — it’s a financial burden for the club, which received the $5.5m in free money.

Over its five years of operations the average annual revenue of the function centre — which all up cost $6.8m, according to the accounts — has been just $97,000 a year.

Taking out operating costs including catering and maintenance and that figure falls to $53,700 a year.

Take out overheads such as electricity, water, gas, insurance, security and licensing — which the club does not individually apportion to the facility in its annual reports — and the results are worse again.

In 2019 the gun club hired an events coordinator for the facility — named The Range Function Centre — but she resigned in 2020 and appears not to have been replaced.

Revelations by The Klaxon:

• Oct 18 2021— Contract given to Wagga Wagga councillor
• Oct 19 2021 — Dominic Perrottet personally signed off on grant
• Oct 22 2021— Only grant in region to a non-government entity
• Oct 25 2021— Grant “rejected for years”  before Maguire letter
• Nov 7 2021 — Up  to $1m of project “cost” unaccounted for
• July 13 2022 — $5.5m grant illegal under Restart Fund Act

At the heart of the woes is the failure to attract major events — the promise of which was precisely what got it over the line, after some rejigging of the figures.

The gun club’s business plan — although given “conditional approval” by Berejiklian’s “expenditure review committee” in December 2017 — was rejected in April by the government’s Investment Appraisal Unit, on grounds it didn’t deliver a net return for taxpayers.

Projects must be determined to deliver a “cost/benefit ratio” of over one, meaning the benefit of the grant is worth more to NSW taxpayers than the cost.

The proposal scored 0.88.

An “updated business case” was submitted and the government appraisal was “amended” — allegedly following intervention by Berejiklian — and the project passed, barely, with a score of 1.10.

In the interim, behind the scenes, the gun club had been told it needed to include “non-shooting events” (as the vast majority of shooting events would occur regardless) along with forecasts for how many extra interstate or international visitors the facility would attract.

It needed to provide a net benefit to NSW — rather that cannibalising existing NSW businesses.

The club was told it also needed to provide details of events that would otherwise not occur in Wagga Wagga, such as because other facilities in town were too small.

(The gun club’s own busines plan states the events needed to be “business events”, such as confernences and exhibitions because they were “high-yieldng”, as opposed to community events. “It must be noted that a BE does not include weddings, theatre style shows, presentations or other community ceremonies,” it states).

The “updated business case” included eight major “potential conference style events” — none of which has eventuated.

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The eight major “potential conference style events” provided in the updated business case. Source: ICAC

They included national conferences of the Country Women’s Association and the APEX Services Club; the national exhibition of the Lamb Industry; national functions for the Royal Australian Air Force; conferences held by the Artlands Festival and electricity retailer Country Energy; and the annual conferences of Local Government NSW and the Australian Local Women’s Association.

Not one of those events has been held at the Wagga Wagga gun club in the five years since it opened.

And it’s not down to Covid-19 — those events have gone ahead most years, just not in Wagga Wagga and not at the gun club.

Since 2018, when the function centre opened its doors, the results of the club have plunged.

The impact of the conference centre has exacerbated a decline in fees from members in recent years, in part caused by Covid-19, although in 2021 and 2020 ACTA’s memberships were much the same as before the pandemic. (And in 2020 and 2021 ACTA received $303,800 in Covid-19 stimulus including JobKeeper).

Every year since 2018, when the function centre was opened (shown below), the ACTA’s overall operating result has been lower than the rest of the decade.

ACTA’s financial performance before and after convention centre. Source: ACTA. Graphic: The Klaxon

In its annual reports the club does not individually apportion overheads to the function centre — only direct “operating costs” — but factoring them and the impact of the function centre is grim.

In 2019, the year before the pandemic hit, and in 2022, which was largely unaffected, the function centre’s results, although slightly better, remain dismal.

In 2019, its first full year of operations, the function centre recorded revenue of $121,070 and operating costs (not including overheads) of $28,706.

In 2022 it delivered total revenue of just $134,117, with operating costs of $39,494.

From ACTA’s annual reports we have compared several overhead components in 2015 and 2016 (the project was constructed over 2017 and 2018) to 2019 (the function centre’s first full year operating), as well as last year.

Club overheads soaring. Source: ACTA. Graphic: The Klaxon

Water, gas and electricity soared from $25,800 in 2016 to $48,100 in 2022; “rates and taxes” grew from $9,200 to $37,300; and “permits, licenses, fees & subscriptions” went from $7,000 to $48,600.

The club’s total insurance costs soared from $46,100 in 2016 to $205,500.

The $5.5m grant saw ACTA’s total assets almost double, from $6.1m in 2016 to $11.8m in 2018.

In around 2016 the club started packaging “personal firearms insurance” with memberships, resulting in a “large premium increase…absorbed by the ACTA”.

The impact of each to the club’s overall insurance costs is not stated, but from 2017 (after the “personal firearms insurance” changes but before the function centre opened) and 2022, the insurance bill grew from $111,534 to $205,500.

The “depreciation” booked against the facility has no bearing on the day-to-day finances of the club.

It’s an accounting entry, but it helps to shed light on the performance of the taxpayer-funded project.

To date, the revenue of the centre less its operating costs — but before the function centre overheads — is just one-third of its $823,793 depreciation.

The gun club has repeatedly declined to comment when contacted by The Klaxon.

The function centre’s total revenue less direct costs, even before overheads, is a fraction of its depreciation. Source: ACTA. Graphic: The Klaxon

In the years since its opened its doors, references to the function centre in ACTA’s annual accounts have become less frequent.

The 2017 report states that following “persistence shown in continually applying for funds over a period of over 4 years after repeated rejections”, the project had been approved, “securing the long-term future of the Association”.

In 2018 it reported: “By the end of the year, The Range was in good demand from school communities for presentation nights and Year 12 dinners”.

“As a result of those events, a number more have already booked for 2019”.

In 2019 it said the function centre “averaged around 3 events per month”.

“This included school presentations, trade fairs, seminars, career expos and other community events,” that year’s annual report states.

“Income generated from catering was $65,527 and hire of the centre was $65,542”.

“A ‘business event’ does not include weddings, theatre style shows, presentations or other community ceremonies” – ACTA business plan

2020 was a “most difficult year”, “due almost entirely to the Covid-19 pandemic”.

Bookings “ceased in mid-March” and “social distancing restrictions didn’t ease significantly enough to allow Function Centre bookings to re-occur again until September.”

In late February 2020 it held that year’s “Wagga Wagga Lifestyle and Leisure Expo”.

The club’s 2021 accounts state: “There is little to report in regard to the Function Centre due to Covid”.

By 2022, news of the function centre was relegated to the “Significant Changes to State of Affairs” audited section of its annual report.

“2021 year was significantly affected by COVID-19 and our operations were negatively impacted…the Function Centre is still feeling the effects of the issues affecting 2021,” says the annual report, released this month.

Yet the club remained hopeful: “but we are seeing a good return to normal business”.

Further revelations by The Klaxon:

• Aug 13 2022 — Deleted docs prove grant illegal twice over
• Aug 9 2022 — Barilaro created “fund” used to make illegal grant
• Jul 14 2022 — NSW Auditor-General missed illegality of grant
• Nov 8 2022 — Perrottet refuses to answer parliament over grant legality
• Jan 19 2023 — ICAC delay “shields” Perrottet
• Jan 31 2023 — Secret side probe behind ICAC delay
• Mar 24 2023 — Perrottet, Keen in election eve rift over grant

Searches show the function centre is slated to host a small handful of events this year, yet none appear anywhere near the size of even a 400-person event — or of a size that could not be hosted at numerous other venues in town.

In September the Riverina Eastern Regional Organisation of Councils will hold an “Energy and Innovation Conference”, “with over 100 attendees”.

The following month the same group will hold the “No Time to Waste Rural and Regional Waste Management Conference”, which is “the only conference of its kind in southern NSW” and “attracts over 100 delegates”.

The impact of the failures of the gun club function centre is magnified for taxpayers: a massive 97 per cent of the taxpayer “benefits” were to come from increased tourism in the region.

Writing to then NSW Premier Baird in late 2017 — just days before NSW Treasurer Berejiklian’s committee “conditionally approved” the project – Blunden put his thoughts about this succinctly.

“Increased tourism accounts for 97 per cent of the forecast benefits (so it’s suss),” Blunden wrote as part of his “oppose” recommendation to Baird.

“This goes against all the principles of sound economic management” – Nigel Blunden

“Gladys and (MP Stuart) Ayres want it,” Blunden wrote.

“No doubt they’ve done a sweetheart deal with Daryl, but this goes against all the principles of sound economic management”.

In August 2017, with Berejiklian as NSW Premier, then NSW Treasurer Dominic Perrottet approved the $5.5m grant. The ICAC has indicated it’s likely to report by June 30.

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Anthony Klan

Editor, The Klaxon