Secret report says it could take 17.5 years to recoup an expenditure of $3 million at South West Victoria Livestock Exchange

The Warrnambool City Council discussion paper, which has until now been kept under wraps due to "market sensitive intelligence", was compiled by BDO Consultancy.

The Standard has now obtained a copy of that report.

Based on the saleyards' performance in the past eight years, it will "likely" take between eight and 17.5 years to recoup a $3 million expenditure, according to the report.

"Competition poses a greater threat to the SWVLX than south-west Victorian throughput requirements," the paper said.

"It will be critical for the council to ensure its capital expenditure is based upon objective criteria, in meeting appropriate governing standards and addressing the impact of competition."

The city council set aside $2.56 million in its 2021/22 budget for saleyards upgrade while flagging the price tag for works could be as much as $3.5 million.

With the cost of materials ballooning during the COVID-19 pandemic, especially steel, that figure could rise sharply.

Last financial year, the facility made a $210,000 profit.

The sale of the land has been tipped to net the council as much as $15 million.

The report also urges the council to identify fixed costs that may be converted to variable in an operating expense review.

The discussion paper was addressed to council director of corporate strategies Peter Utri and council manager of financial services David Harrington.

Mr Utri, who oversees the saleyards' operation, has been a strong supporter of expenditure at the saleyards after the October 2020 collapse of a concrete walkway during a sale.

Tenders have been called for the replacement of concrete walkways and an extension of roofing.

The draft also recognised the new Mortlake saleyards was on an upward trend and Mortlake and Ballarat facilities had continued to increase throughout.

"These competing saleyards promote themselves for animal safety and well-being, environmental sustainability and workplace health and safety," it said.

In the latest Meat & Livestock Australia financial year figures for 2020/21, Mortlake has had a 40 per cent jump in sales to 90,828 and is now the fourth largest sale centre in the state.

Warrnambool is now the sixth largest sales centre in Victoria, having recorded a 20.9 per cent drop, to 78,443.

The draft also gave the highest priority in key areas of focus to: "Due consideration should be given to the available alternatives to the capital expenditure prior to proceeding to with the decision."

City councillors have yet to vote on the individual topic of spending money on the saleyards.

They did approve the council budget, which included the works.

The draft discussed alternatives, including, realising the asset as a going concern - selling the saleyards.

The apparent advantages includes providing additional funds and eliminating the need for continual evaluation regarding saleyards operations and investment.

Disadvantages included loss of revenue and loss of control regarding future relocation and/or redevelopment.

"Public interest may be a lesser priority for the purchaser which could impact the community," the paper said.

And a sale "could impact council's reputation in the community".

A concrete walkway at the South West Livestock Exchange was removed after collapsing in October 2020 during a sale which was described as being "like an earthquake".

No one was injured, but the incident led to a review of the facility, which found the walkways had to be replaced.

The facility was moved from the former Swan Reserve site to its current location in 1970.

Almost $1 million has been spent putting a new roof on the saleyards - a joint project between the council and Victorian government.

The large roof area also allowed for the capture of a large volume of stormwater into tanks which have a combined storage of more than 400,000 litres.

The saleyards has been touted by governments as contributing about $30 million to the city's economy each year.

Warrnambool City Council was asked to comment, but said "the confidential discussion paper on the livestock exchange is a commercially sensitive document".

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