Local, Opinion/Comment

Does the Airport provide more for Council than just the announced profits?

Recent articles on the airport here at CCO have focussed on the wisdom of an effective privatisation through a long term lease  at a time of Covid19 and whether it would deliver as good an outcome for ratepayers as a pause in the process until a post-Covid outcome would. 

But there are a number of other issues that also need to be considered too and today we look at them.

By The Editor.

What Council makes out of the airport.

Council has regularly announced profits from the airport until this year.  They have varied over the years between $2.5m and $8m per annum.  Profit increased over the decade 2010-20 by an average of 17%.

However they are not the only way the airport delivers revenue to the Coffs Harbour City Council (CHCC). 

Are we witnessing what the Aircraft Owners and Pilots Association of Australia has called a ‘dash for cash’?

An analysis of the airport budget for the 2020/21 financial year and previous accounts from other financial years shows five line items that on investigation show not only has the Regional Airport not cost ratepayers anything but that it has also been responsible for generous annual payments to the Council for;

Administrative services; Currently approximately $300,000 p.a. even though for the past 10 years the airport has been managed under contract;

Rates; Currently approximately $220,000 a year; and,

Dividends; Currently approximately $400,000 p.a.

The above amounts to approximately $920,000 a year in total over and above a delivered operating profit.  Clearly any new operator would still have to pay the rate component.

In addition there have been other contributions to CHCC expenditures including roughly $900,000 to an upgrade of Hogbin Drive.

A ‘privatised’ airport might not get government funding support

Most investment in the airport has come via grants from both the federal and state governments.  The airport was upgraded and conditionally given by the Commonwealth to the CHCC at no cost over the late 1980’s and early 1990’s. 

This concluded with the CHCC, subject to a further targeted grant from the Commonwealth, assuming full financial responsibility for its further development and operational maintenance from 1 October 1991.

Once essentially privatised though such federal and state grant largesse would not at all be guaranteed for what would in effect become a private monopoly. 

This of course would in all likelihood mean increased charges for airport users as has usually been the case where monopoly airports have been privatised.

CCO understands a condition of a successful lease is the completion of the preparatory work for the Technology Park.  The CHCC has already received $10m from the federal government but must also commit $5m of its own money and is hoping that the State Government will deliver a grant of $10m too, with negotiations in relation to the latter currently ongoing.

Cr’s Amos, Arkan and Swan are right to seek information on whether Council would have any control over issues such as landing times and who might become tenants in the Technology Park if the airport is leased. 

Many residents under flight paths and living near the airport would in all probability share these concerns too.

Aviation Rescue and Fire Fighting (ARFF) Fire Station - Coffs Harbour | St  Hilliers
Would Council have any control over flight times and Tech park tennants under the proposed lease?

Why a ‘guarantee’ not to spend the money on the CCS in Gordon Street is not binding or enforceable

According to a report by Emma Darbin in the Friday 4 September edition of News of the Area (NOTA) (Page 12) “Council also resolved that any proceeds received from the long term lease of the airport will not be used to fund the Cultural and Civic Space Project” (CCS).

CCO has had it confirmed that this indeed did form part of the discussions among Councillors on the airport lease and that this ‘promise’ may have influenced how one Councillor eventually voted.

This ‘promise’ cannot be enforced

A Council in 2020 cannot ‘bind the hands’ of any new council in the future. 

Should, say, Mayor Knight’s 2021 ticket win a majority at the next Council elections, as an example, they could vote that the lease monies from the airport lease be spent on the CCS.

That would be perfectly legal.

In addition even if the above was not the case the lease money from the airport would have to be ‘ringfenced’ within CHCC accounts so that they could not find their way into any broad CCS related expenditures. 

Having recently discovered the ‘opaque maze’ that are the CHCC accounts all one can say is that in our opinion it would then be a matter of “good luck with that!”

Why getting a manager to run the airport for ratepayers is not a major issue

One of the more absurd arguments being used by the CHCC Executive to argue for the essential privatisation of the airport is that they don’t have the ‘skill set’ to manage it.

Yes.  That is why the excellent Mr Dennis Martin did that magnificently for the previous 10 years. 

So as an idea why not hire a new expert Airport Manager? The CHCC could start by contacting The Australian Airports Association and getting a list of their members for starters. They are not hard to find.

Given this is not exactly an onerous proposition it does lead one to wonder just how seriously the CHCC Executive researched alternatives to their preferred lease model.  And everything we have seen that is publicly available on the matter suggests the answer to that  query in our opinion seems to be; “Not very.”

No, this seems increasingly to be more about a ‘fire sale’, or as the Aircraft Owners and Pilots Association of Australia (AOPA) put it; “A dash for cash”.

See; https://aopa.com.au/dash-for-cash-coffs-harbour-airport-to-be-privatised/

Was Council so bedazzled by an offer for the airport from a superannuation fund backed group several years ago, and is now so commited to the ide,a that in a time of unprecedented turmoil in avaition and elsewhere they don’t now know how to operate a hand brake?

And see AOPA here quoting former ACCC Chairman Graeme Samuels on his view on how privatised monopoly airports have failed airport users; https://aopa.com.au/airport-privatisation-dogfight-airlines-calling-out-government-inaction/

This is this Thursday’s rescission motion on the lease of the airport.

Councillors Arkan, Amos and Swan, have given notice of their intention to move the following rescission motion:

Councillor reflects on the 'funny old times we're living in' | Northern Star
Councillors Amos and Arkan, along with Councillor Swan, are moving the rescission motion tomorrow night

Rescission Motion:

That the resolution 2020/194 titled BS20/50 Coffs Harbour Airport Long Term Lease – Stage 3 Tender for Binding Bids, set out below, be rescinded.

That Council:

1.       Progress the airport lease through negotiation in line with the recommendation contained within the Binding Bids Evaluation Report (Confidential Attachment 2).

2.       Receive a further report on the outcome of the negotiations.

3.       Resolve that any proceeds received from the long term lease of the airport will not be used to fund the Cultural and Civic Space Project.

If the motion is successful, we intend to move the following:

That Council:

1.       Bring back a report containing further information on the implications of potential financial impacts of an additional 50 year option.

2.       Provide a further detailed direct comparison on the financial implications and advantages of maintaining airport management under Council control verses leasing options.

3.       Seek further clarity as to our control over hours of operation, projected flight paths and anticipated arrival and departure times over the length of the lease.

See; https://infocouncil.coffsharbour.nsw.gov.au/Open/2020/09/CO_20200910_AGN_2231_AT_WEB.htm

9 Comments

  1. I for one strongly recommend Cr.Rhoades spends a few moments to read and digest this article and the previous one by the forensic financial sleuth before voting.

    “Hello Councillor, are you fully tuned into these high finances”?

  2. Richard McDermott

    Surely no council that purports to represent ratepayers would ever contimplate selling or leasing in perpetuity an airport when residents in flighpaths have no say through their council on landing times, would they?

  3. 40cmPedestalFan

    Two things, I’d like:

    To take a good look at that lease, and one of these with which to do so:

    https://www.stlmag.com/news/Ooh-That-Smell-The-Bridgeton-Sanitary-Landfill/

  4. Craig O'Reilly

    This is a great snap shot that shows Councillors do not have an understanding of the wider economic and regional significance of our airport.

    The strong management team who run the airport clearly do an excellent job in and keeping CHCC at arm’s length so they can achieve these outcomes.

    One Question that keeps getting avoided by CHCC is that our airport is just not of economic significance but also of regional significance too. This means our airport effects a wider community not just Coffs Harbour, when you look at the area Bellingen Shire, Nambucca Shire, Macksville Shire and Clarence Valley Shire.

    This effective privatisation of Coffs Harbour Airport affects a larger economic and social community than just Coffs Harbour. And Councillors need to take this into account because the CHCC Executive will not and care not.

    Has the CHCC investigated with the federal government that the conditional grant of the airport back in 1988 gave IT the right to sell off or lease the airport?
    After all we know what happened with Woolgoolga and our waste management facility and council’s record in this regard is not exactly great. I’d argue evidence of this needs to be produced because of the wider effect selling/leasing the airport it will have on the larger communities around Coffs Harbour.

    From the CHCC agenda for their meeting of 27 August 2020 it seems they acknowledge they have a statutory regulated requirement to find out if they can sell or lease. Has any councillor seen a report or letter from the Fedral Government saying that it is OK to do what is being proposed? Has the CHCC fulfilled its requirement in this?

    In yesterday’s interview on Triple M with Cr Tegan Swan intimated that once the 99 year lease was signed off that Council would be able to review it. I would love to see how they can enure that and am willing to bet it would affect the price of the lease, meaning it would probably be worth less as a result.

    Unfortunately I strongly suspect once it’s gone we lose the income generated and we lose control for the term of the lease.

    Everything you read about selling off regional airport is negative and because of the economic and regional significance of our airport I do not believe that CHCC has the right to sell/lease it off – even if it is just morally so.

    But that has not stopped Council in the past.

    • Excellent points, clearly expressed and highlighting what I perceive as a “modern political behaviour”.

      For some reason, best known only to themselves, modern politicians appear to be abdicating their social responsibility to ensure that the welfare of all Australians is protected, in the long term. Privatising public entities is the simplest way for politicians to avoid the responsibility for ensuring that these entities are competently managed and that they provide services to the public in an effective manner. The energy industry would seem to be an appropriate example. Can it be shown that, with privatisation, gas and electricity provision has improved, and that rates to consumers are cheaper? Could equal or better results have been achieved by ensuring effective public management of the service?

      There is a catch cry which is commonly dragged out when valid criticism is levelled at governments for ducking their responsibility for ensuring proper management of public utilities: “We’re politicians, not business managers”. This comment, in fact, indicates that these politicians are also incapable of managing their political roles, which must include the oversight of all public interests.

      It seems to be fashionable to privatise anything which might become a political burden to manage, thereby enabling pollies to have someone to blame when things go wrong. The bottom line almost always appears solely to be financial profit, when it should also include customer satisfaction.

      Where our airport is concerned, it seems that the achievement of customer satisfaction and financial profit are already being adequately managed, and it appears that, without interference by council, this situation is unlikely to change. Currently, ownership and control of the airport by council, appears to meet the immediate and future needs of the community.

      “If it ain’t broke, don’t fix it”.

      • 40cmPedestalFan

        This is insightful and spot on, Julian.

        The recent introduction to the silly LGNSW outfit has prompted some further thoughts, too, relevent to what you’ve said. It goes to the levels and pockets of bureaurocracy that we assiduously create.

        Further to outsourcing of managment, which also falters from it, I wonder if the Australian political system has weakened its quality of employees. Why should, for instance, a local Council employ someone with a highly developed skillset and proven success when it can outsource it? ‘

        Has our Council, as one example, lowered its ability to perform because it no longer has to? Can it now simply employ someone who performs the functionary basics and then heads off to some other outfit for knowledge, advice, assistance and even the execution of important functions?

        What if the parasitic, self-congratulatory, self-regaling, self-promoting [had to have a dig at it!] LGNSW, as just one outfit, didn’t exist? Wouldn’t our NSW Councils have to choose employees of a higher skillset and experience in order to perform their duties? And wouldn’t the community be left with a clearer picture of how their own Council is performing, by removing the clutter as to which body is doing what, or not?

        It seems to me that we’ve seriously weakened a system in ways it was never functionally intended.

        • Great insight ’40CM’. You are certainly attracting a ‘fan base’ here on CCO.

          You are spot on. It’s all about outsourcing advice and billing the ratepayers nowadays. It’s a wonder the community has to pay the megabucks the council executive team receives for their so-called expertise, which, in the main, is no more than a coordination role. A role that low level clerks were once assigned and required very little intelligence.

          One recent example that comes to mind was the advice CHCC sought from Hawkridge Entertainment Services, in the midst of community debate about the location of the proposed Cultural and Civic Space. This amounted to an undisclosed sum spent to arm CHCC with a report to persuade the community that Gordon Street is by far the better location for a Cultural and Civic Space than City Hill. A task outsourced to an entertainment services company, even though the proposed Cultural and Civic Space is devoid of any entertainment facility.

          Go figure!

          • 40cmPedestalFan

            Thank you, CLB, though I neglected to acknowledge the excellent portrayal by Craig O’Reilly.

            Yes, I have seen that serenading by CHCC of the report recommending Gordon St and disparaging City Hill.

            Just imagine. The pamper-paper vacu-bag presented to Councils by Micromex or whatever it’s called was never going to provide meaningful value on what Council needs, or even where to look. Why would it jeopardise its own jackpot?

            Similarly, it’s just as effortless to imagine the General Manager, if that’s the correct term, engaging Hawkridge with a “it’s my preference to steer away from City Hill and do it in Gordon St. The Mayor’s too.”

            Done deal. Any half-literate consulter can choose and arrange words to frame a conclusion so it’s weighted one way while maintaining a professional reputation. Too easy.

            “I hear you,” nods Hawkreidge, open palm outstretched. Throw in Councillors Dunning and Kruger, then you need add no more than a Community Hero award in the form of a plastic tiara, and here we are. Bogged into an expensive dud of Goldstar divisive quality and sub-poor standard for a community long-deserving of much, much more, dudded for forty years and sniggerlaughed at by visitors for the same.

            What astounds me is how easy it is to slip into these sub-poor positions.

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