Local, Opinion/Comment

Is this the real on-going cost of the proposed Civic and Cultural Project?

The Coffs Harbour City Council has stated that the cost of the proposed Civic and Cultural Centre Project will be $76.5 million.

By Peter Higgins

A drawing from a new web site by the CHCC giving information on the proposed Cultural Centre and new Council Chambers.
See: https://www.heartofcoffs.com.au/

However, it is known that certain costs, essential to the project, have not been included in this figure, for example, the cost of the forecourt works, roadworks associated with the project and fitout of the building, and Council has declined to confirm whether numerous other costs are included in the stated figure of $76.5 million such as interest cost of money borrowed during the construction period and escalation of construction costs over the construction period.

The cost of the project, when all elements are included, is likely to be of the order of $90 million. (I refer to my letter published in the Advocate on Saturday, 14 September 2019.)

The Council proposes to sell currently owned assets – the CHCC administration building, library, art gallery and museum – to partially fund the Project, raising $22 million (I believe this to be an optimistic figure).

Also, Council will redirect an amount of $10.5 million from an asset renewal fund. (More about this in another letter.)

This then leaves an amount of $57.5 million to be borrowed to fund the project. There may be other sources of funding of which I am unaware – so I will assume a borrowing of $50 million though it will likely be more .

Council has stated that any loan will be repaid over the “life of the building”. Goodness, how is that to be worked out? Assume 30 years. Why – because 50 years would be a burden on great grandchildren and 25 seems too short.

In an interview with a senior Council officer in 2016, I was told –

  • Council could borrow money at an interest rate of 3.5%.
  • Council allows a long-term annual operating and maintenance cost of 3% of the capital cost of its buildings.

In the current economic circumstance, a rate lower than 3.5% may be possible but it is implausible to assume that any financial institution would lend such a large sum at an historically low interest rate over a period of 30 years.

So I will use 3.5 % in the following analysis. Some elements will not require inclusion for maintenance and operating costs, so I will assume an amount of $75 million for the capital cost on which maintenance and operating costs must be allowed.

On the above basis –

Annual interest and redemption on loan of $50 million over a period of 30 years at 3.5% interest with a residual less than $200000 = $2.715 million with a residual of $18400 to be paid at the beginning of year 31.

Annual operating and maintenance cost at 3% of capital cost = $2.25 million

Total annual cost = $4.965 million

Total loan repayment = $81.6 million

Weekly cost for every week for 30 years = $95480

For a loan repayment period of 25 years ;

Annual interest and redemption with a residual of $144180 to be paid at the beginning of year 26 = $3.03 million

Annual operating and maintenance cost = $2.25 million

Total annual cost = $5.28 million

Total loan repayment = $75.9 million

Weekly cost for every week for 25 years = $101,540

There could be some offsets; income could be generated from the lease of the proposed café and gallery bookshop; maintenance and operating costs would not be paid on building assets sold.

However, offsets would be small in comparison costs outlined above.

The above analysis of on-going costs for the proposed civic and cultural project is a simple one; there are factors for which the appropriate data is not available to me and, possibly, not to Council at this time. Notwithstanding this, because such factors would have a relatively small impact, the huge on-going cost burden to ratepayers is inescapable.

Stop this unaffordable project NOW.

__________

“The above is a letter sent to the Advocate for publication in the “Letters to the Editor” section a couple of weeks ago.

Publication was declined on the pretext, as advised to me, that a letter from me on the subject of the Civic and Cultural Space Project had previously been published and that I had therefore “had my say”.

I note that CHCC has not advised ratepayers and citizens of Coffs Harbour of these on-going costs.”

Peter Higgins


Editors Note: 10/10/19 –

Peter, there is a need to look at the way the $10.5M  in the asset renewal fund arose.

It could have come from a revision done on the useful life of assets.  There are Australian Standards  (and taxation schedules) to assist the determination of an asset’s useful life.  

As editor of CCO I am aware another article (based on a potentially flawed “review asset renewal strategies” ) is not far off.

The new CHCC website on the proposed Civic Centre and Council Chambers can be found here; https://www.heartofcoffs.com.au/

11 Comments

  1. Ron Richardson

    The obfuscation around legitimate on costs from Council in regards to this make you realise that once you ‘wake up and smell the coffee it’s hard to get back to sleep’

  2. Tom Strickland

    Thank you Peter for delivering a realistic analysis. These are the very facts that arose undetected in Port Macquarie. The initial Petition of 13,000 signatures, now approaching 15,000, has shouted the message: NO OFFICES – THAT DENY US ACCESS TO GOVERNMENT CULTURAL GRANTS! Yet Council, and I quote recent headlines, “won’t back down” to collaborate with the ratepayers. What does it take? It’s never too late to parley! How can this Council expect to ever again be respected? Obviously they feel smug that their position is now unassailable, and that we are but fools who don’t even deserve direct, truthful answers to our questions. Where is Council’s accountability to the ratepayers? Disrespect of the community will never quell this unrest.
    Peter’s experience is commonplace, where the local media is compromised, and is “gagging” free speech.

  3. The following is a copy of the letter which I sent to the Advocate on 15 September. Like Peter’s letter, it was unpublished. I didn’t seek an explanation, since I have become increasingly doubtful of the paper’s impartiality in community debate.

    “Although perhaps not immediately obvious, contributions by Phyllis Taylor, Peter Higgins and Chris Johns (Your Say 14 September), share a common thread – dissatisfaction with Coffs Council. They speak for a huge number of fellow residents.
    This disaffection arises from the fact that some of our local pollies are more interested in exercising the power given to them by the electorate, than they are in following the wishes of that same electorate.
    Politicians at all levels tend to fall into two broad groups – those who have a wish to serve their community, and those who wish to express their own self-importance.
    Phyllis asks for a regional gallery, museum and performance centre at City Hill, a cost-effective way to enhance the lifestyle of locals and attract tourists. Peter reflects upon the pollies’ refusal to tell us how they will spend our rates and Chris speaks about their attempts to prevent public discourse on vital issues.
    The drive by some of our councillors to enhance their own working conditions, at public expense and at the expense of a performance centre, smacks of self-interest. The refusal to reveal all costs associated with the development of their luxury accommodation, speaks of megalomania. The desire to prevent the expression of individual opinion, even that which is in the public interest, reflects paranoia.
    Remuneration for elected councillors comes from our purse, as do the wages and salaries of council employees. While we pay the bills, we have the right to expect complete transparency from those who spend our money. Instead, we are expected to wade chest deep through bovine excrement to get at the truth.
    I can’t wait for our next council elections.”

    Was Denise Knight’s full page advertisement on page 15 of the Advocate (October 5), funded by our rates? If it was, are all ratepayers likewise entitled to submit a full page response, funded by our rates?

    The “letter” is little more than a cynical political stunt, designed to assure us that we are in good hands. It does nothing to substantially address the issues raised by Peter and his fellow concerned community members. I suspect that the captain of the Titanic, had he been politically savvy, would have broadcast just such a message to his passengers.

    • The Wednesday 2 October and Saturday 5 October full page ads in the Advocate were paid out of the Council’s communication’s budget. The mayor confirmed this herself in an interview on Prime news implying it was proper use of council resources “to ensure these myths were busted.” This probably explains the Advocate’s reluctance to upset their biggest paying customer by publishing too much negativity towards this idiotic proposal and also explains why I see so many copies of the Advocate left in the gutter nowadays on my daily walks. And to think the fast becoming irrelevant Advocate wants us all to subscribe…… what a joke.

  4. “During times of universal deceit,telling the truth becomes a revolutionary act” George Orwell.Things dont change!!

  5. Peter mentions that there is a need to look at the way the $10.5M in the asset renewal fund arose.

    It could have come from a revision of done on the useful life of assets. There are Australian Standards (and taxation schedules) to assist the determination of an asset’s useful life.

    As per my note above (10/10/19) I am aware that there is another article (based on potentially flawed “review asset renewal strategies” ) that is not far off for publication here.

  6. Fortunately I do not read the Advocate anymore.What a shame ,I am so disappointed in the Advocate .The local paper has become irrelevant and will disappear into the ether and blame the internet .What a wasted opportunity for good journalism and the vox populi.Instead it will be remembered for being a stooge for the CHCC,rather than an independent voice for locals Maybe they should have taken a leaf out of the Betoota Advocate!!.They have become the local Sky news with our own “UNMATCHED WISDOM” leader .I believe under the freedom of information act the cost of the full page advertisements taken out by our mayor should be revealed to ratepayers. Any thoughts or do we need a petition for this as well!!

  7. Mayor Knight will go down in Coffs Harbours History as the principle of the greatest loss of ratepayers money on a”BAD” decision , when the vote was 4 all, to use her casting vote to put us the ratepayers holding the “can” for this over the top totally unnecessary ego driven Building , She will make the loss of $8.8 million hit by collateralised debt obligations (CDOs) look small time in 15 to 20 years down the track.

    COFFS Harbour City Council lost $8.8 million over five years in a ‘high-risk’ investment since the start of the Global Financial Crisis in 2007.

  8. Rikki Bekker

    I have just flicked through today’s (12/10/19) Advocate – all 64 pages (50 of which are advertising). It took 5 minutes to ‘read’.

    It has become laughable. There have been no formal letters to the editor for two editions running now? Read into that what you will but our local paper is now a risible joke.

  9. I wonder if the Mayor has heard the expression “flogging a dead horse”.It is starting again ,just received a letter from the Mayor spruiking the cultural centre.The brochure outlines “myths are busted”and “misled by false information”The Mayor says rates will not increase.She will be long gone when rates are increased,probably living on the Gold Coast.A sunny place for shady characters.It also states CHCC managed larger projects than the cultural centre.As Pauline would say “Please explain”what projects have the council “managed” larger than the cultural centre?If recent “management ” of projects such as Palms centre paving or the Jetty Park are any indication, God helps us all.The brochure is worthy of the script writers in the ABC Utopia program

  10. Thank you, Peter, for your detailed analysis. It is patent that the train is well on its way to Bankruptcy Town. One can only hope and pray that sanity prevails and the Local Government Minister Acts. Clearly the Councillors who voted for this project and the Executive are NOT ACTING IN THE BEST INTERESTS OF THE PEOPLE and that is a breach of their Statutory Obligation to do so. Whilst the Minister may not like to intervene; whilst she may prefer councils to be independent bodies; bodies able to work through problems and find solutions; in this instance, there are just too many dark corners to be investigated for a Minister to turn a blind eye. If the Minister does turn a blind eye, one would have to pose the question, WHY and wonder if there was more to the story? Whatever the outcome of the Petition and on-going cries for action, TRUTH always finds a way to bubble to the surface and I suspect that TRUTH will introduce new faces to the chamber after the next Council election.
    Janne C Lindrum

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