Two confidential offers for Council Chambers too
Next Thursday Coffs Harbour City Councillors, at the last scheduled meeting before the Council elections on 4 September, will be asked to approve a 30 year loan with Westpac for the CCS.
By The Editor
Those of you who have been following the CCS saga reasonably closely might be somewhat taken aback by this because Senior Council Executive staff regularly said that the state government TCorp loan from the state treasury for a period of 30 years at 2.2% was merely a ‘formality.’ Indeed some Councillors who voted for the CCS said this was a key reason for doing so.
But the agenda for the next Council meeting states that these executive staff members were, at best, being too optimistic. This is what they have to say in the agenda under item BS 21/41;
“In recent discussions/meetings with representatives of TCorp, TCorp have communicated a reluctance to lend for ‘construction’ projects, particularly as the sole lender, due to the increased risks involved and they have indicated they are unable to offer a borrowing over a 30-year term. TCorp has also advised a range of additional due diligence requirements would need to be met, noting that this additional level of scrutiny has not been requested by the commercial lenders that local government traditionally relies upon for borrowing requirements.
TCorp has suggested that Council explore borrowing from the broader market; that is, the traditional commercial lenders, as a viable alternative.
For comparison purposes, it should be noted that as at 12 July 2021, TCorp’s indicative interest rate offered to Local Government generally for 20-year fixed rate amortising funds was 2.21%. However, as with all indicative rates, these may change for any particular borrowing based on the credit assessment and the time at which borrowing is actually drawn down. Recently, TCorp advised that on 11 June 2021 it had loaned a 20-year fixed rate semi-annual amortising funds at 2.59%. As mentioned above, an indicative rate was not formally sourced from TCorp through the EOI process as they are unable to offer a borrowing over a 30-year term, whereas other commercial lenders will thus de-risking the subject borrowing.”
So indicative rates do change? And 30 years wasn’t a guaranteed period, least of all at 2.2%?
If you think you are reading some ‘humble pie’ above you are right. Quite a lot of it in fact.
So now what?
Never fear Council has gone to the commercial market and after much analysis of a number of expressions of interest (EOIs) has arrived at this recommendation;
1. Enter into a fixed interest rate loan agreement to borrow $50.265 million over 30 years with the Westpac Banking Corporation.
2. Authorise the General Manager under delegated authority to execute the loan agreement.“
Interestingly the fixed interest rate payable for this loan appear to be in an attached ‘Confidential document’ One has to ask why such a thing is confidential! The opacity is highly problematic.
But get this!
It is proposed to draw down the loan by 14 August 2021. Why might that be?
Well according to Council; “in order to meet Council’s contractual commitments for the Cultural and Civic Space project it is recommended that Council progress the borrowing of funds in line with adopted Council minutes. Four EOIs have been received offering funds to fulfil (sic) Council’s loan requirements and it is recommended that Council accept the loan offer to borrow $50.265M at a fixed rate over 30 years with the Westpac Banking Corporation.’
Does that make you feel better? Especially as we now know the building is getting smaller in public and staff areas but bigger in Executive areas as per yesterday’s story?
The following comes from the NSW Planning Department which was referenced and linked in yesterday’s story. Red is a space decrease and black is a space increase;
But wait! It gets better! We now have two offers for the Council Chambers. ‘Confidential’ ones though
Agenda item BS 21/40 refers to the sale of 2 Castle Street, the Council Chambers no less.
A fortnight ago we knew council had an offer for $7.25m for this building. Now we have two confidential offers, presumably including the formerly public offer. And we have this recommendation from council executive;
1. Adopts the recommendation in Confidential Attachment ATT1 BS21/40 CONFIDENTIAL Summary of Recent Offers and Recommendation.
2. Notes that the matter will remain confidential until all necessary documents necessary to facilitate the sale and transfer of the property are executed by both parties.” (CCO emphasis added)
Am I being too harsh? Or does the rubber stamp lead photo capture how you feel?
Because it sure as heck mirrors my feelings.
The agenda for Thursday 22 July’s CHCC meeting referenced above can be found here; https://infocouncil.coffsharbour.nsw.gov.au/Open/2021/07/CO_20210722_AGN_2245_AT_WEB.htm
For just a couple of past CCO stories on the interest rate issue see; https://coffscoastoutlook.com.au/can-councils-ccs-interest-rate-estimate-be-believed/ and this one from the ABC (reproduced on CCO) on 28 April 2020 which states;
“The council planned to fund the construction by selling four of its buildings, including its existing offices, and applying for a loan from the State Government’s financial authority, TCorp.
But Ms Hancock said legislative amendments made due to COVID-19 prohibit loans for works on council offices.” See; https://coffscoastoutlook.com.au/mayor-says-to-state-government-give-me-good-reasons-in-writing-to-stop-cultural-civic-centre/