The airport ‘privatisation’: Some ‘hidden’ issues

A recent CCO analysis questioned whether the airport lease was a good one.   We concluded that the answer was “no’ based on currently available financial information.

By The Editor and Rob Steurmann

This conclusion was based on Council’s predicted net return of $550m over 99 years in 2021 dollar terms.  However, there are a number of issues, other than financials based on opaque assumptions, that also need to be considered too.

The Enterprise Park – a threat to the CBD?

The proposed Enterprise Park is included in the airport lease/management agreement.  We estimated current land-side net profit over 99 years to be approximately $396m.

Given council says they are getting $550m out of the lease over 99 years and given air-side net profits have averaged $4.5m for the four years prior to 2020 it would appear that Council is effectively taking an annual reduction land-side on the agreement they have for the Enterprise Park.

This is in spite of the Enterprise Park very recently being re-zoned to B5 for Palisade which allows the following businesses and organisations (screen shot from CHCC records);

Now that is a lot of potential businesses who, if council are to be believed, are going to return a good income via their agreement with Palisade.  An agreement that is commercial in confidence in regards to this income issue, of course.

At the same time though it is also hard to see how this does not hold some potential to be a threat to the current CBD.  Indeed it could be argued it means that the CBD would be geographically closer to City Hill. 

Yes, that would be the same City Hill Council has claimed is unsuitable for a cultural and entertainment centre because it is not close enough to the CBD!

“Here is the proposed zoning. I should say that Councillors had no involvement in this process and only learned of it a few months ago. Clearly the existing zoning, which allowed only aviation related activities, was felt by the potential lessee to be too restrictive. It’s now proposed to be a mix of aviation, industrial, business.” Cr Sally Townley, Coffs Coast Independent News Facebook site – 16 February 2021.

Additionally there is some talk of an airport hotel being constructed – see the picture at the top of the story – presumably it is represented as buildings to the right.  Now there may well be a sound business case for this.  But it is interesting to note airport hotels, or those based near airports, are almost universally built around what are known as hub airports.

Hub airports are those one flies into so as to catch connecting international and domestic flights to other destinations. 

Coffs Harbour Regional airport is currently not a hub airport and is highly unlikely to be so in the near future.  If there are medium to long term plans for it to become one there will be major flight path and flight timing issues.

If there is an alternative strategy relating to the hotel then it would need to be associated to plans in relation to tourism, events and/or possibly gaming/gambling related expansions.  Time will tell what the plans are in that regard.

Can the lease be on-sold?

CCO understands that there are numerous clauses in the soon to be signed airport lease agreement covering the ability of Palisade to on-lease/sell the lease to a third party.  We also understand the details of this may have been ‘so sensitive and detailed’ that an in-depth briefing for Councilors may not have occurred.

If this is correct then one needs to ask ‘why is it so sensitive’?’

A picture near where the Enterprise Park is to be situated after recent rains. Picture submitted by a CCO reader.

Are Council’s assumptions too optimistic?

Council claims that the airport deal is worth $550m over 99 years. 

We have measured that against what we broadly know in regard to net air-side and land-side profits in previous years.  But we have no real idea what the assumptions are that Council has used to arrive at this figure other than to say we suspect it is not as good a deal as Council’s Executive claims it is.

And we are pretty sure Councilors don’t know what the assumptions behind that figure were either.

But then again that is no surprise. 

Where Council Executive wants something to happen then one off optimistic scenarios often form the basis of an ‘analysis’ for Councilors.  Medium-case and worst-case scenarios rarely get a look in. 

And when council’s executive doesn’t want something to occur a worst-case scenario is wheeled out.  In this instance best-case and medium-case scenario analysis often rarely get a look in either. 

It appears as if though SWOT analysis often appears to be something completely unknown as an analysis tool by Council management when reports to Councilors are scrutinised.

This is something we will highlight next week when we look at the report Council Executive gave Councilors last year in regards to what interest rate costs for the CCS could be.

In the meantime we can only conclude in regards to the airport ‘privatisation’ that at a time when the aviation market is overwhelmingly a buyers one Council has decided they nevertheless needed to do a ‘dash for cash’.

Perhaps we will discover why this ‘dash’ is needed as the year progresses?

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8 thoughts on “The airport ‘privatisation’: Some ‘hidden’ issues

  1. Without all the numbers it is difficult to drill into the financial detail however it is obvious the potential to reap the rewards of all the work CHCC has put into making the airport the success it is are being wasted here. As my Mum might have said “blind Freddy could see they are throwing the baby out with the bath water!”
    It is mind numbing to have to watch this council make these outrageously inappropriate decisions. There is absolutely no vision for future .

  2. Could the reason for the airport fire sale be that council is actually drowning in debt? Given the haste in which the sale was conducted, in a buyer’s market no less, isn’t there a role for the NSW Audit Office to have a look at council’s books to assure residents that best practice has taken place and everything is kosher? Afterall, isn’t that why we have a government audit office?

    With so many expensive items on its agenda, such as, the proposed CCS and the recently announced entertainment centre; the waste management debacle; fixing a rotting Coffs Harbour Jetty; liability in several recent legal cases; and three swimming pool upgrades; has this council committed the community to massive future spending it simply cannot afford without a large cash injection through selling off prime community-owned assets for less than they are really worth? Is this best practice? Is this good management?

    Even though council has given an undertaking that proceeds from the airport sale will not be used to fund the CCS, couldn’t some ‘creative accounting’ overcome this commitment?

    1. Well said, CLB. I will add to your already overly-sufficient assessment by raising the general misreading of the nature of local government especially for an LGA our size, as I see it, by our current General Manager.

      This council under General Manager Steve McGrath has in my opinion exhibited the hallmarks of a privately owned corporation, not a representative body – minus the corrective measures and overseeing of the corporate world.

      Two quick examples lately are: a) once again the treatment of the councillors by the GM in a council meeting, showing exasperation at their questioning (his job is to answer to them); b) the response to the question by Clr. Arkan regarding homelessness in Coffs, by both Knight and McGrath, treating the question as if an imposition posed by a pestering charity (Both of these two people couldn’t shut down that line of questioning quick enough. It’s all on record).

      I can’t get past the feeling that we have a General Manager, who as I’m reliably informed, apparently banged again and again on the door of the previous General Manager, requesting a job – and therefore would seem to have been happy to have a place elsewhere in the staff, perhaps not even at the executive level – then through a resignation found himself ushered into the top role under what appear to many to be ‘dubious circumstances’. This, having left his previous position under widely-questioned, and yet again dubious circumstances, as many of us understand it. No clarifications have ever been given.

      We have a systemic pattern showing now. High rates, low delivery. High promises, low delivery. High confidentiality. Low genuine community engagement and of his council, high community rejection. In-house dealings and agreements with select Councillors coming to light only through a brief public discussion and abnormal vote. Outsourcing of significant roles, obligations, tasks and responsibilities generally expected a competent GM would handle him- or herself or within-council delegate. The legal cases you mention. The obvious rush to get cash. The poor if existent personal engagement with the community. We have had the appointment of an executive whose experience in local government is mostly of a population about one third of ours (with other appointments not yet looked into). The general feeling of mistrust he engenders amongst many citizens, as publicly expressed.

      The creation of a strange civil works entity, severely questioned. ‘Plans’ and ‘Masterplans’ over-ruled and unreliable, and of themselves showing no adequacy for managing a difficult future. Little appearance of attempting to address adequately a mounting catalogue of local government housekeeping matters. The self-admitted inability to handle the management of the airport even for an interim period until covid and economic uncertainties are settled. Even, and this is unfathomable, the self-admitted inability to find a manager who could run it efficiently. (Who couldn’t do that?)

      It has every appearance of someone out of their depth.

      What really irks me, though, is the manner Steve McGrath, himself and through his executive (our! executive, supposedly) thrust upon the Councillors in that most defining – historically defining – meeting of the-point-of-no-return when the governing body was to vote on his continuing negotiation unto signing the airport lease. To say to councillors: “If you vote to stop me continuing negotiations then you will bring a bad name upon the CHCC and you will compromise other opportunities for the CHCC”. That looks all the world to me like duress. It looks all the world to me as a system where the power and responsibility balance is turned on its head.

      What does something like that assertion, given in executive advice, indicate? What does it further engender? It indicates and engenders a governing body that has neither the time nor inclination nor energy nor atmosphere to take him on. It breeds a weak council. It breeds one-off Councillors having a role outside of their capability. It breeds a Councillor who thinks of a question and doesn’t ask it. I think all of that shows a badly managed council. But I don’t think any of that is due to a power he himself possesses: it’s a sign to me, instead, in this airport case, of a badly ‘managed’ deal, a deal which necessarily includes Councillor involvement.

      I won’t harp on it, after this. But the answers seem written into these figures:

      Singleton LGA population at the time of his ‘leaving’ was around 22,700.

      Correct this if it’s wrong, but I think we have to go back to the 1960s to find that equivalent population in Coffs, including the then-shire aggregate.

      In any case, it’s extremely difficult to imagine someone can come from a township of 22.700 and, immediately, be fully competent managing a city well over three times that size. With that in mind, it’s reasonable to assume the strategy would be to outsource as much as possible. Further, it doesn’t seem as though a General Manager can learn on the job: once you set in play your strategies of ‘managing’ you have to live by them, unless you show a sudden change in methods and procedures reflecting that greater capacity, which hasn’t happened. You’re out of your depth from the start, and stay that way. Instead, it seems more and more is being flicked to courts and consultants.

      It’s a really unpleasant reality to look at. But we as a community didn’t get to follow along through the full procedure of Steve McGrath’s appointment, and now as ‘the chickens are coming home to roost’, and as important LGA matters heretofore hidden enter into public light, it’s entirely appropriate we look at this appointment with the strictest eyes.

      That’s the reasoning, above. Now, here’s the personal element that a reader can give or take. But I don’t trust this fellow. I’m in the groupings that senses something amiss there. It’s difficult to dislodge an image of the attraction of government for some who seek work within it: a bosom of protection, perks, stonewalled off from what a corporate manager has to face, for which he or she has to visibly answer and account (but not in government, and especially local government). Nestle into that bosom, all soft and cuddly and protective on the accountability front; accompanied in the system, such as the silly LGNSW and so on, by others of that ilk.

      Unpleasant, again. With no apologies. Not everyone in local government is like that, most probably are not, at a guess. But it does come to mind. I just don’t think Steve McGrath ‘gets’ local government, in terms much more than that. I don’t think he’s ill-intentioned. But it does appear that the nursery of the local government system is attractive for those who would by observance get a shock in the corporate world if in a similar high position. I don’t think, from having observed him, that Steve ‘gets’ the ‘spirit’ of local government. He certainly doesn’t show it.

      Maybe all of the above is wrong. Maybe the evidence exists to change this line of reasoning and I haven’t seen it.

      What I do know, though, is that it’s very reasonable to expect a General Manager with proven experience who has expertly managed a city at least three times our size – from anywhere in the world – would love to move here and take on the job. This is so, nationally, especially as the trends of residency move in a regional direction. It is perfectly reasonable to expect that person to be able to look over our LGA, see where future problems are embedded and unseen by inexperienced eyes, then head those off.

      She or he would have an immediate feel for the city, being a smaller microcosm of what he or she’s managed, then reshape it quickly into a better functioning organism. He or she would see wastage, dead ends of effort, bad decisions and poor delegation, areas of being suckered. She or he would have a strong standing with higher governments; would be better connected there and in the private and corporate world. Would know which deals to do, to not do. Would see areas of decay before they arrive, and plan to energise them. Would scare the heck out of the consultant with the quivering, sweaty palms: these would go running. Would know how to engage with the community. How to head off problems in implementation, and, better, know how to do it with full community engagement and more than majority support. Would be comfortable in appointing strong executives who may even be more proficient. (And so on!). So let’s end on … would be wholly comfortable sitting in watch of a netball or footy game, in a cafe or at an exhibition, happily and genuinely enjoying the warm company he or she keeps.

      1. An accurate summation of the status quo indeed. I feel sick though. Nauseous at the thought that while you have nailed the current situation in such damning terms there is little anyone can do to change this. This bloke is all powerful and he knows it. How many more controversial deals and decisions not in the community’s interest must be made and how many costly losses in court will provide sufficient evidence that he and the Executive are way out of their depth and a change needs to occur? How many tens of thousand more words need to be written?
        I feel sick because the answer appears to be infinite

      2. COULDN’T AGREE MORE.

        Have just heard that GM’S contract is up in April 2021, ie in about 2 months time. (if end date is 30.04.2021).
        SALARY AROUND $380,000.00 a year +perks.
        What happens then ??? is there an option to extend? who votes to extend? COUNCILLORS ? CAN HE BE TERMINATED THEN ?

  3. In reply to 40cmpedestalfan;

    All of your observations above are valid, 40cm. You make a good point that local government general managers operate relatively unhindered by official oversight in NSW, unlike their counterparts in the corporate world.

    Given your extensive understanding of the role, competencies and skills required of a local government GM and how local government is meant to work, council should seriously consider appointing you in an advisory capacity to steer it in the right direction. You might even offer your services as a private consultant, as it’s clear this council sets aside ample funding to outsource the most basic advice to counter its shortfall in original thought and common sense.

    The GM’s track record in Coffs makes it is patently clear that he is grossly unsuited to his present role and whoever was responsible for appointing him should also be disqualified from holding any future position on council. I was not aware of his alleged approaches to the former GM seeking a gig on council. He must have been over-the-moon when he scored the top job and this alone is worthy of close examination, given the former GM’s tenure seemingly ended abruptly under a veil of secrecy.

  4. Cheers, CLB. Steve McGrath was in fact a consultant himself prior to being slipped into the top job in Coffs, though for how long we don’t know. It appears of course that he was employed there, which means the self-corrective mechanism and the fiscal-tuning of, in effect, waking up unemployed and having to create your own work for the day, as with every self-employed individual or family, and as with every other head of a corporation as could also be argued, didn’t and still doesn’t apply to him. These local government people can really live their entire lives in that bubble, suckling the teat and warm and comfy at the bosom while guarded from realities we have to face. They use big words, appropriating them often without substance. It’s easy to think they’re eminently proficient because of that. And the perks are endless.

    For instance, here’s Denise and Steve with George not tagging along but firmly ensconsed in luxury late last year living it up at Cockle Bay Wharf. The link is too long: just search for “Country Mayor’s Association Friday 6th November, 2020”. These things don’t get reported, of course. Who knows what they got up to. Or what they dreamed up.

    I’ve come across about a dozen of these suckling bodies. I mentioned there the silly LGNSW, who hands out hollow awards solely to appear authoritative, which readers may remember describe themselves as “The peak body representing local councils in NSW”. Righto. Enjoy, then, the LGProfessionals (http://www.lgprofessionals.com.au) who describe themselves as: “The leading association representing the professionals in NSW local government”. Ridiculous. A dozen. Steve and Denise and now George would know them all very, very well. I wasn’t joking about the piss up thing. We just don’t get to see it. Away from us, that’s where decisions and with them political strategies are made, or deep in the bowels of the C.ex.

    So, as far as we know, the situation is that Mr McGrath was “asked to leave” Singleton Council, which looks a lot like a polite euphemism. The closer information I’ve received is that he was arguably ‘kicked out’. (If Council doesn’t like this kind of public discussion, then it can clarify it.)

    Which means we don’t know the actual population of the built environment of Singleton at the time he sat in the General Manager seat. The above figure refers to the Singleton LGA. The built environment, or “city”, a tiny town, which he, ah, managed, had a population of just 16,135 in 2011. Thus, it could well be smaller at his time. Truly, that’s the size of the built population. And he was, in the context we know, asked to go. Frightening.

    You’re right, CLB. The former GM resigned, after an unworkable situation with the then-mayor Keith Rhoades. Rhoades would without doubt have known about McGrath repeatedly asking for work, and after the resignation, as far as we know, Cr Rhoades apparently slipped McGrath into the top job.

    The piss up thing is a bit of humanising fun, but we can certainly ask the question whether alcohol was involved in the then Rhoades McGrath getting together. Remember, Rhoades had already been there forever and a day, and we know people tend to think they own the place after a while.

    What perfectly highlights the Country Town state of our council is that whomever slipped McGrath into the General Manager’s position clearly didn’t give a second thought about his adequacy for the role, in terms of what he could handle. The one thing McGrath seems proficient at is knowing the functions and responsibilities of local government in terms of the law – that he has to provide a masterplan and so forth. But within that there’s no quality accounting, as far as I can see he just has to provide one. Maybe that technical knowledge, and having already embedded himself in the local government bosom, was persuasive for whomever (singular or plural) to give him the job of running our enormous city, in comparison. It is I think an error of judgement and process that has us in the social mess we’re in, if not financial mess, with the big deals going on that sound like porcupines spiked with alarm bells. It stems from there. You can see, also, how, in my opinion, an untalented blowhard like Denise Knight could easily cosy up to this most inexperienced GM.

    We don’t know either, after the former General Manager’s resignation, if any councillor or councillors bothered to open up the position for other applicants. (We don’t even know if McGrath actually applied.)

    While here, I’ll just add this. In mention of what a highly proficient new GM can do, one who has run a government of a population three times our size, there’s a special understanding that has been placed in public discussion about the CCS-idea not meeting its promises, and deserves some more attention.

    In providing a plan for Singleton, of 16,130 people being the township not including rural residents, McGrath may well have thought a city three or four times that size can be handled merely by duplicating the process he’s used to. In other words, it’s simply more of the same. Here’s a patch of 16,000 people, there’s another patch, there’s another patch, another patch.

    He may not have. But the point is relevent. We’d have to go back to, I’m guessing now, the 1950s for us to have that low population. Maybe further. It’s not a case of multiplying, in the way I’ve presented it as 3X, because the problems and challenges and responsibilities occur at an increasing rate. So that’s six decades of growth that McGrath has no experience in. With indexed need for experience required over the time.

    Think of a street you’ve had problems with. Imagine an intersection that has been notorious for years and years, deep into our recent history. Who hasn’t at some stage in their life been caught at one of these and can’t get out? Now imagine that time and add just 15% of the traffic to the intersection. You’ll be stuck there for hours, not minutes. Further, areas wider afield are affected due to a build up of traffic as these clog up. That’s 15% increase in cars, with devastating results.

    That problem is indicative of how a city suffers under bad guidance and with someone out of their depth, because it’s not just traffic that suffers, it’s social integration, business welfare, industrial land, crime, physical and mental health issues, CBD thriving, keeping opportunities for future changes by not ruining them now, and so on. These all go into the planning of a city. A General Manager must be on top of it all, and much more. So here’s the killer. The difference between what McGrath was experienced in, to then taking the critical role in Coffs is not just 15% as in the above minor example. The difference McGrath lacks in experience is over 300%.

    So back to our proficient new GM who’s moved here, nearing the end of his or her solid career having managed a city of a quarter of a million people, and is keen to get out of that city, move to a region with beaches and give another good ten years of service in the city of Coffs where he or she will finish life. This person looks over the CBD, aware that shops that have been empty for far, far too long, shops not a hundred metres from the Highway.

    That, she immediately realises, means the CBD has fundamental systemic problems, dangerous problems. She is already aware that the CBD has undergone several attempts at rejuvenation, from closing off the old High St and putting in rotundas, to pulling these down and applying the then-forefront of street rejuvenation which has long been hopelessly outdated. She’s aware that none of these attempts have worked.

    So she studies the CBD. She has long known that a city is an organism, with internal functioning parts, as locations and provisions, that interact with each other, feeding and nourishing, as each performs its task in what should be a healthy body. She knows a CBD is one of those parts, and is itself an organism. She studies it because the problem is systemic, and is not easily solved. It will, in fact, take all of her knowledge and skills.

    She knows the highway is moving west, and doesn’t hit the kneejerk panic button. She knows, and this is what this is all leading to: she knows that the CBD with this degree of impairment cannot be solved just by putting another building into it. She knows that to do that, she will not be connecting the arteries, will not be energising anything in any other of the CBD streets, will do nothing at all for the systemic malfunction that is in this state of decay. She knows this is the state, if not properly corrected, that ends in atrophy.

    She knows also that to add another building of this CCS type, of low-magnetism and specialised function, as expensive as this, will be like throwing an iron bar into the financial cogs of the monies available to her, public monies, chugging the possible future of what she knows should be done, to an immediate halt.

    This CCS-idea came from somewhere in Council – McGrath, Knight, Cecato, Adendorff, other paid functionary’s perhaps. Someone there had the idea. It wasn’t imposed on us by a higher government. These people saw the highway was finally going west and kneejerked into this idea, and not one of them has the experience or skills to know how to solve the real problem of the CBD, and have sat in private somewhere and cooked this CCS thing up.

    Along with the airport ‘deal’ that blares with alarm bells, this CCS-idea is proof of the worst Council in Coffs Harbour’s history. It is proof of people hopelessly out of their depth. All of them. The manner of implementing these are proof of a broken, malfunctioning council.

    It should be stopped by law.

  5. In the interests of retaining and maintaining my mental health, I’ve stayed away from extending my learning into the incredibly murky area of council management. Reading the comments above, confirms the wisdom of my decision.

    I’ve been happy to simply believe that something stinks, in relation to the Coffs Council situation, an assertion inspired, and then borne out, by the debacle surrounding Knight’s Palace.

    Prior to my involvement in battling the forces of evil, I was blissfully ignorant of council management practices. I just voted for whomever I thought would do a reasonable job in reflecting community views and values, and then let them get on with the job.

    My understanding, at that time, was that councillors and council management officials would operate in a, more or less, joint capacity, in the business of looking after the town. I thought that councillors would have a vision of progress for the town, and that this vision would be realised by the management of technical issues, by council managers. In short, I thought that councillors worked for us, and that council officers worked for council. It was as simple a concept as the dog wagging the tail.

    How naive was I?

    By simply reading the volumes of material created by CLB, PedestalFan and others, in this forum and in others, I have learned that we are almost certainly dealing with personnel who are suffering at the hands of the “Peter Principle”. The GM seems to have been promoted to a position at which he has become incompetent, and Denise Knight has been out of her depth for a very long time.

    This might help to explain behaviours which, at first, I had attributed to blatant egotism. The very thought that someone in a position of power could seek to disenfranchise those who had elected her, puzzled me immensely. A person would need to be seriously, and perhaps fatally, narcissistic, to believe that such a behaviour would even be tolerated, let alone be acceptable.

    Then I thought that, perhaps, she might have realised her error, but was unable or unwilling to find reverse gear, a cowardly but almost understandable reaction. My next thought considered the possibility of her receiving and acting upon bad advice fro numerous sources. My ultimate conclusion is that all of the above apply.

    In my opinion, we have a mayor who has narcissistic tendencies (don’t we all?), who is ego driven (aren’t we all?), who lacks the knowledge and skill to meet the demands of her role, and is unwilling to acknowledge this, who cannot recognise bad advice when she hears it, who is willing to sacrifice democratic principles in order to satisfy her wishes, and who lacks the courage to stop the train before it crashes into the station. Whilst everyone has the capacity to experience these failings from time to time, our mayor has managed to combine them all into a critical mass.

    Unfortunately, in my opinion it seems that she may be aided and abetted in her destructive behaviour, by a General Manger who may be using her weaknesses to disguise his own failings, and to further his own ends.

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