The Gordon St Complex
This is the first of four articles looking into the complex figures and finance behind the Coffs Harbour City Council’s (CHCC) proposed Gordon Street Council Chambers/Museum and Art Gallery.
We aim to break this down and present an important issue to you in a way that can be readily digested.
Coffs Harbour City Council (CHCC) voted to go ahead with plans to build a new complex in Gordon Street (possibly looking like the picture below). In typical style the Council agenda Articles explained, to some extent, the sources of the funds. This did not faze our Council and our elected representatives simply accepted Council’s figures. Yet, a closer look reveals many issues once encountered in Port Macquarie Council’s Glass House project may be about to be repeated on us. Mention was made of a cost blow-out; $30 million to over $70 million. Does this sound familiar?
Leaving aside any issues as to the reasons for the proposed council Chamber/Museum/Art Gallery complex any such proposal must have a proper financial base. But the matter is complex and needs to be split into several topics. And these are:
- The initial funds of $30 million and;
- Additional funding of $40 million.
The diagram below shows the initial funding of $30M and lists the possible sources of the funds.
It is possible Council may have foreshadowed the need for funds and included it in the budget estimate Articles. But, if so, there has been no discussion on this even though Council approved the estimates.
Special Variation to Rates
When Your Council Your Community (the “blue book”) to promote the case for a special variation to the rates was published residents were given an assurance the extra funds were not for the purpose of building an entertainment centre. In the book it was stated with some force the increase was for the sole purpose of addressing the accumulated arrears in repairs and maintenance. A figure of $70 million was championed by Council. So, on the surface, funds are not from this source.
So the first $30 million has not come out of rates. (Or has it?) Perhaps our councillors might explain to residents how they proved this to be so. There are many areas still in need of footpaths and guttering. So it defies imagination as to how arrears of $70 million are no longer and funds of $30 M are available.
That is unless you look at the spurious calculations. The Independent Pricing and Rates Tribunal (IPART) accepted Council figures. They approved a permanent increase in the rates and in the first year this amounted to $4M. Now the word permanent is to blame. The increase was to address the arrears in repairs.
In the first year $4m is spent on repairs but, and this is the interesting point, once done they are done. Yet in the second year there is, because of the permanence a fresh $4m to do them again and another $4 m to do more repairs. The figure used for the rate calculation did not revert to the original base figure; it accumulated. And the first $4m does not need to be done again so what happened to this money? Oh dear, it is not a simple calculation as Council made out and by so doing IPART was misled or unable to understand the mistake.
So the question is what happened to the repeat $4m in the second year? Did Council accelerate the repairs program? Or perhaps Council conveniently diverted it to a “slush” fund for the building project?
Now the effect of this mistake is cumulative. By year 3 some $8M is available and in year 4 it rises to $12M. Yet the decision by IPART only requires Council to spend a fresh $4m to be spent on repairs each year.
In simple terms Council were required to spend $16 million and with a deficit of $70M the repairs have not been erased. But take a close look as some $40M was available so where is the additional $24M? And on top of this the repairs of $70M have disappeared. Magic!!
Major financiers would love to have this ability to generate money.
So are we to believe the arrears of $70M are no more and we have initial funding of $30M. This is $100 million inside four years. Or, to put it into a figure each of us can relate to it is $500,000 per week. Every ratepayer puts in $12.50 a week; and that is only the start. When it is said like this it does seem much at all. Why it almost sounds feasible.
It is from this extraordinary position that my second article in this series will examine the next serious issue. At the recent Council meeting it was revealed the cost has blown-out and not one sod has been turned as yet.
The diagram gives you a snapshot of the issues; it is to help you get a big picture of the many issues. It is just to acquaint all with some aspects as yet unexplained by Council.
This is a complex matter and needs to be addressed by a series of articles. This is the first of them and it is offered only to set the agenda. Later on the unsaid issues likely to arise from the sale of Rigby House will be discussed. There is some dead money related to this sale and it is not clear if the $20.5M is gross or net proceeds.
Article three looks at further options related to the sale. There is the confusion likely to arise from a sale with vacant possession. Or will it be to a sale with a lease back arrangement. Bridging finance might well be needed.
In the fourth article the issue of the so called savings from the Transformation to Sustainability (T2S) project will be raised. So put your thinking caps on; there may well be a need for residents to educate our representatives should we wish to avoid the issues that Port Macquarie Council went through.
In Coffs Harbour we seem to be in the same position as Port Macquarie Council was before the costs began to escalate. There is a history we can learn from but will we do this? It’s over to you; it is time to think about it before it is too late.
This series of articles is not about the need for the complex or where to locate it; it is far more basic than that. It is to do with the cost and if Coffs Harbour can afford it as currently proposed.
In simple terms it will be about your back pocket.
Cob worked as a forensic auditor for governments in Australia before moving to the Coffs Coast to retire.