In the course of a review of council’s financial situation, Council has determined that its budgetary position has deteriorated since the March quarter result in 2020 when a deficit of $41million was reported. Following a rigorous review of the Council’s budget this deficit has now increased to $89million.
In addition, some expenditure over the past 12-18 months may have resulted in restricted funds being used contrary to the provisions of the Local Government Act 1993.
Council faces an immediate and serious liquidity issue.
Appointment of interim administrator
The Minister for Local Government, the Hon Shelley Hancock MP, has suspended Council for a period of three months from 30 October 2020.
Dick Persson AM has been appointed as interim administrator. Please find below FAQs on what this interim administration period means for Council and the community.
Business Recovery Plan
Council’s focus continues to be on reducing expenditure, arranging financing, raising additional income, monitoring incoming cash flow, performing cashflow forecasts and ensuring a more sustainable cash preservation. $7 million of spending will be reallocated after the ongoing financial review showed these capital items should have been funded from Waste, Water and Sewer Funds rather than the General Fund to better reflect the use of those items. Council has identified over $30M worth of property assets that may be considered for sale within the next twelve months. Any sale of assets would need to be a resolution of Council. Council is also working with its financiers to organise additional financial arrangements. Council’s Business Recovery Plan is a multi faceted approach to address the current liquidity issues and introduce structural changes aimed at ensuring the longer term financial sustainability of Council operations.
- Sale of Assets will help Council's bottom line - Council Meeting Highlights 30 November 2020 - see also below FAQs on property asset sales.
- Administrator puts rate rise on the table - Media release 26 November 2020
- Council secures $50M loan - Media statement 12 November 2020
- Stage two of Council's Business Recovery Plan underway - Council Meeting Highlights - 9 November 2020
- Acting CEO appointment confirmed at Extraordinary Meeting - 3 November 2020
- Appointment of an interim administrator - 30 October 2020
- Council forges ahead with financial recovery - Council Meeting Highlights - 26 October 2020
- Extraordinary Meeting - Council resolution - Wednesday 21 October
- Council acknowledges State Government assistance to pay employees - media statement - 21 October 2020
- Council seeks financial assistance to pay employees - media release - 20 October 2020
- Council commits to action plan towards financial recovery - Council Meeting Highlights - 19 October 2020
- Council seeks urgent answers from the Minister for Local Government and Office of Local Government - media release 17 October 2020
- Council stays focussed on a Recovery Action Plan - media release 13 October 2020
- Update on review of Council's budget - media release issued 8 October 2020
- Review of Council's budget - media release - issued 6 October 2020
Interim administrator of Council
An interim administrator has been appointed by the State Government under section 438M of the Local Government Act 1993 effective from 30 October 2020 for a period of three months.
The Minister for Local Government, Shelly Hancock has issued a suspension order, suspending all thirteen Councillors, including the Mayor, and appointed an independent administrator as the decision-making body of Council.
The administration period has been set by the Minister for three months. The term of administration may be extended if the duration of the council suspension is extended. The interim administrator will be required to prepare a final written report no fewer than 14 days before the end of the suspension period. Each Councillor and the Chief Executive Officer will be advised by the Minister when the suspension period has ended.
The interim administrator constitutes the Council and, must perform all the functions, powers and duties of the Council, which must be treated as if they were performed by the Council. The interim administrator will effectively act as the Mayor and the Councillors.
In addition, the interim administrator is responsible for oversight of the implementation of the suspension order and any performance improvement order and reporting on progress to the Minister for Local Government or the Chief Executive, Division of Local Government at the identified reporting milestones.
Other functions may be specified in the order by which the interim administrator is appointed.
Dick Persson AM. Mr Persson is a former senior NSW and Queensland public servant and local government administrator including as Administrator of Northern Beaches Council in 2016-17.
The interim administrator is expected to commit the necessary time to effectively:
- conduct the relevant council meetings
- undertake the civic and ceremonial functions of the governing body
- undertake the administrative functions of the role, such as oversight of the Chief Executive Officer and implementation of any performance improvement orders.
The interim administrator has confirmed he will be taking on the role in a full time capacity.
The interim administrator’s remuneration is set out in the suspension order. The level of remuneration is generally based on the current level of Councillor and Mayoral fees for Central Coast Council as set by the Local Government Remuneration Tribunal. All remuneration and allowances are paid by Central Coast Council.
The interim administrator will be provided with the office space and other support that was previously provided to the Mayor of the Central Coast.
The interim administrator constitutes the Council and must perform all the functions, powers and duties of the Council, which must be treated as if they were performed by the Council. The interim administrator will effectively act as the Mayor and the Councillors. The interim administrator will work closely with the Chief Executive Officer and make all decisions that an elected Council would do. The interim administrator will consider all staff reports presented to Council and make decisions. The interim administrator will also be able to bring matters to Council via Administrator Minutes.
The interim administrator is here for residents to contact and engage with. The role acts as the Council, and undertakes the responsibilities of the Mayor and Councillors representing the interests of residents and our communities. More information on contacting and engaging with Administrators will be made available in the coming days.
In the meantime, you can continue to contact us or report an issue in the usual way:
Call our Customer Service Centre on 1300 463 954 (24 hours)
- Email us at email@example.com
- Submit an online customer request through our Customer Service Centre via our website [link]
- Write to us at PO Box 20, Wyong NSW 2259 or PO Box 21, Gosford NSW 2250
- Visit us at 2 Hely Street, Wyong or 49 Mann Street Gosford.
Yes. Engaging our community on a range of Council plans, projects and initiatives is a core responsibly of local government and this ongoing dialogue with our community will continue.
If a decision on a plan, project or initiative is to be made by the interim administrator in lieu of Councillors, the results and recommendations from any community engagement will be included in Council’s Business Papers for consideration at Council meetings, as per the usual process.
For more information about engagement at Central Coast Council, please visit yourvoiceourcoast.com
Yes. Under Council’s Code of Meeting Practice, all Council meetings are open to the public and are live streamed and webcast. Community Forums will still operate as normal, with members of the public able to register to speak on items on Council’s published agenda. Due to the Public Health Orders currently in place, Council Meetings are conducted remotely.
The suspension does not include any staff members of Council. The day to day running of Council and delivery of essential services will continue.
During the suspension period, Councillors are suspended from office and as such are not entitled to exercise the functions of civic office or receive any fee or other remuneration.
Councillors will be required to hand over any Council equipment or resources they have for the period of the suspension.
Councillors who are suspended have the same rights as any other member of the public.
On the expiry of the Ministerial suspension order, the Councillors resume office and the interim administrator leaves the office position unless:
- The Minister has fixed the date on which a general election for the Council is to be held and has published notice of that date in the Government Gazette
- A bill to dismiss the Council has been introduced into Parliament.
There have been many questions asked about how the financial situation evolved. We are still investigating and also conducting a forensic audit.
Amalgamation costs are part of this story.
Amalgamation has been a complex process with challenges, including the consolidation of Council systems and processes.
We know from other local councils that amalgamation can take up to 10 years for completion.
At present we estimate the real costs of amalgamation will be in the order of $100million. Council received $20million at the time of merger to assist with amalgamation this included $10million to consolidate systems and process etc, and $10million for infrastructure ($9million for council $1million for the community)
Is the State Government recognising the cost of the merger was much more than what Council was given funding for?
Council cannot speak on behalf of the State Government but can say this is one of the items Council is investigating; what impact the amalgamation has had and the ongoing financial impacts which we estimate could be in excess of $100million.
How does Central Coast Council compare with budgets of other same sized amalgamated Councils?
It is difficult to compare directly with another council when taking into account differences in a local government area size, population, number of ratepayers and types of service delivered; such as Central Coast Council is also a water utility and other councils are not.
Geographically, the Central Coast Local Government Area is larger than Canberra and has the sixth highest population in NSW. Council’s budget is amongst the highest budgets in local government in Australia.
COVID-19 costs are also part of this story.
The impacts of COVID-19 is one of the items Council is investigating. Both the timing of rate collections and the impact of reduced income has had a material impact on working capital in the order of $50million.
As the largest employer on the Central Coast, Council needed to ensure the local economy stimulus continued, by:
- Ensuring all fulltime equivalent staff were kept on in employment – 92% of the Council workforce are local residents and high contributors to the local economy
- Encouraging staff, where possible, to take leave but with the closure of buildings and facilities, staff were also required to work from home which meant a cost to Council in moving the staff from an office environment to a home-based environment - this factor is still an ongoing requirement as we come out of COVID
- Providing a business relief program which meant rents on Council properties were deferred
- Delivering a $242million Capital Works Program, the highest ever; has led to a reduction of income in the order of $50million.
Central Coast Council cannot speak for other councils, but it is likely that other councils will also have been impacted financially by COVID-19 and natural disasters in NSW, also experienced here on the Central Coast.
Can you explain the whole process? How could we suddenly have ended up in this situation?
An external consultant, Grant Thornton was commissioned to carry out a review of Council’s finances and systems this year due to COVID -19 impacts, including potential cashflow issues in relation to reduced revenue streams. The result of that review identified there were discrepancies.
On 2 September 2020, the Chief Executive Officer engaged a further external provider, DMB Consulting Pty Ltd, for the purpose of advising further on the discrepancy issues raised from the Grant Thornton review surrounding the use of Council reserves (internal restrictions) and specifically whether the reserves have been utilised in accordance with their approved purposes.
On 23 September 2020, DMB Consulting Pty Ltd met with Council’s Executive Leadership Team and the acting Chief Executive Officer to present preliminary findings. The provider was requested to provide an Interim report as soon as possible. As a preliminary measure, Council’s Executive Leadership ceased all but essential recruitment and removed delegations from staff with regards to tenders and contracts as a prudent action.
On 3 October 2020, DMB Consulting Pty Ltd submitted a draft interim report to the Chief Executive Officer. This draft report (dated 3 October 2020) highlighted some expenditure over the past 12-18 months may have resulted in restricted funds being used contrary to the provisions of the Local Government Act 1993.
Previous audits including the external audit of council finances for 2018/19 by the NSW Audit Office failed to pick up any discrepancies in the finances. A PWC report in 2019 in fact indicated that council had “a financially prudent plan” in place. It was not until Grant Thornton was commissioned to undertake a review of Council’s finances and systems this year by the CEO due to cashflow issues and COVID -19 impacts that the discrepancies were picked up.
For more information, see Item 3.8 Budget Review Process, Council Meeting 12 October 2020.
Council adopted the 100 Day Recovery Action Plan in the Council Meeting on 19 October.
Immediate focus of the Plan is reduction in rate of Council expenditure to address the serious cashflow issues of Council. Long term, the Plan is about financial stability of Council operations to deliver effective and efficient services to the community.
All decisions taken during this period of rapid change ensure that essential services are maintained and impact on the Central Coast community is minimised.
There are a number of actions in the plan including:
- Identifying savings in the Capital Works and Operational Services programs
- Reduction in non-essential services
- Workforce reduction
- Asset review
- Fully costed restructure of the business
- Identifying future revenue opportunities
- Investigation of loans and borrowing options
- More aggressive debt repayment programs
What have been the first few steps of the 100 Day Recovery Action Plan?
The following actions were implemented immediately as part of the 100 Day Recovery Action Plan:
- Immediate stop on spending
- Overtime restricted
- Financial delegation changes
- Portion of the contingent workforce released
- Undergraduate program for 2021 paused
- New apprentice roles not yet commenced are not proceeding
- CAPEX savings of around $23M identified
- Review of operational budget to identify further savings
- Payment terms amendments and all suppliers notified
Council is still seeking support from the State Government and continues regular communication including to the Minister for Local Government and the Office of Local Government.
The draft interim report from the external provider, DMB Consulting Pty Ltd highlighted that some expenditure over the last 12-18 months may have resulted in restricted funds being used contrary to the provisions of the Local Government Act 1993. Despite having concerns as to the accuracy of the detail in this draft interim report, noting that the draft interim report itself expressed concerns about the reliability of the financial information provided to DMB Consulting; there was enough substance for Councillors and the Office of Local Government to be notified.
Council conducts annual financial audits as required by the Local Government Act and these are conducted by the NSW Auditor-General.
Council has also finalised the scope for a forensic financial audit for Council with an appointment of a provider imminent.
Yes. Natalia Cowley commences in the role of Chief Financial Officer on 27 October 2020.
Does Council own land like any other person or private entity?
Central Coast Council is responsible for the care, control and management of land and facilities for a variety of purposes relevant to the current and future needs of the community it serves. Much of this land Council manages on behalf of the NSW Government (Crown Lands) for the benefit of the Central Coast community. The majority of Council’s land holdings are classified as community land, including our beaches, parks and reserves. Council is also responsible for operational classified land which includes its administration buildings, depots, and commercial holdings. How Council land is acquired and classified is undertaken pursuant to the Local Government Act 1993 and other relevant land legislation.
How big is Council’s land portfolio?
Central Coast Council manages approximately 7,000 parcels of land. It should be noted though, that any one park or reserve could be made up of several individual land parcels.
How much of this land can be sold?
Of the land that Council manages, only a third is classified operational and could therefore be considered for sale. However, it must be stressed that Council is only considering selling 1% of operational land holdings.
Why is Council looking to sell its land now?
Under Council’s adopted 100 Day Recovery Plan there is an action to review Council’s land holdings and consider the sale of non-core assets no longer required. This is the focus of this review, as these parcels of land have previously been considered for disposal, being either duplications from the amalgamation of the former Gosford and Wyong Councils, or surplus to Council’s current and future requirements. The disposal process is now being prioritised to assist Council’s financial position, as part of the 100 Day Recovery Plan.
What would be the process for Council to sell any of its land?
In undertaking this review of surplus land, Central Coast Council will take into consideration the social, environmental and operational purposes for which Council held this land and which land needs to be retained for the exercise of the functions of Council. Any land assessed as being surplus to Council’s needs would then require a Council resolution to approve the sale. Once a resolution has been made, Council would then go through a competitive sales process at an open market tender to achieve the best possible return on any transaction.
Why is Council selling assets before the Administrator’s report into what happened to Council finances?
The review and sale of assets was a key recommendation of the Business Recovery Plan unanimously adopted by the elected Council on 19 October 2020.
Why will there be no community consultation on the sale of these assets?
The properties being considered for sale will be discussed in an open session of Council. This transparency allows the community to review, considered and comment on any of the properties prior to a resolution being made. Any member of the community can speak to this item should they wish to provide feedback to the Administrator. It should also be noted, that Council has undertaken the review of surplus properties in accordance with the adopted Land Transaction Policy. This Policy requires that when land is identified for disposal then the Community Strategic Plan (CSP) forms a key part of the decision making process. The Policy does not require public consultation and it is not been practice in past property sales. This is true of the sale of 4&10 Warren Road which was approved for sale by the elected Council, without going on public exhibition.
With the proposed sale of all lands associated with the Cultural Precinct proposal does this mean that Council has now abandoned any plans for a Regional Performing Arts Centre in Gosford?
On 25 September 2019 Council resolved to withdraw from any further work on the Gosford Cultural Precinct and proceed with a stand-alone Regional Library. Council is reviewing plans for a Regional Performing Arts Centre (RPACC). The sale of the lands in the Gosford CBD does not mean that the RPACC will not proceed, but rather that the RPACC will not be developed on any of the land previously identified for the Cultural Precinct. Other locations will now need to be considered.
Is the Regional Library going ahead?
Yes the Regional Library is going ahead. No properties identified in the land sale are associated with that project. More information on the Regional Library can be found here - https://www.centralcoast.nsw.gov.au/council/news/gosford-regional-library-design-revealed
Are you selling the Conservatorium site that is next door to the Gosford Administration Building?
Council is proposing to sell land that contains demountable rooms which the Conservatorium currently lease from Council.
4 and 10 Warren Road Warnervale is the land supposed to be sold for the Chinese Theme Park. As that sale fell through some time ago why has it taken so long to sell the land?
4 and 10 Warren Road was part of a previous Biodiversity offset program commenced by the former Wyong Council. The Biodiversity program was commenced to enable the progress of all the employment lands south of the Sparks Road including the Central Coast Aircraft Landing area, the Warnervale education and employment zone and the land at 4 and 10 Warren Road. This Biodiversity program was nearing completion and was based on a land area for the previously mentioned sites and the Central Coast General Aviation Hub. In November 2017 Council resolved to immediately suspend all works and expenditure on the Central Coast Airport (renamed to the Central Coast Aircraft landing area) which resulted in the termination of the 3 year Biodiversity study as no alternate employment opportunities were adopted by Council to support this study. In 2018 the NSW Biodiversity conservation act came into effect meaning that the land at 4 and 10 Warren Road now requires a new Biodiversity study to value the offsets required to sell the land in accordance with Council adopted land transaction policy and both former land transaction policies. The new Biodiversity study has commenced for 4 and 10 Warren Road and upon conclusion will inform the independent valuation for the site allowing the land to be sold in accordance with Councils Land transaction policy.
What does the sale of the Gosford Administration Building mean for Council staff and the community? Will Council have a presence in Gosford after this sale?
The Gosford Regional Library is proceeding and it has always been part of the plans to relocate Council’s Customer Service to the new Library. So the community will be able to access Council services at the Regional Library when it is complete. In relation to staff, the sale has been considered due to the 95% reduction in occupancy rates from pre-COVID levels attributed to remote and flexible working arrangements. The yet to be adopted draft Accommodation Strategy, also considered the sale of the Gosford Administration building due to these reduced occupancy rates as well as the forecast that post-COVID occupancy may be reduced to 50% of pre-COVID levels.
Is the Gosford Administration Building heritage listed? Will it need to be protected?
The Gosford Administration Building has a local heritage listing. The building does not need to be protected.
What is the process for selling the sites? Does each sale have to come back to Council to be endorsed?
Once the properties have been resolved by Council to sell, the Chief Executive Officer (CEO) is authorised to sell the sites in accordance with the Land Transaction Policy adopted by Council. The properties will either require an independent valuation or to be sold for not less than Council previously paid for the sites. The properties will be listed with agents and competitively marketed for the highest market price. The sales do not need to come back to Council to be endorsed as long as they sell for more than the independent valuation or sell for more than Council previously paid for the sites.
How much does Council expect to get from these asset sales?
These properties have been identified as they are likely to attract interest and a positive return for Council. While it is hard to estimate at this time, Council will only be selling for market value and with that expectation it is expected to attract in excess of $50M for Council.
What happens if no one wants to buy some or all the sites and we waste more money trying to sell them?
The majority of the costs associated with the sale of commercial land is payable upon settlement, so the risk for additional costs in this process is negligible. Council is already receiving strong inquiry from the private sector and is confident of a positive outcome with a lot of these sites put forward for sale.
Some of the assets have tenants in them, including a youth and an education centre. What will happen to those tenants when the assets are sold?
The parties who are impacted from this sale program will either be relocated to alternate premises or it will be a condition of sale for the nominated sites that they be retained and incorporated in any future proposals for the sites. Council also resolved at the 30 November Council meeting not to proceed with the sale of assets at 219B and 219C Albany Street North Gosford, which currently house a community based long day care centre, a dementia centre and the Rumbalara Hostel. The Administrator promised to also review the rental agreement with the leasee.
Why is Council not proceeding with the sale of three lots at 23-35 Ashton Avenue?
The Administrator resolved at the 30 November 2020 not to proceed with the sale of this land so that it can be considered for affordable housing for the Central Coast.