Budget for the times

The 400 pages of Council’s draft Delivery Program, Operational Plan, Fees and Charges, and Long Term Financial Plan were endorsed for public exhibition at the May Meeting without comment.

Mayor Neil Reilly says the reason is simple.

“It is because we have been living this budget for the past 18 months.

“We have had multiple briefings, input from our appointed financial advisor, our auditors and the Office of Local Government, and the result is pretty much a collaborative result.

“There are no surprises in it. We’ve looked at it so closely for a long time and been very open with the public about what we are dealing with.”

While the Audit Office did not qualify the recently signed off 2020/1 accounts with a going concern qualification – meaning it does not have the funds to pay its debts as and when they fall due – it came close, and the key priority of all of the financial plans is to ensure Council remains a going concern.

The draft budget for 2023/4 shows how crucial the sale of Council’s assets are, with a deficit of $11.9 million for the year unless money comes in from Council’s divestment strategy.

The pared down budget for the coming year will see all expenditure for capital works coming from grants or dedicated reserves, and operational efficiencies.

Service reviews are to be conducted into the leisure centre, holiday parks, waste services and Pavilion operations to assess the best way forward.

In total, the forecast gain from sale of Blue Haven Bonaira (if reclassification is approved) and six other parcels is expected to bring in $31.2 million, which would result in a surplus of $19.3 million if they were achieved within the 2023/4 financial year.

The divestments would improve the working capital position by $14.7 million. As at the end of April, Council had negative available cash of $2.5 million.

“Any surplus we arrive at is going to be dependent on property divestments,” says CEO Jane Stroud.

“There are a range of properties at market or progressing to market and the two year cashflow times out those sales.”

The next off the mark will be the Akuna carpark site, which will be going out to market next week.

“Although the sale of key assets such as Blue Haven Bonaira (subject to reclassification of the land) will help restore our immediate liquidity, longer-term we are still running at a deficit, and there is much more work to be done to rectify this,” says Council’s Chief Operating Officer Joe Gaudiosi.

The Bonaira sale would also result in a reduction of current liabilities of around $70 million.

However the Long Term Financial Plan says it will still take until the 2026/27 financial year to achieve a balanced budget with positive unrestricted cash movement in it and future years.

“Our draft Long Term Financial Plan shows that, if we can work through the divestment of key assets, operational improvements and other initiatives as per our Strategic Improvement Plan 2, the structural deficit should continue to improve, with the Long Term Financial Plan showing a positive cash result in 2026-27,” says Mr Gaudiosi.

It will take until the 2032/33 financial year for the cash balance to reach a sustainable level.

Council is continuing talks with its banker TCorp to renegote a $15 million portion of the $45 million that falls due in August this year.

Council has resolved to pay off $30 million before then, as a sign of good faith.

“The way I gauge it is I am sleep more nights than I used to, because we are making progress,” says Mayor Reilly.

“We can see where we want to be and how to get there.”

Also on exhibition is the draft of Council’s Community Consultation Plan, which sets out a new vision for how it will consult with the community over various issues.

Ironically, Councillor Karen Renkema-Lang criticised the way the Plan was being put our for public comment.

“It deserves more than a 28 day exhibition,” she said.