Letter: $10.8 Million Reasons To Question

Filed in editorletters, Just In by November 14, 2019

To the Editor,

On 7 November Upper Hunter Shire Council’s General Manager made several comments on scone.com.au in response to my letter of 23 October. 

The response from the General Manager seemed to be like saying, don’t you worry about that, it’s only $10.8 million, just a trifle and nothing to worry about, now off you go!

I have since written to him personally to address and clarify the several matters at issue, below is a snapshot of what other ratepayers should know:

The Invitation

I was never actually a member of the Council’s Airport Management Committee, but I did sit in on two or three meetings about four years ago. Not being a committee member, why would I have been especially invited to attend committee meetings, as the General Manager claimed. At that time, Council emailed me the upcoming meeting agenda, as I’d requested, so I could keep abreast of the issues under discussion at the time. The last agenda I received though, was in June 2015 I believe. It’s surely a bit more than a stretch to claim I was invited to these meetings.

This Committee used to be called the Scone Airport Users’ Group, and is meant to be a consultative committee, providing two-way communication between Council and the various airport stakeholders. But when I sat in on a couple of the committee’s meetings as a visitor, I found the staff involved to be dictatorial, arrogant and not at all consultative. So, I chose not to waste any more of my time attending them.

The Main Issue – Will the shortfall come from other services?

Council plans to borrow $10.75million for this project.  If it does, it will have to come up with $600,000 each year for the next thirty years, to make the loan repayments. If their overly optimistic marketing and financial assumptions prove to be wrong, and the project doesn’t earn what Council says it will, ratepayers can well expect to be slugged with a massive rate increase to enable Council to meet those loan repayments.

The General Manager claims Council is in a “strong and solid financial position.” So, if the Airport Project proves unable to at least break even, does the Council plan on dipping into the rates money from the General Fund so it can to make the $600,000 pa loan repayments? But the General Fund is meant to fund Council’s adopted Annual Operating Budget, for the repair and improvement of the Shire’s roads, bridges, parks, gardens, waste management facilities, and to meet community services, environmental planning and Council administration expenses.

So, if they used the General Fund to prop up the Airport Project, would that mean that there’d be less money for our roads, bridges and all the basic things we need and so would those budgets have to be cut back even further?

I support the need for an upgrade to the airport’s runway and for the construction of an Aviation Museum. But Council’s project report lacks even the basics of a normal business plan and is wildly optimistic in its market assumptions and financial projections. They haven’t produced a marketing plan and are unable to justify their claim that 1,000 people will visit the museum each and every week for instance.  Where will these people come from?  Council also hasn’t factored in the probability that sometimes they will have to cancel an airshow due to poor weather.  What will that do to their cash flow projections? The project report Council sent to the Office of Local Government with their application to borrow the $10.75 million is based on best case scenarios and leaves no room for anything to go wrong. No commercial business would act this way.

Council Clutching at Straws

Yes, I did make a submission to Council on its Draft Airport Master Plan – but that was four years ago in 2015!  Talk about Council clutching at straws!  That was years before Council had even thought about including in its Master Plan an $8 million “Warbird Attraction”, or its $4.1 million plan to build large aircraft hangar buildings for leasing.  Not only were these major components of the current Airport Plan not included in the 2015 Draft Plan, there were also no financial or marketing projections.  To suggest that, prior to the Project Information Session Council held seven weeks ago, I had any involvement in, or was even aware of, the development of this current project, is completely untrue, mischievous and unprofessional ….  And is just another instance of how Council is using “spin” to mislead ratepayers and avoid public scrutiny of the project.

The fact remains, that prior to the Council’s recent Information Session – which I attended – Council had made no attempt in the past four years to talk with the various airport business operators and property owners about any matters discussed at its Airport Management Committee meetings.

Next Steps: We need a second opinion

We need an independent business analysis that considers a range of possible scenarios – good and bad.  Why wouldn’t Council want a second opinion before borrowing so much money?  Why aren’t they listening to the concerns of residents? And when a financial or marketing flaw is pointed out to them, why do they just ignore it?

A rational approach would be a November Council meeting to:

  1. Have the project justification and the marketing and financial assumptions underlying all aspects of the Scone Airport and Aviation Museum Project Plan reviewed by an external, completely independent accounting firm with experience in aviation developments;
  2. Re-consider the project scope with a view to reducing the project risks, as well as the level of debt funding required and the ongoing maintenance costs;
  3. Not proceed to any construction contracts until:
  4. the review has been completed and any issues it raises have been adequately and publicly addressed, and
  5. comprehensive marketing and business plans have been developed for the project’s final form – which must demonstrate an economic and social benefit to the Upper Hunter Community.

Sincerely,

Geoff Pinfold

Geoff Pinfold is a resident, ratepayer, previous Council employee in charge of the airport, owns hangers at the airport and owns a light planes.

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