Open Letter: Submission to Council’s Plans

Filed in editorletters, Just In by June 2, 2020

Scone resident, Daryl Dutton, has shared his submission to Council for their Draft Operational Plan and Draft Delivery Program 2017/2018 – 2020/2021. The Plan was on display until last Thursday and has now closed. Council voted not advertise the plan. The letter is addressed to Steve McDonald, general manager of the Upper Hunter Shire Council.

Dear Steve,

I make this submission in response to the Council’s Draft DP&OP 17/18- 20/21, currently on exhibition.

1. Balanced Budget.

I would commend the Council for exhibiting a balanced budget in the proposed 20/21 Operational Plan, if only it were true.

The Budget includes the disguised operational losses for the Scone Saleyards of $404,618 for 20/21, contained in transfers from Restricted Assets with negative balances or offset inappropriately using unspent loan funds. These losses are in addition to the Operational Losses in 18/19 of $474,184, operational losses in 19/20 of $147, 296, with predicted further losses in 21/22 of $228,807, further losses of $177,299 in 22/23 and $107,524 in 23/24. The cumulative losses reach a staggering $1.54 million LOSS, totally unfunded and disguised within the budget. This does not comply to financial reporting or public disclosure requirements, in my view.

Council MUST recognise these losses, NOT use borrowed funds for Capital on Operational losses. This is bad financial Management and Reporting and demonstrates an unsustainable financial position, not a balanced budget as portrayed.

2. Loan Repayments

The General Fund Debt Coverage Ratio is currently very close to the Office of Local Government benchmark of 2.0x, being 2.55x, down from over 8.0x a few years ago. When the additional $5.0 million loan approved by Council, but not budgeted is included, that benchmark may well have been exceeded. With additional loans of $10million for Airport, $3.5 million for Campbell’s Corner I am very concerned Council has totally saddled the General Fund with debt, with no further opportunity to respond to community needs for many years.

This again, in my view is poor financial management.

3. Activity Budgets 20/21

Real Estate/ Commercial Properties/ Campbell’s Corner Building.

Campbell’s Corner was purchased by the Upper Hunter Shire Council for $3million in January this year.

The current year’s 19/20 Revised Budget Revenue for the Campbell’s Corner Building (predominantly) is set down as $445,182, yet the Year to Date to April, is only $185,139 with two months to go. There is no way this figure is correct and disturbingly distorts the real revenue position year for year end.

The predicted Revenue for 20/21 of $462,475 is just as unlikely in current markets, with further “growth” predictions to $498,035 in 23/24 grossly optimistic and very unlikely.

Sound familiar to the Airport and Saleyards Revenue predictions??

Very disturbingly, these Revenue Predictions are very significantly different to the “Financial Implications” document included in the Capital Expenditure Review document (June 2019) used by Council to proceed to purchase Campbell’s Corner Building. This documents states that the current TOTAL Revenue for a full year is actually only $211,563. The revenue predictions of $352,600 for Campbell’s Corner Building is therefore grossly exaggerated, in my view.

Who in their right mind would predict 1.7 times the current revenue for next year, for retail rentals in Scone, given all the known circumstances of other retail closures, empty shops, covid-19, bypass implications and most recently, the Target announcement?

Councillors and Managers, if you want to be Retail Property Entrepreneurs, you should RESIGN your roles in Local Government and risk your own money. You are not entitled to use public funds to satisfy your own ego’s.

Councillors, you have been sold another complete dud of a deal!

The Secret Decision to purchase the Campbell’s Corner building was made in breach of the Local Government Act/ Regulations for failing to disclose the decision to the public, as previously advised. (Related story: What Has Council Purchased Confidentially?)

The attempt by the Mayor Clr Bedggood, Deputy Mayor Clr Collison and Clr Campbell to Secretly Rescind the prior secret decision, so that Council would NOT purchase the building FAILED when Clrs Fisher and Brown jumped ship to the other side. This, in my view was also in breach of the meeting code, for failing to publicly report the details of the lost attempt. Further, the Council also breached the Capital Expenditure Regulations in denying the community the right to be consulted on such Capital Expenditures, in my view. The GM’s public statements, that the purchase was included in the 19/20 DPOP, is misleading in my opinion because that inclusion does not comply with the comprehensive mandatory requirements for public consultation in such Capital Expenditures.

REMEMBER the secret $740,000 sale of the former Administration Centre?

The reason given by the Mayor and GM at the time was that this building was an “under-performing asset”, which meant it had too much space that was not being utilised.

Remember the secret deal that Council rented half that building back as the current library, paying twice as much rent for half the area than it was able to achieve by investing all of the sale price, giving the owner 10% return on investment. THAT was a BAD decision, but this current secret decision to spend $3 million to buy and another $0.5 million to do urgent repairs is FAR WORSE.

Has any Councillor or Manager actually read the TECHNICAL DUE DILIGENCE report in the April meeting Business paper, undertaken by consultants in July 2019??

This Report clearly states the Campbell’s Corner Building IS NOT FIT FOR PURPOSE, in my opinion.

The Electrical Services are SUBSTANDARD and emergency lighting is NOT COMPLIANT.

The Plumbing / Amenities are SUBSTANDARD.

The Air Conditioning, where provided is obsolete, mechanical services are NOT compliant.

The FIRE PROTECTION is NOT COMPLIANT, “numerous non-compliances have been identified in the Certification Assessments by Wormald…”, Numerous Non- Compliances with the Sprinkler System, including the “failed jacking pump”. The latest sprinkler test in March 2019 was a FAILED test.

The Building Fabric Report shows significant defects including structural members and the fact that a complete new roof is required.

The BUILDING DOES NOT COMPLY WITH THE BUILDING CODE OF AUSTRALIA. This is particularly concerning given that the fire protection is inadequate, one exit at basement level where two are required. Insufficient HOSE REEL to provide coverage within the building. Exit paths exceed travel distance limits and pathways are too narrow. Staircases and Ballustrades are NOT COMPLIANT, etc.

How is it, that this Building was purchased with these KNOWN DEFECTS?

How is it that this Building IS STILL being used for retail purposes? Why hasn’t it been SHUT DOWN, like the Council shut down Stone & Co Antique shop in Murrurundi—is that a bad double standard??

Has the Council informed its INSURANCE Company that its new purchase is NON COMPLIANT?

Has the Council informed its tenants that the building Fire Services are non-compliant, particularly given the 24hour access to the Building?

The Capital Expenditure Report apparently prepared in July 2019 but NOT publicly disclosed, demonstrates further, how bad the deal is for Ratepayers and Residents of this Shire. The justification for the decision to purchase the building to incorporate the Scone Library was apparently because the current library has “ no capacity to expand or offer new services” …which is totally the reason the current library was sold, because it had unutilised space—what a joke!!

The Capital Expenditure Report and the consultants DUE DILIGENCE REPORT both identify that a FURTHER $1.8 million is REQUIRED to rectify the building, exclusive of the further $1.5 million to incorporate the new library, that is a total outlay of $6.3 million!

The Council has borrowed $3.5 million thus far, including $400,000 to the building rectification in 20/21 Capital Expenditure Report (CER) that has been wrongly described as “Proposed Acquisition Building”in the budget documents, unless this is another disguise for yet another secret deal. The loan repayments for the initial $3.5 million are $236,400, which is significantly more than the current total revenue of $211,563, before the further costs of outgoings such as insurance, rates, repairs, identified as $120,000 per year in the CER report.

THIS IS A SERIOUS LOSS-MAKING DEAL from the very start, with very significant further essential rectification expenditures required and STILL NO LIBRARY. For the next number of years, the WORST CASE APPLIES, where Council is forced to pay rental on the current library building AND pay for the losses on the new building. Council is seeking a further $1.5 million grant from the State Government for the library development, however there is no promised grant, particularly considering the previous grant given to Council for the current library development that was “gifted” to the new owner— WHAT A DEBACLE!

SCONE SALEYARDS

Scone’s renovated saleyards were opened in March.

I have discussed above the totally inappropriate disguise of the ongoing operational losses of the Scone Saleyards, bringing cumulative losses to $1.347 million in only three years since the over-capitalisation works and very little prospect of improvement in the current economic, post drought environment. No amount of spin on predicted “growth” can counter the real experience of continuous years of operational losses. The predicted revenue for 20/21 is predicated on a 25 percent increase in costs to local farms and cattle producers to sell their cattle next year, on top of the 40 percent increases over the last two years. The fees are already 64 percent higher than Singleton and 15 percent higher than Gunnedah.

The predicted cattle sales for this current year will NOT be achieved and the future predictions are highly inflated and unlikely to be achieved, despite these predictions also resulting in operational losses. The accumulated losses in excess of $1.5 million over the budget period are NOT funded and are inappropriately disguised in transfers from negative restricted “assets”.

Council MUST come clean and transparently report its operational losses to the community, in my opinion.

The Scone Saleyards are again, a serious loss-making deal for residents and ratepayers, where the interest and principle bill, with operation and maintenance costs exceed the total revenue from user charges, despite the increased fees. No amount of spin can disguise these losses nor can overstated promises of “growth” be achieved. The Scone Saleyards were traditionally within the top 10 of the State, now they are well outside, demonstrating a loss of market share.

SCONE GOLF COURSE

I note the transfer of the Scone Golf Course from the Recreation component of the budget to the Economic Affairs section, for one year only.

Duncan Yuille teeing off on the 8th hole at Scone Golf Course, when it was still under construction.

The estimated cost to the ratepayer in 20/21 to maintain the Golf Course is $312,000, but the current cost to date this year is $363,444 with two months to go. The Scone Golf Course, prior to its over-capitalisation did not cost Council or ratepayers anything, zero cost, another debacle.

The estimated income from the Golf Course in 20/21 is set down as $140,438, which is significantly higher than the current year to date income of $78,866 (end of April) with all member Golf Club dues paid for this year. The revised budget figure for 19/20 of $133,500 is a large overstatement of reality and a poor basis for the 20/21 estimate.

The current year to date (April) cost to maintain the Scone Golf Course is $363,444 with two months to go. The figure of $203,500 at 0458 in the “revised” budget for 19/20 is a gross erroneous understatement of the full year cost which is already $363,444. The proposed 20/21 Budget operational expense is therefore again, grossly underestimated if current maintenance is to continue.

Why is revenue overstated and expenses understated??

Why is there only a budget allocation for the 20/21 Financial Year? What is going to happen to the Scone Golf Course post June, 2021?

TRANSPORT AND COMMUNICATION

SCONE AIRPORT

An artist’s impression inside the Warbird Hanger, of the proposed Scone airport. There has since been a redesign as tenders exceeded budget.

I have made significant submissions to Council in regard to the proposed Aviation Museum, War Birds Event, Airside Infrastructure and Hanger Developments which I will not repeat here, except to restate my ongoing objection to Council continuing to expend funds and calling fresh tenders, prior to the completion of the EXTERNAL REVIEW. This decision makes a mockery of the REVIEW PROCESS which I now fear will be a sham of a process. This is, in my view, negligence for which the Council should be held accountable. (Related articles: Scone Airport Development.)

MAIN ROAD 358/ REGIONAL ROADS

I note the report to the May Council Meeting, requesting authority for a new $5 million loan, currently unbudgeted, apparently to undertake rectification works on MR358. I can see no reference to the new $5 million loan in the budget documents nor can I find the Capital or Operational Expenditure for the proposed works in 20/21. I can find the current revised expenditure of $985,600 which is NOT identified as rectification works, as distinct from any original grant expenditure.

How did it happen that a Road Grant specifically for a B-Double Standard Road connecting Merriwa to Willow Tree was expended and yet the road actually constructed DID NOT meet B-Double Standard and obviously considerable Council Funds are now required to RECTIFY the problem??

How was it, that a considerable section of Road, constructed to Heavy Vehicle specifications FAILED following a single rain event in January, now has a 5 tonne Load Limit?? Was the specification in error, the materials not fit for purpose or the construction methodology or supervision inadequate??

Why would such events occur that require Council to borrow significantly for a Main Road project, under Council responsibility? Who is accountable?

I note the Geotech Report is not yet complete (since January) and therefore the real cost of rectification is unknown, it could be significantly more, Council is at its loan limitations.

How has Council dealt with this situation, who is responsible, how will Council ensure similar events do not happen again?? An external Review is required here too!

I look forward to your response,

Regards,

Daryl Dutton

Daryl Dutton is a resident and ratepayer of Scone, he is also a former General Manager of the Upper Hunter Shire Council.

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