Supplementary Agenda of Ordinary Council Meeting

AMENDED ITEM

Item No: 2.1
Title: Securing Your Future: Consideration of Rate Rise
Department: Corporate Affairs
8 February 2021 Ordinary Council Meeting

Reference: F2020/03181 - D14425719

Author: Natalia Cowley, Director Corporate Affairs and Chief Financial Officer

Executive: Rik Hart, Acting Chief Executive Officer

Report purpose

The purpose of this report is for Council to consider a special variation of 15% to meet the needs identified in the revised Long-Term Financial Plan. In addition, a draft Debt Recovery and Hardship Policy is presented to Council for consideration.

Executive Summary

Council continues to have a serious financial situation.

Council has already commenced a number of measures to manage costs and increase income to address the situation and long-term financial sustainability. These include significant staff reductions ($31M), restrictions on spending ($22M), and the proposed sale of assets ($49M). The spend on infrastructure has also been reduced from $225M to $170M annually. These steps achieve 70% of the $76M annual savings target needed to action the financial recovery.

The remaining 30% ($23M excluding rate peg) will need to come from additional income to pay back the restricted funds unlawfully accessed. This income target can only be achieved with a 15% rate peg. It is for this reason that it is now recommended that Council proceed to apply to IPART for a rate increase of 15% (13% special rate increase and 2% rate peg increase).

Council resolved to consult on a 10% one-off special rate variation staying in the rating base for 7 years and a permanent rate variation of 15% one-off. This consultation was undertaken with most respondents not supporting any rate rise. Of those who did support a rate rise, when presented with the three options, 15% was preferred more than 10%.

It is clear from the community feedback that any decision to increase rates will be unpopular as our community are rightly concerned about this increase.

The primary purpose of the Special Variation application is to deliver financial sustainability by reimbursing the unlawfully accessed restricted funds that have been spent on projects and infrastructure brought forward over the past two years, delivering significant benefits to the community. Council have a legal obligation to reimburse the restricted funds.

Council’s revised Long-Term Financial Plan shows that with a 15% variation, Council will be able to repay approximately $100M of the externally restricted funds within 10 years, with the remainder being reimbursed from asset sales and internal restriction write-offs.

Council’s revised Long-Term Financial Plan shows that with a one-off 10% variation remaining permanently in the rate base for seven years, Council will be unable to repay the externally restricted funds and will return to a deficit budget in 2026-27.

There is a very real risk that should Council not obtain a 15% increase it will impact the status of the bank loans with a potential early call on these loans.

A rate increase is the final option being considered as part of Council’s financial recovery. Council has obtained loans, reduced spending and cut staff. Without a rate rise of 15% Council may find itself again in a dire financial situation.

It is recommended that Council resolve to apply to IPART for a 15% one off permanent special variation increase.

Corporate Affairs Recommendation

1 That Council resolve to apply to IPART for a 15% one off permanent special rate increase.

2 That Council adopt the revised Long-Term Financial Plan (General Fund) for the purpose of public exhibition.

3 That Council adopt the draft Debt Recovery and Hardship Policy for the purpose of public exhibition.

4 That a further report be provided following public exhibition of Long-Term Financial Plan and draft Debt Recovery and Hardship Policy to meeting of 22 March 2021 as a late report.

Background

On 26 November 2020, Council resolved the following:

1229/20 That Council endorse the making of an application to the Independent Pricing and Regulatory Tribunal for a one-off Special Variation of 8% in 2021-22 to remain permanently in the rate base for 7 years, which plus the 2% rate peg increase in 2021-22 represents a total rate increase of 10% for 2021-22.

1230/20 That the funds raised from this Special Variation are to fund improvements in Council’s financial sustainability.

1231/20 That Council notify IPART accordingly.

1232/20 That Council staff update the integrated planning and reporting documents with information relevant to the proposed SRV application.

1233/20 That Council staff undertake community consultation and engagement in relation to the proposed SRV application.

On 14 December 2020, Council further resolved:

1283/20 That, in addition to the resolution of 26 November 2020, Council endorse the undertaking of community consultation on a potential application to the Independent Pricing and Regulatory Tribunal for a one-off Special Variation of 13% in 2021-22 to remain permanently, which plus the 2% rate peg increase in 2021-22 represents a total rate increase of 15% for 2021-22.

1284/20 That a further report be provided to Council regarding community consultation undertaken for Council to determine any final application to be made to the Independent Pricing and Regulatory Tribunal for a one-off Special Variation in 2021-22.

Special Variation

Attached is the revised Long-Term Financial Plan for the General Fund only, which is the Fund impacted by the SV rate increase and where the restricted borrowings took place.

The Plan has been revised to show the following three scenarios:

· Temporary Fix - 10%

· Securing our Future – 15%

· No rate rise – rate peg only

Several informed assumptions have been made in the Long-Term Financial Plan. These include the following:

- That there will be a $31M reduction in staff costs to headcount levels at amalgamation

- That there will be a $22M structural reduction in materials and contracts

- That Council’s infrastructure spending will remain at the same level as is funded by depreciation, and has been put in place for 2020-21

- The Council will manage and monitor costs and find further efficiency and productivity gains.

It is clear from the modelling that without a 15% variation, Central Coast Council will not be financially sustainable and will be unable to pay back the reserve funds unlawfully accessed and service its debt.

As a result, it is recommended that Council now resolve to apply to IPART for a one-off 15% variation to remain permanently in the rating base and apply from 2021-22.

Council has also undertaken an Ordinary Rate comparison of the neighbouring Councils of Lake Macquarie, Newcastle and Cessnock (shown in Table 1). All three councils’ rates are significantly higher than the Central Coast and will remain so even after a proposed 15% rate increase.

Table 1.

Typical residential ratepayer

Former Gosford LGA

Former Wyong LGA

Lake Macquarie

Newcastle

Cessnock

Ordinary Rates

1,029.00

1,202.00

$1,494.64

$1,582.47

1,261.79

% variation against Central Coast Average

34%

higher

42%

higher

13%

higher

It is now proposed to place the revised Long-Term Financial Plan, as attached, which shows Council’s forecast position both with and without the potential special rate variation on public exhibition for 28 days to receive public comment. At the end of this exhibition period a further report will be provided to Council for consideration.

Two documents are required when applying for a Special Variation:

· Part A is a spreadsheet with financial data from the Long-Term Financial Plan with option proposed.

· Part B is a word application outlining the proposed options and impact, consultation that has occurred and how the special variation has been considered in the Long-Term Financial Plan.

Attached to this report are two applications, one for 10% and one for 15%. These two are provided as Council consulted on both options.

The documents are due to IPART on 8 February 2021.

Consultation

In accordance with the above resolutions, Council undertook community consultation on both a potential 10% and 15% special variation.

The aim of the engagement for Securing Your Future (Special Variation of rates) was to provide an opportunity for ratepayers and residents to have their say on the proposed options for a Special Variation (SV) application to IPART. The engagement has been planned over three phases:

· Phase 1 (Inform) Awareness and why a special variation is needed

· Phase 2 (Consult) Seek community feedback on proposed options and resulting impacts on service levels

· Phase 3 (Consult) Public exhibition of draft Long-Term Financial Plan and draft Debt Recovery and Hardship Policy. Conduct telephone survey seeking feedback on the percentage increase Council will propose to IPART.

Awareness of the proposed Special Variation was undertaken through the following activities (details are included in the attached report):

· Letter to every ratepayer (residential and business)

· Your Voice – Our Coast website

· Frequently Asked Questions online

· Media Releases

· Coast Connect articles

· Enewsletters

· Social media

· DL flyer with rates notice

· Media coverage achieved through radio, television, newspaper – printed and online.

Community members without internet access were encouraged to visit one of our Libraries or Administration Buildings or call us during business hours on 1300 463 954 for assistance completing the survey or discussing impacts.

Consultation has been undertaken for Phase 1 and Phase 2, the two online surveys conducted from 8 January to 1 February 2021. Partway through the survey period, Council responded to the community when concerns were expressed that the initial survey did not provide a “no rate rise” option. Adjustments were made with the second survey commencing from 22 January 2021 inclusive of this option. While the data for the first survey was able to extract and report on a lack of support for a rate rise, Council extended the options to provide more confidence to the community that their voice was being heard.

Anyone could complete the second survey, including those who responded to the first survey. Information was updated on yourvoiceourcoast.com to communicate the changes to the survey as well as media.

The total number of responses for both surveys was 10,229. Survey one received 3,944 responses and survey two received 6,285 responses.

A significant amount of feedback was received, and this has been summarised below and in the attached report.

Key findings from consultation

· Most survey respondents do not support a rate rise.

· Those who do not support a rate rise feel that ratepayers should not shoulder the burden of Council’s mistake/s.

· There is concern about the affordability of a rate rise for either themselves or others in the community.

· Some respondents feel Council’s maintenance of roads, open space and natural assets are already poor.

· Some respondents feel they already don’t get value for money paid due to a perceived lack of maintenance of Council assets, or lack of expected infrastructure in their immediate area, such as kerb and guttering.

· Some suggestions about alternatives to a rate rise include (but are not limited to) seeking NSW Government funds, increasing revenue from fines, selling assets, reducing staff, employee pay cuts, reduction of capital works and scaling back services and expenditure in general.

· A minority of survey respondents support a rate rise.

· The key reasonings behind support is to ‘fix the problem’, maintain services and/or to create a sustainable pathway forward for Council.

· Some respondents who support a rise also expressed a desire to improve the Central Coast through improved assets and economic growth and investment.

· General sentiment from respondents (either in support or against a rate rise) showed the community would like to understand who is accountable for the financial issue and what actions will be taken against these individuals or entities.

· Some respondents will continue to distrust Council, with others stating their expectations of better financial management and accountability in the future.

· There are some suggestions from respondents that corruption or fraud has occurred.

· There is overall strong support for the appointment of a financial controller.

Preferred Option

Preference out of three options from survey 2* results:

· 10.2% preferred Option 1 – Temporary Fix - 10%

· 17.4% preferred Option 2 – Securing our Future – 15%

· 72.4% preferred No rate rise – rate peg only

* Note figures have been rounded. As the survey was changed to include a third option of ‘No rate rise’ we have presented the details for survey 2. To protect the integrity of each data set, the attached report presents the results of each survey separately.

The results of the consultation will also form part of any application made to IPART.

In addition, Council received over 378 submissions up to 1 February 2021. The themes and issues raised in self-initiated feedback were like those raised in the survey. These submissions will be provided to IPART. It is also noted that a significant number of people made submissions directly to IPART. Council is still accepting any written submissions or feedback up to 26 February 2021. IPART continues to accept submission up until 1 March 2021.

Council will also undertake a statistically valid phone survey over the next few weeks should it be resolved to apply to IPART for a 15% special rate variation. The results of this survey will be provided to IPART by 1 March 2021.

Debt Recovery and Hardship Policy

In the process of considering an application to IPART, it was determined that it was appropriate to review Council’s Debt Recovery and Hardship Policy. There was also community feedback regarding capacity to pay, particularly for those experiencing hardship. As a result, the attached draft for the purpose of public exhibition has been developed.

The Policy has been reviewed in accordance with the Office of Local Government’s Debt Management and Hardship Guidelines.

The attached draft Policy shows the additions in bold italics and deletions in ~~strikethrough.~~ The Policy has also been updated to be in the new template.

It is recommended that the draft Policy be placed on public exhibition for 28 days and that at the conclusion of this period a further report be provided to Council with any comments.

Revised Delivery Program and Operational Plan 2020-21

Whilst the proposed Special Variation (SV) does not apply to the current 2020-21 financial year, understanding how the financial situation has impacted the current program of works is important. This is detailed in the attached Revised Delivery Program and Operational Plan 2020-21. These changes provide an indication of the continued path and support the need to apply for a SRV.

Financial Considerations

At its meeting held 19 October 2020, Council resolved the following:

1108/20 That any motions put before Council for the remainder of this term of Council that have financial implications require the Chief Executive Officer to provide a report on how those additional costs will be met.

The following statement is provided in response to this resolution of Council.

An amount of $200k has been allocated in the 2020-21 budget for a community engagement program to facilitate consultation with the community, in regard to a proposed application to IPART for a Special Variation. This amount will be sourced from the existing materials and contracts budget of Council. Funds remain for the conduct of the statistically valid phone survey as set out in this report.

Link to Community Strategic Plan

Theme 4: Responsible

Goal G: Good governance and great partnerships

R-G4: Serve the community by providing great customer experience, value for money and quality services.

Risk Management

It was previously report to Council that Council had yet to complete the rates harmonisation process following the amalgamation of the former Gosford City and Wyong Shire Councils. An extension was granted by the NSW Parliament to 30 June 2021 for completion of the rates harmonisation process.

This process has been completed and is incorporated into the proposed Special Rate Variation. Through this process, the rates across both former local government areas can been harmonised, ensuring there is equity in rates charges levied across the whole of the Central Coast region.

Options

Council has three options:

- Determine not to make any application for a rate variation to IPART

- Determine to make an application for a one-off for seven years to IPART, commencing 1 July 2021

- Determine to make a permanent, one-off rate variation of 15% to IPART, commencing 1 July 2021.

Critical Dates or Timeframes

Any application to IPART for an SRV is due on 8 February 2021. Council has advised IPART that a decision as to whether to proceed will be made on 8 February 2021 and that the application documents would be uploaded thereafter should it be required.

Attachments

1 ⇩	Debt Recovery and Hardship Policy - for public exhibition	D14459909
2 ⇩	Delivery Program and Operational Plan - SRV Revision	D14461483
3 ⇩	Securing Your Future - Consultation Report	D14478921
4 ⇩	Long Term Financial Plan for Public Exhibition - D14480010
5 ⇩	Part A - Temporary Fix - 10% - D14480031
6 ⇩	Part B - Temporary Fix - 10%	D14480025
7 ⇩	Part A - Securing our Future - 15% - D14479915
8 ⇩	Part B - Securing our Future - 15%	D14480026

*2.1*	*Securing Your Future: Consideration of Rate Rise*
*Attachment 6*	*Part B - Temporary Fix - 10%*

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*2.1*	*Securing Your Future: Consideration of Rate Rise*
*Attachment 8*	*Part B - Securing our Future - 15%*

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ADDITIONAL ITEM

Item No: 3.2
Title: Gosford Regional Library
Department: Community and Recreation Services
8 February 2021 Ordinary Council Meeting

Reference: CPA/2804 - D14468964

Author: Beth Burgess, Unit Manager, Libraries Learning and Education

Executive: Julie Vaughan, Director Community and Recreation Services

Report purpose

To seek formal approval to submit the Development Application for Gosford Regional Library to the Department of Planning and to commence and complete demolition of the existing building on 123A Donnison Street, Gosford.

The report will also seek approval to include identified Developer Contributions for the Gosford Regional Library from the Section 7.12 contributions plan as an alternate funding source for this project.

Executive Summary

In August 2020 Council approved to proceed with the development of design documentation for Gosford Regional Library for the purposes of submission to the Department of Planning for development consent. This documentation is now ready for submission and documentation is ready to call for tenders for the demolition of the existing building located on the site at 123A Donnison Street, Gosford; which is the location for the new Regional Library.

This represents the next stage of this formally gated project and hence approval is needed to progress to the next stages, being Development Application (DA) submission, complete demolition and commence construction documentation.

The current approved budget of $27.7 million for this project is made up from the following funding sources:

Table 1: Current Approved Funding Sources

Type	Amount
Council Special Rate Variation	$8,100,000
Federal Government Grant	$7,000,000
Sale Proceeds – 136-146 Donnison Street, Gosford (‘Kibbleplex’ building)	$12,600,000
Total	$27,700,000

A review of available Developer Contributions has identified that Gosford Regional Library is part of the Section 7.12 contributions plan with an additional $8.5m available for use for this project.

Approval is also being sought to change the funding sources to include the Developer Contributions into the project and reduce the need to use the restrictions identified from the sale proceeds of Kibbleplex.

Community and Recreation Services Recommendation

1 That Council provide approval for the submission of the required documentation to the Department of Planning to obtain Development Consent for Gosford Regional Library.

2 That Council approve the demolition of the existing building on 123A Donnison Street, Gosford following the tender process and engagement of the successful contractor.

3 That Council approve the commencement and finalisation of the development of full construction documentation suitable for calling of construction tenders for the Regional Library.

4 That a further report be provided to Council prior to the commencement of the construction phase of the project, including tender documentation.

5 That Council approve $8.5 million Developer Contributions from Section 7.12 of the contribution plan be included as an alternate funding source for the Gosford Regional Library project.

6 That Council resolve, for the purposes of s.11(3) of the Local Government Act 1993, that Attachment 1 is to be treated and remain as confidential because this document relates to s10A(2)(c) and contains information that would, if disclosed confer a commercial advantage on a person with whom Council is conducting (or proposing to conduct) business and because consideration of the matter in open Council would on balance be contrary to the public interest as it would affect Councils ability to obtain value for money services for the Central Coast community.

Background

Council at its Ordinary meeting on 8 October 2019, finalised the site for the Regional Library by tabling an urgency motion which concluded that the site at 123A Donnison Street, Gosford ‘Parkside’ would be the preferred Regional Library & Innovation Hub site.

The following was resolved part thereof;

984/19 That Council approve the preferred site location for the Regional Library & Innovation Hub as the Parkside building (Lot 100 Deposited Plan 711850) Located at 123A Donnison Street, Gosford.

There have been a number of subsequent Council meetings; 9 December 2019, 13 July 2020, 24 August 2020 which have all supported the project to proceed with the development of the design for the Library, preparation of full documentation for a DA and calling for tenders for demolition of the current Parkside building. The last Council resolution for this project was adopted on 24 August 2020 with the following resolution, in part:

893/20 That Council direct the Chief Executive Officer to proceed with design works and prepare submissions to the Department of Planning for Development Consent.

894/20 That Council direct the Chief Executive Officer to call Tenders for the demolition of 123A Donnison Street Gosford; site of the future Gosford Regional Library.

Current Status

The project is currently at a stage where the design work has been completed by the lead design consultants: Lahz Nimmo Architects, and full documentation has been prepared ready to submit to the Department of Planning for Development Consent.

The designs have been evaluated by external quantity surveyors who have valued the construction works. (Attachment 1 – Confidential) Construction, demolition and fit out are within the allocated budget for the project.

The Regional Library design includes dedicated library space, Council customer service centre, library administration, meeting rooms, flexible function spaces, maker/creator spaces and collaboration and innovation spaces for the community over four levels, incorporating the current functions of the existing Smart Work Hub. The flexible design of the building allows for the capacity for Council meetings/civic functions to be held within the function space which may be required when the Gosford administration building is sold.

Libraries play a fundamental role in our community which has evolved over time. Traditionally libraries were viewed as institutions for collections and information, today they play a more contemporary role, offering not only the traditional functions but also a community space where people can meet, access technology, share and learn.

Documentation to call for tenders for the demolition of the existing structure on 123A Donnison Street, Gosford has been completed and is ready to proceed. The tenants that were occupying the Parkside site have now vacated the site providing vacant possession of the site.

A review of Developer Contribution Funds has been undertaken which identified that Gosford Regional Library is part of the Section 7.12 contributions plan and that in fact there is an additional $8.5m in Developer Contributions that can be used for the purposes of the Regional Library. These funds can be incorporated into the project cashflow modelling, reducing the need to access the full amount from the sale of 136-146 Donnison Street, Gosford (‘Kibbleplex’ building).

Therefore, the new breakdown of funding sources would be as follows:

Table 2: New Breakdown of Funding Sources

Type	Amount
Council Special Rate Variation	$8,100,000
Federal Government Grant	$7,000,000
Developer Contributions	$8,500,000
Sale Proceeds – 136-146 Donnison Street, Gosford (‘Kibbleplex’ building)	$4,100,000
Total	$27,700,000

Consultation

Recent consultation has included two briefing sessions with Councillors regarding the design for the Gosford Regional Library; 6 July 2020, 17 August 2020 and preliminary meetings have been held with the lead consultant, Council Planners and the Department of Planning in preparation for the submission of the DA.

An internal working group comprising of staff from Libraries, Innovation, IM&T, Community Partnerships, Planning, Energy & Customer Services was formed and have been consulted as part of the design process to ensure the Library design will meet the current and future user needs.

Financial Considerations

At its meeting held 19 October 2020, Council resolved the following:

The following statement is provided in response to this resolution of Council.

There will be no financial or cash impact to complete the next phase of the project; DA submission and demolition and construction documentation as this can be covered by the Federal funding that has already been received to date.

Due to the current financial situation facing Council, a further report will be required at the next stage to ensure adequate cashflow exists to complete the future stages of the project.

Link to Community Strategic Plan

Theme 5: Liveable

Goal L: Healthy lifestyle for a growing community

L-L3: Cultivate a love of learning and knowledge by providing facilities to support lifelong learning.

Risk Management

The Regional Library project has been in planning for many years and has a high level of community interest and expectations to deliver. The project has incurred delays to the original timeline and as a result a revised timeline has been developed in order to still meet the milestones of the funding agreement (Attachment 2 – Revised Program Timeline). The DA will need to be submitted by the end of February to avoid any further revisions of the timeline and possible impacts on delivery of required milestones for Federal funding.

The project is being managed by a formal gated Council approval process which requires formal approval before commencing each phase of the project.

Options

1 That Council continue progress with the Gosford Regional Library project as this will provide the community with important public infrastructure and meet the commitment for funding from the Federal Government and collected Special Rate Levy monies and approve a change to the funding sources to include use of Developer Contributions from Section 7.12 of the contributions plan.

This option is recommended by staff.

2 Not to proceed with Gosford Regional Library project will result in a high need community asset not being delivered to the community after Special Rate Levy has been collected for this purpose and the return of Federal funding. Additionally, Council has engaged Architects Lahz Nimmo for $1.3m and cancellation would result in considerable financial loss.

This option is not recommended by staff.

Critical Dates or Timeframes

In order to comply with the requirements of the Federal Grant Funding, it is imperative that Council proceed with the submission of a DA for the Gosford Regional Library and tender the contract immediately to complete the demolition process.

In accordance with the original Program timeline; DA was to be submitted by the end of 2020 and tenders for demolition of the existing building were planned for November 2020 with demolition to commence in February 2021. The project is now running behind schedule and any further delays will impact the ability to meet the Federal grant milestone obligations and the planned completion for October 2023.

Attachments

1	Confidential Attachment - Gosford Library Cost Review -		D14116791
2 ⇩	Gosford Regional Library Revised Program Timeline		D14468952

*1.2*	*Confirmation of Minutes of Previous Meeting*
*Attachment 1*	*Minutes - Extraordinary Meeting - 3 February 2021*

Item No: 1.4
Title: Administrator Minute - Beach Parking
Department: Administrator
8 February 2021 Ordinary Council Meeting

Item No: 1.2
Title: Confirmation of Minutes of Previous Meeting
Department: Corporate Affairs
8 February 2021 Ordinary Council Meeting

*2.1*	*Securing Your Future: Consideration of Rate Rise*
*Attachment 2*	*Delivery Program and Operational Plan - SRV Revision*

*2.1*	*Securing Your Future: Consideration of Rate Rise*
*Attachment 3*	*Securing Your Future - Consultation Report*

*2.1*	*Securing Your Future: Consideration of Rate Rise*
*Attachment 4*	*Long Term Financial Plan for Public Exhibition - D14480010*

*2.1*	*Securing Your Future: Consideration of Rate Rise*
*Attachment 5*	*Part A - Temporary Fix - 10% - D14480031*

*2.1*	*Securing Your Future: Consideration of Rate Rise*
*Attachment 7*	*Part A - Securing our Future - 15% - D14479915*