The Chair of Council’s independent Finance Advisory Committee (FAC), Graeme Gherashe, has come out strongly in support of CEO Jane Stroud’s Strategic Improvement Plan (SIP).

Included in the business papers for Council's April Meeting (Tuesday 12th), the SIP frankly outlines urgent measures that need to be undertaken to improve Kiama Council’s cashflow and liquidity voluntarily, to ensure the Office of Local Government does not have to step in.

Typically, when councils are not seen to be addressing problems, the Office of Local Government issues strategic performance orders, hears a response from the council, and then a decision is made on whether to put the council into administration.

Mr Gherashe says the SIP sets out the next steps to continue working through issues outlined in the CEO’s State of the Organisation report released in February.

He is one of five Kiama community members with extensive finance, strategy and governance experience on the FAC, alongside the Mayor, Councillor Jodi Keast, and Council’s CEO, CFO and Director of Engineering and Works .

“I’ve been impressed with the openness and willingness to resolve the not inconsiderable financial issues currently facing Kiama Council and our work has been about moving forward in a positive and sustainable way,” says Mr Gherashe.

“Since the FAC was established, we’ve been having the difficult but necessary conversations around Council services, revenues and assets. What is outlined in the SIP is the outcome of these conversations.”

Council’s CEO Jane Stroud, who has been working on these issues since she came to the role in June last year, says, “We have approached this proactively from the outset and not waited for strategic improvement orders or a public inquiry.

“We’ve chosen to be very open and address the situation head on.

“While we have a healthy balance in our constrained reserves, our available cash is very limited.

“It is my professional view that we need to improve the immediate and long-term unrestricted [annual] cash flow by at least $20 million for a business of our size, to avoid ever having to go through these issues again.

“At the moment we have deficit operational budget of $4.8 million without the capital contribution portion.”

The tender for Council's Akuna site ends next week

The Strategic Improvement Plan builds on the State of the Organisation Report tabled in February, and outlines immediate actions required within the next 12 weeks for financial sustainability, along with longer term actions which link back to the options outlined in the original Report.

The urgency is to ensure Council is ready and able to pay the third tranche of its TCorp (NSW Treasury Corporation) loan, associated with the Blue Haven redevelopment, when it comes due in August 2023. The amount to be repaid is around $45 million.

“Of course we are able to explore refinancing or alternate loan options, however refinancing is typically based on meeting covenants related to cashflow and liquidity ratios,” says Ms Stroud.

“We need to take immediate strides to improve cashflow and liquidity to ensure that all our financial ratios are where they need to be, so that we are in the best possible position to meet our Fit for the Future ratios from the Department of Local Government.”

Amongst the immediate actions in the Strategic Improvement Plan is an investigation into the viability of ‘superfluous assets’ – not only Akuna St, but Council’s residential holding at Spring Creek, the old nursing home at Havilah Place and other land.

Joint venture arrangements may be considered for the holiday parks; and various options for Blue Haven, including possible sale or lease, are to be explored by two specialist firms.

Blue Haven Bonaira

Ms Stroud stresses that this is not a fire sale.

“It is about being strategic and deliberate about what we retain ownership of and how we realise our investments, to make sure we are always here for the people,” she says.

“Spring Creek, for example, is sitting there doing nothing and if it was sold it would improve our balance sheet immediately. That is why we are appealing to the State Government to remove an outdated covenant that is stopping its sale.

“I’ve been clear that we need to take action, to set ourselves up for the future and to be sustainable.

“This is a wonderful organisation with a proud history and a bright future, but we must be deliberate in our approach and not complacent.”

As Mr Gherashe puts it, “It’s time Council had a good hard look at its asset portfolio and the types of services it is in. Do we need to be in all these businesses or is it time to realise our investments and dispose of some assets, so that we are not just asset rich and income poor? Maybe it’s time to switch things up.

“The FAC has been in constant dialogue with the CEO, CFO, Mayor and Councillors. Last week we were briefed by the Audit Office and together we are working through the issues openly, robustly and with a deliberate plan.

“We’re not sweeping issues under the carpet, but rather facing them and planning carefully for how we can proceed. When you make plans, the act of planning is itself a positive step – no one plans to fail, we plan to succeed.”