Charles Dickens’s character Wilkins Micawber in David Copperfield warned of debt’s downside: “Annual income twenty pounds, annual expenditure nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pound ought and six, result misery”. 

While Kiama Council has suffered significant debt, pulling Blue Haven out of the general ledger and creating new yearly accounts for the last current and preceding financial years has created a surer course. Even so, there are still hard times ahead, as recent figures released by the Kiama Council’s Sustainable Communities Advisory Committee shows spending continues to exceed revenue.

In part, this was due to an “extraordinary escalation” in contracts and materials – felt by most Councils across NSW - and a growth in depreciation with no growth in revenue.

Materials and services costs increases, growth in depreciation with no growth in revenue.

Whilst the council’s total cash position didn’t deteriorate in the last five years, mainly due to the sale of assets, the unrestricted cash balance (the thin purple line) – this is the money the council can spend today (liquidity) - remains very low.

Unexpected outlays such as litigation fees, flood damage and more, are funded from unrestricted cash.

Council’s negative unrestricted cash balance in 2020/21 and 2021/22 financial years.

Blue Haven Terralong

The decision taken by Council about 40 years ago to move into residential aged care seemed like a good idea at the time. The Blue Haven businesses did not have a separate set of accounts. The council was navigating blind. Profit, loss and expenditure were all recorded in the general ledger.

In 2022, the Council separated the ledger and created a new set of accounts for Blue Haven to establish the true profit and loss.

Blue Haven Terralong in the red

The true financial position of Blue Haven Terralong and Bonaira combined for 2022-2023 is at a $2.54m loss for the financial year.

The Sustainable Communities Advisory Committee’s report states over-investment in aged care and an under-performing return, and has caused “underinvestment in civic assets such as swimming pools, sports fields, surf clubs, stormwater, roads, mowing services, etc.”. This was in the context of the local sporting community needing more modern assets and to encourage female participation.

Council’s unrestricted cash balance at 30 June 2023 was $2 million and would have been more except for the need to fund $5 million of landslide repair works.

On 13 October 2022, Council voted to sell Blue Haven Bonaira Residential Aged Care Facility and the Bonaira Independent Living Units, but voted to retain Blue Haven Terralong. In light of new and more accurate figures, grounded in modern accounting methodology, the sale of Blue Haven Terralong looks key to resolving some of its financial issues. One strategy would be to resolve the sale after the September Council elections, in the hope of removing some of the Councillors who either don’t agree with the figures or place social justice issues above solvency.