Central Coast Council crisis: One year on from the $565m financial fall
It was the news that rocked the coast – this time last year Central Coast Council announced it was facing “liquidity issues”. We look back at the biggest financial disaster in local government history.
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When Central Coast Council announced it was facing “liquidity issues” on October 6 2020, no one could have imagined the reality of the situation.
Two weeks later, council staff were looking at empty pay checks with the council finding itself completely out of cash.
The State Government stepped in, suspended councillors and appointed an Administrator who didn’t take long to reveal that council had an accumulated debt of $565m.
Dick Persson, who was brought in to fix the mess, described the situation as “the greatest financial crisis in Australia’s local government history”.
With the Public Inquiry hearings into the crisis currently underway, we take a look back at how it all unfolded and the revelations that shocked not only the region but the country.
October 6, 2020
It was just after 1pm on October 6 when the statement was released.
“The Council is in a serious financial situation and faces an immediate and serious liquidity issue,” it read.
“Central Coast Council has, following a year of natural disasters and the impact of COVID-19, undertaken a review of the council’s budget which reveals that its budgetary position has deteriorated since the March 2020 result. The deficit reported at that time of $41 million is now expected to increase to $89 million.
“Some expenditure over the past 12-18 months may have resulted in restricted funds being used contrary to the provisions of the Local Government Act 1993.”
NSW Local Government Minister Shelley Hancock quickly acted to appoint an independent financial expert to look into the situation.
October 21 2020
Then came the bombshell no one was expecting when it was revealed that council could not pay its 2157 staff members.
The Express revealed that staff had received a late night email a few days prior indicating that they may not be paid. The council had been pleading with Ms Hancock for permission to use its restricted funds in order to pay staff for the week ending October 18.
This was enough information for Ms Hancock to announced that she planned to suspend Mayor Lisa Matthews and councillors. She also announced that the State Government would advance $6.2m to the council to make sure staff are paid.
“The local community is sick of excuses from council,” Ms Hancock said.
October 30, 2020
Despite fighting for their positions, councillors received word that they were officially suspended.
Suspended Central Coast Mayor Lisa Matthews told the Express she received the call that she was suspended at 2.26pm and within five minutes, her emails had been cut off.
“I’m really disappointed; she (Ms Hancock) really mustn’t have given much consideration to our submission.”
“Just to say ‘you are gone’ really makes me angry. They have taken emails straight away and are asking for laptops and swipe cards. It looks like we are criminals. Councillors didn’t cause this. I hope over the next 12 weeks someone gets to the bottom of it so the truth can come out.”
She said the council’s crippling financial status “blindsided” councillors.
“Since we got the news we have worked non stop to find the answer,” she said.
The suspension came with the news that Administrator Dick Persson AM would be charged with the job of finding out what happened.
November 3, 2020
We first meet Mr Persson who hired Rik Hart to assist him. Both men came with extensive backgrounds in Local Government.
“The figures that have been talked about are big figures,” Mr Persson said at his first press conference. “I’m not aware of any council not being able to pay its wages.
“This is not going to be a secret thing. Between us we have come out of retirement and we are here for a duration to help work through these issues.”
November 30, 2020
Mr Persson announced that CEO Gary Murphy has his contract terminated.
“I felt the situation has become clear enough that the financial management of the council is not deemed acceptable and as the chief executive officer Mr Murphy had a primary responsibility,” he said.
He said the ratepayers will cop the brunt of the 38 week severance pay to Mr Murphy which will be to the tune of $380,000. He said he understood ratepayers would be angry regarding the payout.
December 2, 2020
Mr Persson delivers his 30 Day Report into the crisis, revealing the council had an accumulated debt of $565m over the past four years including $200m to be repaid for the use of restricted funds.
“Central Coast residents have been badly let down by their council and widespread anger over the council’s performance is totally acceptable,” he said.
Mr Persson outlined a range of issues that contributed to the major losses including:
■ use of restricted funds
■ extra IT costs associated with the amalgamation
■, The Independent Pricing and Regulatory Tribunal (IPART) pricing decision on water, sewerage and drainage
■ Council’s expanded service and capital works programs that they could not afford
■ Extra staff recruited at the time of merger
■ An Industrial Relations dispute over a 38/35 hour week which saw the former Gosford Council back pay staff.
Just a few days before this report was delivered a rate rise was flagged for the region, sparking widespread anger. Asset sales also became a hot topic.
February 4, 2021
Mr Persson releases a 90 Day Report into the crisis, revealing the council had secured new commercial loans of $150m and staff numbers would be cut to return to a level similar to the time of merger back in 2016.
Mr Persson said the bottom line was that the council had a recurrent shortfall of around $70m in 2020 and confirmed a 15 per cent rate rise (if approved) would result in an extra $26 million for the council.
Angry protesters demanded answers at the council meeting as to why they should pay for the financial mismanagement.
“I support a rate increase because I don’t believe there is any other alternative,” Mr Persson said. “We have cut costs as much as we can.”
The report also came with a proposed referendum to decrease councillor numbers.
March 2, 2021
New CEO David Farmer was appointed.
Mr Farmer, the former CEO of Ipswich City Council, was selected from a field of 29 applicants.
He said he wanted to restore the “great organisation” out of crisis and had a track record in turning councils around. He said he understood the challenge that lay ahead.
“This is not a small problem that we have here,” he said. “It’s a problem that won’t be solved straight away, it will take years to try and get this organisation back into really strong, functional shape.”
March 12, 2021
Voluntary and forced redundancies were being handed out at Central Coast Council.
Mr Persson confirmed that while many people took advantage of the voluntary redundancy program, people are being told to go.
“There’s quite a lot of people leaving now,” he told the Express.
“It’s quite a sad place here, I have been walking down the halls to find people in tears. It’s hard for staff and their work mates, these people didn’t do anything wrong.”
March 13, 2021
Former CEO Gary Murphy speaks out after an email trail was released alleging he knew about the use of restricted funds.
He told the Express that while he took full responsibility for the situation, the documents released by Mr Persson do not show any evidence of wrongdoing and had been taken out of context.
“I was quite furious and disappointed when the administrator decided to release the information with no context,” he said.
“The Administrator has made a lot of comments about the fact that I knew about the use of restricted funds. That’s not correct.”
April 15, 2021
Mr Persson releases his final report and states that he will take whatever action necessary to prevent the return of councillors.
In the report, Mr Persson sets out “who was mostly responsible” and talks about the newly merged council embarking on an “expansionist journey” in terms of capital works and employing 250 extra staff.
He outlines his claims of the former CEO’s alleged inaction on the budget and a number of councillors that “still refuse to accept responsibility” and used political point scoring tactics.
He also said there was no evidence the financial collapse had anything to do with the 2016 merger.
April 27, 2021
Local Government Minister Shelley Hancock extends the councillors suspension and reveals a public inquiry will be launched to investigate the embattled council’s financial management and ability to serve the community.
“The performance of Central Coast Council, particularly concerning financial management, has been of great concern to the local community,” Mrs Hancock said.
“On behalf of all Central Coast ratepayers, I want to see (the) council performing in the best interest of the community and this public inquiry will help get to the bottom of the issues which have impacted its performance, resulting in my suspension of councillors and appointment of an interim administrator.”
Following the announcement of the inquiry – which could see the council dismissed – local government elections on the Central Coast have now been postponed until late next year.
April 28, 2021
Central Coast Council releases its 2021/22 Budget with some hard truths.
The Budget, which forecasted a $7m surplus for 2021/22, outlined the implications of the financial crisis on council services such as cancellation of events, longer time waits for development applications, reduction in maintenance programs such as ovals and water main flushing and longer waits for non urgent work.
“I have never been involved in a budget that had to make such massive cuts,” Mr Persson said.
“But there are still some positives and a $173m capital works program.”
May 12, 2021
On his last day in the job, Mr Persson takes a swipe at councillors asking that any sacked councillors from NSW be prevented from standing at the next election.
“Councillors shouldn’t be allowed to stand in the next election,” Mr Persson told the Express in his final interview.
“The legislation can be amended to prevent sacked councillors from returning. It’s an idea I am putting to the Minister”.
He described his role at council as the “hardest” in his history with local government.
“It was a catastrophe and a lot of hard decisions had to be made quickly. We don’t like putting rates up or selling off assets. Right on Christmas we were on he phones waiting to hear if we would be able to pay staff and creditors in January.”
The grandfather and keen golfer said he had worked with a lot of amazing people and volunteers over the past six months and thanked them all.
“In this job you get to meet the finest in the community,” he said. “I know more about the Central Coast than where I live. It’s been a privilege to do it.”
Mr Hart took over as Administrator.
May 17, 2021
IPART approves Central Coast Council’s bid for a 15 per cent rate rise over three years.
Will and Jen King, of Terrigal, said they were disappointed with IPART’s decision.
“It’s frustrating for the community,” Mr King said. “We are now having to pay for the council’s stuff up. That’s what most people are thinking.”
Mr Hart said the three year rate rise “wasn’t enough to ensure “long term financial sustainability”.
“IPART’s decision of only allowing a special rate increase for three years is somewhat disappointing given the financial crisis we are in,” he said.
“Whilst the increase gives us short term stability, it doesn’t provide for long term financial sustainability.”
He flagged that the council would be applying for an extended rate rise beyond three years.
September 27, 2021
Hearings into council’s Public Inquiry commence, however technical issues delay the hearings for a week.
Suspended Mayor Lisa Matthews managed to give her evidence on day one, speaking out about a lack of trust between staff and councillors.
“I believe that this council from the get-go never really worked on the relationships between the councillors and the executive leadership team,” she told the Inquiry.
“It was really an us and them approach and they were guarded, and we were guarded, and that struck me as really odd, because to make a successful council, we all need to be working together and I didn’t feel that we worked together. We were not one team.”
The Inquiry into this massive failing of a local government continues.
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