Central Coast Council financial crisis: Debt free deadline moved forward

It’s been two years since council fell into financial crisis to the tune of half a billion dollars. There’s light at the end of the tunnel with the debt expected to be paid off earlier.

Central Coast Council is in a “stable” financial position.

Two years ago, Central Coast Council could not pay its staff and was scrounging for emergency bank loans.

It’s been a tough few years for the embattled council and community – from staff cuts, service cuts, asset sales and rate rises – however the council has revealed it is hoping to pay off its debts earlier than expected.

In October 2020 council shocked its workers, announcing that it couldn’t afford to pay wages in the lead up to Christmas. Soon after news broke that the council was facing liquidity issues and had plunged $565m into debt which included $200m to be paid off for the unlawful use of restricted funds.

At Tuesday night’s council meeting, it was revealed that some of the debt would likely be paid off earlier than the 10 year timeline.

However Administrator Rik Hart told the Express he hoped the entire $565m debt would be completey paid off by the end of 2024.

Central Coast Council Administrator Rik Hart.

He said the debt revealed when the crisis hit was broken up into $360m in bank debt and $200m to be repaid for the use of restricted funds. The restricted funds debt will be paid off through council’s asset sales.

“We are looking to have the entire debt paid off by the end of 2024 when an elected body comes in,” he said.

“It will give us a fresh start.”

Council chief executive officer David Farmer said the council’s financial performance was currently exceeding planned forecasts.

Central Coast Council CEO David Farmer said council’s expected to pay emergency loans earlier than expected.

“Our strong financial performance means that we can allocate surpluses to pay down some debt earlier than originally forecast and set aside funds for future needs, while we continue to prudently manage other financial challenges such as rising costs due to inflation,” Mr Farmer said.

At the meeting, council also adopted an updated restricted funds policy to help with the debt and ensure the funds are managed well. Restricted funds can only be used for the purposes intended unless approval is granted from the Local Government Minister.

In December 2020 when the council was facing bankruptcy, it managed to successfully apply for $150m in emergency bank loans.

Former Interim Administrator Dick Persson was brought in to fix the crisis in late 2020 along with the current Administrator Rik Hart.

The updated restricted funds policy includes two new internal restrictions called the Emergency Loan Repayment and Future Projects Reserve. The council allocated $50m to the Emergency Loan Repayment which will be used to pay down some of the emergency loans in December 2023.

This is when council will refinance the balance of the second emergency loan which will have an outstanding balance of $82.6m.

“This is to ensure we can repay the emergency loans as soon as is practical and free up cash flow that we can direct into services that our community want, ” Mr Farmer said.

“We will continue to review our financial position and consider additional transfers to the internal restrictions on a quarterly basis.”

Mr Hart said council’s strong financial performance was another sign the organisation had left the financial crisis well behind it.

“The organisation is financially stable,” he said.

“Our focus is on addressing those areas of concern where we are not meeting our community expectations on service delivery.

“Our community is already seeing the benefit of more investment in road remediation and vegetation management, and soon will see an improvement in development assessment timelines as staff resources have been increased in that area.”