Kiama Municipal Council is effectively trading while insolvent with a shortfall in the "tens of millions" of dollars, Cr Matt Brown has revealed.
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His comment came after the NSW Audit Office took the rare step of sending a letter to Local Government Minister Wendy Tuckerman outlining the problems facing the council.
Kiama council has published the letter in the business papers for an extraordinary meeting on August 24.
The letter states that council's draft financial statements show $141.1 million in current liabilities but just $46.1 million in current assets.
The key source of council's liquidity issues is the construction of Blue Haven's Blue Haven Bonaira Street facility, which is now substantially over budget.
Much of it was built with a $60 million loan, with the outstanding balance of around $45 million payable in August next year. The letter states there is now no certainty that loan can be repaid in time.
Also, the refundable accommodation deposits for Blue Haven sit at $29.5 million, of which Council has set aside just $3 million.
The Audit Office letter also expresses concern that council may have breached the Local Government Act in inappropriately using externally restricted funds, due to the council and Blue Haven businesses not running separate ledgers.
Cr Brown said the letter painted a grim picture of council's situation.
"When combining the accounts including Blue Haven, Kiama's running at a loss," Cr Brown said.
"We have a deficit budget. If you apply that principle in the private sector, it means we're trading insolvent. It means we can't pay our bills when they fall due."
Cr Brown complained councillors were "trying to skirt around the edges" of the problem.
"What really needs to happen is we need to be honest with the accounts," Cr Brown said.
"We need to be honest that Blue Haven is close to $40 million over budget and is running at a loss.
"The ratepayers need a better deal than what they have, otherwise we risk going into administration."
The obvious solution, Cr Brown said, was to place Blue Haven in the hands of a group with experience at running an aged care facility.
The Blue Haven board are the Kiama councillors, and Cr Brown said none of them have experience in running a nursing home.
"The residents of Blue Haven actually deserve people who know what they're doing to be in charge of their business," Cr Brown said.
"There's a good reason why Blue Haven hasn't worked from day one. It is because it's been run by people who have got no idea what they're doing."
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Glen Humphries
I'm an award-winning senior journalist with the Illawarra Mercury and have well over two decades' worth of experience in newspapers. I cover the three local councils in the Illawarra for the Mercury, state and federal politics, as well as writing for the TV guide. If I'm not writing, I'm reading.
I'm an award-winning senior journalist with the Illawarra Mercury and have well over two decades' worth of experience in newspapers. I cover the three local councils in the Illawarra for the Mercury, state and federal politics, as well as writing for the TV guide. If I'm not writing, I'm reading.
