Kiama Municipal Council has a $45 million loan repayment due in six months - but it won't be able to pay it.
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This is despite netting $27 million from a recent property sale.
To build the Blue Haven Bonaira age care centre, council took out a loan with TCorp, the financial partner of the public service.
The council paid $15 million in the 2021 financial year and has a $45 million repayment coming due in August.
However, documents before council's extraordinary meeting on Tuesday state there is only $29.2 million in reserves available to be paid to TCorp.
The council papers float the idea of paying off $30 million - identifying the balance of the repayment from the March quarterly budget review - and then negotiating to pay the remaining $15 million over the next one or two years.
"There is a risk that the loan may not be able to be renegotiated and will become payable on the due date which may impact council's cashflow and liquidity position," council papers stated.
Around $1 million of the $30 million will come from the sale of council's Akuna Street assets - which netted $27.6 million.
The remainder will go to various areas like the Independent Living Units Prudential Policy requirements ($4.6 million), employee leave entitlement reserves ($2.5 million) and unrestricted operational cash ($11 million).
Councillors will also decide on Tuesday night whether to sell off the entirety of Blue Haven, rather than just the previously announced Bonaira aged care component.
A report before council that assessed the options keep, lease or sell, for Blue Haven, noted the age of the buildings at Blue Haven Terralong (home of the independent living units) were almost 50 years old.
It noted they would soon need replacing, though council has no financial reserves for any Blue Haven asset.
The report said a sale of Terralong "may generate interest from potential buyers, especially those who have economies of scale to absorb it into their wider operations to manage the lifecycle and renewal of Terralong".
Were that to happen, it would extinguish all council debts and stabilise the balance sheet.
Council had to make a decision, the report stated, between delivering aged care and municipal services because cashflow would not allow it to do both.
"Difficult decisions are required for the organisation to have a sustainable future," the report stated.
It also noted council was exposing itself to risk due to the fact aged care regulations are becoming "more demanding".
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