Council Finance Statements and the Electoral Commission
I ask that anyone who received a letter from me in July 2022 prior to the formal commencement of the election campaign to read this.
I explained in this letter that despite previous statements asserting I would stand for Lord Mayor that I had decided against it ….
“….I’m writing to say I think I have been and would continue to be targeted by such relentless personal attacks from Sandy Verschoor’s Team Adelaide that I can’t possibly contemplate putting my family through a nasty Mayoral campaign …”
Of course, that nastiness has continued with Team Adelaide’s leader, Alex Hyde, exposed recently for his Facebook trolling through his “Campbell Alexander” account that failed to mention he was actually a Councillor named Alex Hyde or include the “written and authorised” requirements of the election rules.
However. It was the second part of my July letter, page 2, which raised the ire of someone and prompted a complaint to the Electoral Commissioner.
Specifically I said …..
“In the four years since being elected, I calculate Team Adelaide debt is around $50 million dollars in accumulated operating deficits (deficits they began tom accumulate before Covid). This debt will have to paid, one way or another, by you and me”.
The Commissioner wrote to me to say that the paragraph contained three statements that were inaccurate and misleading to a material extent.
I provided the Commissioner with links to pages of the Council’s budgets for each of the following years;
2018/19 -21.117 million dollars (operating deficit)
2019/20 -19.540 million dollars (operating deficit)
2020/21 -6.933 million dollars (operating deficit)
The Commissioner responded that ….
“These statements suggest that a debt of $50 million has accumulated over the past 4 years. The current debt owed by the Council as reported in the 2021/22 Quarterly Business Update Q4 is approximately $8 million, significantly less than $50 million.”
What I had intended to demonstrate was that the Team Adelaide Council had accumulated operating deficits of around $50 million dollars which meant that during the past four years this 50 million dollars had to be paid for or offset in the past, now or in the future by ratepayers through fewer services such as the axing of nighttime parking enforcement most nights and fewer improvements to facilities for the public benefit because around $50 million was no longer available for such expenditure.
My trying to keep my statements concise caused the complainant to misconstrue the intent of my words and I can see the Commissioner has leant on the side of caution.
Later in my July letter I said ….
“Are you aware Team Adelaide have actually hidden likely debt from you? By not including or removing costs from financial documents associated with replacing Council assets (in one case alone they admit $55 million has been disappeared), Council’s long term financial plan looks better than it is.
The Commissioner said in his letter to me that the statement “ …
Team Adelaide have actually hidden debt from you …” had been inaccurate and misleading to a material extent.
I responded by arguing, in much detail, that the asset was coming to end of its life and it had been removed from the Council’s Long Term Financial Plan and the Council’s Asset Management List in a Council budget meeting in the early hours of the morning for the purposes of making the Council’s bottom line look better.
I provided an excerpt of the minuted Council decision which noted that the asset would be the subject of an EOI, somewhat vaguely, “at some point”.
Minutes of the Meeting of Council on April 13th, 2021
23. Item 17.15 - Councillor Hyde – Motion on Notice – Strategic Investment [2017/04450] [C]
Moved by Councillor Hyde,
Seconded by Councillor Knoll -
That Council:
1. Notes the cost of ‘like-for-like’ replacement of the Rundle UPark is included within our Long-Term Financial Plan (LTFP) at around $50 million.
2. Resolves not to undertake such a replacement and requests the Administration removes the assumption from the Long-Term Financial Plan and accordingly amends the Asset Management Plan for Buildings Policy to reflect this change.
3. Resolves to undertake an EOI process at some point before the building asset reaches the end of its life and that the EOI process will explore joint venture opportunities that would realise the immense development potential of such a site in the heart of the Adelaide CBD while also allowing for the construction of a new car park to be used as a similarly profitable UPark operation in the future, similar to the recent air rights development (Central Market Arcade) where Council retains on to its current holdings as part of any future development.
4. Requests that the above EOI process consider adaptable reuse opportunities for any car park that the City would retain.
Discussion ensued, during which Councillor Donovan left the meeting at 10.00 pm
The motion was then put and carried
Councillor Martin requested that a division be taken on the motion
Division
For (6):
Deputy Lord Mayor (Councillor Couros) and Councillors Abrahimzadeh, Hou, Hyde, Khera and Knoll.
Against (1):
Councillor Martin.
The Commissioner found…
“The decision not to replace Rundle UPark is documented in the publicly available minutes of the Council meeting at item 17.15 on 13 April 2021. Those minutes state that the decision requires amendment of the Long Term Financial Plan and the Asset Management Plan for Buildings Policy.”
What I had intended to demonstrate was that the Team Adelaide Council had proposed this and other measures that had the practical outcome of reducing the impost on both the budget under consideration and the long term financial plan without advance public notice, without public consultation, without any formal written advice from the Council Administration to inform Councillors of the impacts and without any subsequent media commentary.
My trying to keep my statements concise in my letter to ratepayers caused the complainant to misconstrue the intent of words and I can see the Commissioner has lent on the side of caution.
A third matter raised in the complaint about my letter related to these words …
“Did you know $70 million worth of your assets will be sold off by Team Adelaide – everything from car parks we all rely on to Council Housing? I say it’s to make the Council’s finances look better. The sell off has begun and if you re-elect them for another four years Council assets, acquired through the prudence of previous Councils, will be gone."
It was alleged that the two statements “ …everything from car parks we all rely on to Council housing and it’s to make the Council’s finances look better..”.
I provided the Commissioner with a list of assets which were are the subject of EOI’s including the Dunn Street Car Park and links to the Indaily reports which included comments from Council staff about the sale of housing. I also detailed how the proceeds of the asset sales are notionally placed in a so called “future fund” which is really just an offset account that reduces Council debt” and provided links to the actual Council budget details.
The Commissioner concluded;
“The evidence provided by you referred to possible/speculative sales of assets and not actual decisions to sell those assets.”
What I had intended to demonstrate was that the Team Adelaide Council had agreed to the sales to the extent they are factored into the budget and I should have included the precise table from the budget which shows the proceeds from those asset sales and the wording describing some of the housing and car park sales undergoing consultation prior to sale as follows;
“$'000s 2021-22 long term financial plan (LTFP) 2022-23 Plan 2023-24 Plan 2024-25 Plan 2025- 26 Plan 2026- 27 Plan 2027- 28 Plan 2028- 29 Plan 2029- 30 Plan 2030- 31 Plan Cash Proceeds from Surplus Assets 12,704 6,793 1,000 30,500 9,700 10,000 - - - -
Some of the assets identified through the Strategy Property Review that are at various stages of the community consultation include: • James Place Toilet Block (realised 2021/22) • 211 Pirie St (Beach Volleyball site) (realised 2021/22) • 88 O’Connell Street (Under contract) • Bus Station site (EOI Approved) • Whitmore Apartments (EOI Approved)"
Page 6 of the budget papers (LTFP) presented to Council Committee 3/5/2022
"The LTFP includes the delivery of the strategic property review and action plan endorsed by Council. This action plan is based around divesting non-performing assets and allocating the proceeds to the Future Fund. The delivery of this plan is subject to variables such as market conditions. The property market has been impacted by COVID and sale of substantial assets must be timed and managed to ensure maximum value is achieved and is strategically aligned."
Page 16 of the budget papers (LTFP) presented to Council Committee 3/5/2022”
My trying to keep my statements concise in my letter to ratepayers caused the complainant to misconstrue the intent of my words and I can see the Commissioner has leant on the side of caution.
Finally, a complaint was lodged in regard to the following assertion in my letter to ratepayers;
“Our roads, footpaths, bridges and even our traffic lights have been neglected by Team Adelaide. The rule is you spend 90% on asset renewal as a minimum to avoid massive bills down the track. The average asset renewal spend since 2018 has been around only 60% and now there’s a massive half a billion dollar asset renewal debt boulder heading towards us.
It was alleged through the Commissioner that the three statements set out below are inaccurate and misleading to a material extent.
7. Our roads, footpaths, bridges and even our traffic lights have been neglected by Team Adelaide.
8. …now there’s a massive half a billion dollar asset renewal debt boulder heading towards us.
9. half a billion dollar … debt boulder heading towards us
I replied that the maintenance and replacement of most asset types at the City of Adelaide have declined in the past four years in line with less than recommended spending levels.
The Local Government Association, supported by the State Government, published the standard for “asset sustainability” for local government areas in 2015 in its Financial Indicators standards. It suggested:
“Capital outlays on renewing/replacing assets are greater than 90%but not less than 110% of level proposed in the infrastructure and asset management Plan (I&)”. It added;
“Any material underspending on renewal and replacement over the medium term is likely to adversely impact on the cost-effective achievement of preferred, affordable service levels and could potentially undermine Council’s financial sustainability.”
I included Team Adelaide’s record on asset maintenance and renewal spending with the public answer to a question on notice, Item 15.4 for the Council Meeting of 8th March 2022.
QUESTION ON NOTICE
Councillor Martin will ask the following Question on Notice:
'Could the Administration advise the following:
1. The Asset Sustainability Ratio achieved by the City of Adelaide for each of the financial years 2018/19, 2019/20 and 2020/21? and
2. The estimated Asset Sustainability Ratio likely to be achieved for the current financial year?’
REPLY
1. The Asset Sustainability Ratio is calculated as the net asset renewals (capital expenditure incurred on the renewal or replacement of existing assets), as a percentage of the Infrastructure and Asset Management Plan required expenditure. The Ratio achieved for the previous 3 financial years is as follows:
1.1. 2018-2019: 76%
1.2. 2019-2020: 40%
1.3. 2020-2021: 72%
2. The 2021-2022 ratio adopted through the Business Plan and Budget process was 60%.
3. The current estimated 2021-2022 ratio adopted by Council in Budget Review 2 on the 8th February 2022 is 77%, based on total capital expenditure on asset renewals of $39.135m, including non-infrastructure assets such as Plant & Fleet.
4. The ratio increased by 17% as a result of the finalisation of the 2020-2021 Financial Statements with projects and infrastructure works continuing into 2021-2022, as well as additional projects that have secured external funding.
5. A revised Asset Sustainability Ratio will be presented to Council through Budget Review 3
Subsequent to the answer to the Question, the Council Administration advised Council Committee that difficulties in obtaining contractors and the cost of materials have meant, at that time, the likely asset sustainability ratio for the 21/22 financial year would be at or below 60%.
The average asset sustainability ratio of the Team Adelaide Council 2018 to 2022 is, based on the published and verbal advice of Council Administration - well short of the minimum 90% Local Government Association measurement used by all LGA’s in our State.
Furthermore, Agenda Item 10.6 for the Council meeting of June 14th, 2022, the City of Adelaide Transportation Plan, showed roads, footpaths, traffic lights had been underfunded and that the renewal costs required alone for these classes of assets and bridges over the coming 10 years of the long term financial plan needs to be 28% higher than has been budgeted.
The assessment of the Council Administration on page 15 of the Long Term Financial Plan is that the total cost of asset renewals and replacements (not including the underfunding referenced on June 14th, 2022 and assets such as Rundle Upark which has been removed from the Asset Management Register) will be almost 580 million dollars or more than half a billion dollars.
The Commissioner found;
You have provided no evidence of neglect, which means to pay no attention to, disregard or to be remiss in care or treatment of, on the part of the Council relating to asset renewal. The impact of the pandemic on the Council’s ability to deliver planned capital works is noted in the 2021/22 Quarterly Business Update Q4. The Long Term Financial Plan supports the complainant’s assertion that the Council is committed to asset renewal and should not have to borrow to sustain this renewal.
What I had intended to demonstrate was that the Team Adelaide Council neglect was driven by chronic and documented underfunding of asset classes, supported by the documentation provided. It might have been more helpful to the Commissioner had I provided photographs of examples of dangerous street paving and road infrastructure.
And had I known the complainant was providing evidence to the Commissioner that the pandemic was to blame for the Council’s failure to deliver asset maintenance or that the complainant had argued that borrowing would not be necessary for renewals I could have pointed to the assets for which borrowing will likely be necessary. Perhaps also I should not have used the word “debt” which has been taken at its literal meaning when perhaps calling the asset burden “a boulder of a bill heading for ratepayers” or something similar may have been as appropriate.
Again, I fear my trying to keep my statements concise in my letter to ratepayers caused the complainant to misconstrue the intent of my words and I can see the Commissioner has leant on the side of caution.
The Electoral Commissioner has provided me with words he has asked me to publish in order to avoid a penalty that could include a fine as high as $5, 000.
Out of respect for the request and out of an abundance of caution I now publish the statement provided to me.
The Electoral Commissioner has determined that electoral material authorised/published by me in late July 2022 in the form of a two page flyer contains the following statements purporting to be statements of fact that are inaccurate and misleading to a material extent: In the 4 years since being elected ... Team Adelaide debt is around $50 million in accumulated operating deficits ...This debt will have to be paid, one way or another, by you and me. ...Team Adelaide have actually hidden likely debt from you Did you know $70 million worth of your assets will be sold off by Team Adelaide - everything from car parks we all rely on to Council housing? Our roads, footpaths, bridges and even our traffic lights have been neglected by Team Adelaide.... now there's a massive half a billion dollar asset renewal debt boulder heading towards us.
The Electoral Commissioner has determined that this is in breach of section 28 of the Local Government (Elections) Act 1999. I now retract the above statements In their entirety.