Can we trust the bean counters over the Bay Pavilion fees. Show us the sums

Presentation to Council Public Forum session by Lei Parker - Aug 24th 2021 CAR21/016 FEES AND CHARGES - OPERATING THE BAY PAVILIONS Councillors, You are being asked to approve a staff recommendation that the draft Fees and Charges for the operation of the Bay Pavilions be placed on public exhibition for a period not less than 28 days. To adopt that recommendation it suggests that you consider the fees to be adequate to meet the projected operational cost of the facility. In the report the staff advise: “the proposed fees and charges will influence the potential revenue that the Bay Pavilions will generate. These fees and charges have also been used by Otium Planning Group to establish a business model for the facility and these have been further applied by the contract operator to provide Council with a forecasted revenue and expenditure for operating the facility over the next 5 years.” “In accordance with these forecasts, which have been based on the proposed fees and charges presented in this report, Council has established an ongoing operational budget for the management and operation of the Bay Pavilions.” You are informed that THE fees and charges were initially developed by Otium Planning Group in preparing an updated business model for the management and operation of the Bay Pavilions in mid 2020. NOTE this carefully Councillors – THE fees and charges before you today were initially developed by Otium. Otium provided you with a business case for a $46 million complex in 2017. That Business Case was used to prove to you (and grant authorities) that the projected incomes and anticipated expenditures of the Batemans Bay Regional Aquatic and Arts Centre were financially viable. That business case described patronage numbers and projected incomes based on notional entry fees. That business case suggested that there would be 127,276 in the first year attending the aquatic centre. This represents 348 people per day, every day of the year. They projected $1,090,349 income from aquatic turnstyles in the first year that equates to $8.50 per visit. They did warn however that the expenditure of the aquatic centre would be $1,506,594 in the first year. That is a projected loss of half a million dollars in a year. You were informed of this via that business case. It also told you that in the first year you can expect 38,720 patrons to the theatre enjoying 12 performances per year. They advised an expected annual income for Year One at $286,414 but clearly told you that they anticipated an expenditure of $599,176. A loss of $300,000 per year with 12 productions. Alarm bells starting ringing in the community when they saw these figures. The community presented their concerns to you and you chose to do nothing. The Otium Business Case was for a $46 million dollar building. You were presented with the glaring anomalies. You did nothing. When cornered on these figures Council staff advised that they had an UPDATED business case. It was a secret Business Case. So secret in fact that Council wouldn’t even release it for scrutiny to the Office of Local Government. Council continues to refuse to release it under GIPA requests from the public. When specifically asked for the new “Updated Business Case” Council has responded saying: Council identified an overriding public interest against disclosure of some of the requested financial information. The overriding public interest consideration against disclosure of that information remains relevant while tender processes are yet to be concluded for the appointment of contractors relating to the BBRAALC, and while grant funding payments for the BBRAALC project remain forthcoming. However, after all tender processes are concluded, contractors are appointed, and all grant funding agreements and payments have been finalised, the overriding public interest against disclosure of the financial information will no longer be relevant.

This means that the community has no option but to trust the staff report before you that speculates that the proposed fees will cover the required income to meet the ongoing operational budget for the management and operation of the Bay Pavilions. I remind you that staff advise you: “In accordance with these forecasts, which have been based on the proposed fees and charges presented in this report, Council has established an ongoing operational budget for the management and operation of the Bay Pavilions.” This same report clearly advises you on page 39…

Might I remind you that there are only 350 seats. The report says: “The proposed pricing of hiring the theatre is comparable to other regional theatres of a similar scale.” Does this mean that your expected revenue for the theatre is based on 500 seats? With gross errors like that what can the community trust of the due diligence that needs to be applied to the affordability by the community of this theatre and this project? Councillors, Otium Planning Group are the same consultants who advised you in 2017 that we would have 348 people every day of the year through the pool turnstyles and that there would be 57,408 general memberships. Otium did however state in their Disclaimer: Readers should be aware that the preparation of this report may have necessitated projections of the future that are inherently uncertain and that our opinion is based on the underlying representations, assumptions and projections detailed in this ‘point in time’ report. There will be differences between projected and actual results, because events and circumstances frequently do not occur as expected and those differences may be material. Presently the projected visitations are ONLY known to you via the “updated business case” that is not publicly available. Presently the projected operating costs are ONLY known to you but the public can not scrutinised these. The only assurity the public has that these projected incomes and expenditures balance, without a need for considerable annual subsidy from the ratepayers is via the statement within the report by Council that says: “Council's independent Audit, Risk and Improvement Committee has been briefed on the financial details of the project throughout the process.” I remind Council that you were recently advised, in this chamber, that the Audit, Risk and Improvement Committee was not fully briefed on the finances of the project as they could not be provided with all financials due to “commercial in confidence”. In fact, in this chamber, Council Phil Constable, a member of that committee, asked for a deferral of the vote to commit to $19 million to pay for the shortfall in this project so that the Audit, Risk and Improvement Committee could be briefed, and their informed advice received. Council advises us that the funding for the facility’s operation and maintenance will come from within the existing Council budget with “Other potential income streams such as the sale/lease of the Visitor Information Centre, Batemans Bay Community Centre and the former Bowling Club site are subject to review and approval through Council.” In 2017 the estimated burden of the proposed $46 million facility was $2.1 million per year being a projected loss of $900,000 per annum in turnstyle/overhead losses and an estimated depreciation of $1.2 million per annum. Council has before them the proposed fees that will translate into an anticipated income. That income projection can only be based on anticipated patronage. What patronage Councillors? Show us the figures. The report says “ In accordance with these forecasts, which have been based on the proposed fees and charges presented in this report, Council has established an ongoing operational budget for the management and operation of the Bay Pavilions”. What forecasts? With no public scrutiny of any of your figures you are now asking the community to trust that the proposed fees, in accordance with forecasts by who, and by what assumptions, will substantially meet the running costs of the facility to lessen any financial burden to ratepayers. The Audit and Risk committee has not scrutinised the updated business case. They have not scrutinised the forecasts. They have not been made aware of the “ongoing operational budget for the management and operation of the Bay Pavilions”. I remind you of the concerns that the Office of Local Government offered on 13th July 2020. I remind you that this communication was knowingly withheld from you prior to your vote to commit to the project and award the tender.

Above: The note of concern communicated by the OLG that the General Manager did not provide to either the councillors or the Audit and Risk Committee. The contents of the letter was only revealed after a FOI application was made. A Code of Conduct was raised against the General Manager and she was exonerated by the reviewer saying the Councillors ******* (see more detail below) Councillors, if you can not assure the community that you have scrutinised the business case, measured and accepted the methodology of the forecast and scrutinised the projected operational costs including depreciation to then commit an affordable budget then how can you put these fees out to the public for comment given they have no access to the business case that forms the base for all of the presumptions.

****** You be the judge - does this pass your Pub Test? The following finding of a Code of Conduct complaint raised against the General Manager for failing to provide this information to councillors prior to their voting to commit $19 million of rate payer money to the Bay Pavilion Project was revealed to The Beagle The rules state:

The General Manager, under a FOI request, confirmed that the Councillors did not see this letter. Unknowingly all they saw was an extract of the letter that appeared in a report on July 28th (15 days later) that quoted the first paragraph above, but not the more concerning second. Our councillors were about to vote to commit $19 million of ratepayers money but were unaware of the OLG concerns around Council's capacity to finance the ongoing operations of the facility that are shared by many in the community. A Code of Conduct complaint was raised by Mr Donald Macdonald once the omission was discovered that the General Manager (or staff delegated under her authority) had determined that the councillors did not need to read the OLG letter as, in the opinion of the GM (or staff delegated), the councillors already had sufficient information to make informed decisions. The ethical and professional standards applicable to council general managers and other staff are provided in considerable detail in the NSW Ombudsman’s ‘Good Conduct and Administrative Practice – Guidelines for state and local government’. In it you will find the following: Advice given by public officials should be accurate, impartial, complete and timely.”

Public officials should provide advice and reports to decision-makers …. that are materially accurate (and) cover all the issues relevant to the matter”.

Written advice on proposals should cover such things as …

· reference to all the considerations which should reasonably be taken into account

· sufficient information to enable any decision-maker to understand the relevant issues”. Note that these are guidelines and not rules. Given that the General Manager “is responsible for ensuring that councillors are provided with information and the advice they require in order to make informed decisions” a Code of Conduct complaint was raised. It will be of no surprise to Beagle readers to learn that the Independent reviewer handling this Code of Conduct complaint considered that the General Manager had done no wrong in not passing on the letter to councillors written on July 13th 2020 by the Office of Local Government that voiced their concerns to Councillors. The Independent reviewer determined that: "If considered in isolation, we can see how the selection of element of the OLG letter, as compared to the provision of the whole letter, could be perceived as providing incomplete information to Councillors. However, when viewed in the context of the publicly available information over the life of the project and noting the previous reports, briefings and information provided to Councillors and that many of these were detailed in the Agenda for the Ordinary council Meeting of 28 July 2020 to vote on the motion, the selection of information provided to Councillors is not considered to be an omission material to informed decision making. "We assess that it is reasonable for reports and briefings provided to Councillors to be focussed on the decision being made, rather then re-providing voluminous amounts of information that Council has previously considered during the life of this project. "We also consider it to be a prudent and professional approach for Council’s staff to select the salient information and provide summaries, rather than to simply pass on every piece of correspondence that Council receives." Pursuant to Clause 6.13 of the Procedures, being satisfied that much of the information that is alleged to have been omitted from the information provided prior to Council voting on motion PSR20/015 for the approval of the construction tender is publicly available through Council’s website.

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