Friday, September 21, 2012

$14 million request by Murrindindi Shire. What for?

Early this week the Murrindindi Shire Council issued a Press Release relating to its lobbying for a $14 million support payment from the Victorian State Government.

You can read the full Press Release here, but in essence the Shire is suggesting that due to large costs relating to ongoing maintenance and upkeep of assets constructed after the Black Saturday fires ($18.7 million over the next 10 years, apparently) that it needs a significant of financial assistance. It is using a report prepared by KPMG, as the main part of its justification to do so.

What crap.

There are many ways that the thinking and subsequent action here is flawed. And whilst not looking to attack or denigrate any individuals, I think there are some problems with the report and the way the information was released.

I'll start with a small point.

The front page of the report indicates that KPMG prepared this in February 2012. In my brief review of Council minutes online I can only find a mention of it in a Council Briefing on 6th August. And then the Press Release this week (17th September).

Now most of us understand how slow the wheels can grind at Government level. But what seems to have escaped the Council's notice is that the report is based on information that is old, and requires significant updates. In my opinion these updates would significantly change the recommendations.

As an example ...

The Kinglake Community and Cultural Facility (KCCF)
The KPMG report states that there has been $33 million in assets have been built post-bushfires, with the largest component of this being "Buildings" at $19.9 million. This includes $5.3 million relating to the KCCF (at the time of the report, not due for completion until sometime towards the end of 2013). This was all well and good in February 2012, when the report was prepared, but on the 23rd April Council resolved to withdraw from the project. Yet over 5 months later they continue to use this report, including the KCCF, to ask for more money.  Shouldn't the report have been updated with such a significant change?

Existing Infrastructure
How much of the infrastructure in the list of "VBRRA contributed assets" per the the KPMG report was actually infrastructure that had existed pre-fires that have been rebuilt? I don't know the full answer to that question but I know that there are at least some. Wasn't there a Hazeldene Bridge before the fires? Wasn't Gallipoli Park in existence before the fires? OK, these additions and rebuilds are improvements on the originals, but wouldn't there have been maintenance and insurance on these anyway? Is Council seeking to reclassify these "upkeep" expenses as new expenditure? Creative accounting? KPMG have apparently made some allowance for this (Page 4 of the report), but they are based on assumptions that are a year old.

Income Generation
I can identify at least two "new" assets where there is rental income that is, or will be, generated. Both the Kinglake Rebuilding Advisory Centre (the RAC) and the Kinglake Medical Suites (under construction) have or will have rent paying tenants. There are probably more buildings where this is the case in the list but these are the two most obvious examples. I cannot see anywhere in the KPMG review that refers to rental income being used to offset any of the maintenance and replacement costs of the buildings.

What I Reckon.
1) Redo the figures. Use current information. Include the income being generated as well. The Council loses (more) credibility using an incomplete report that has out of date information that it's been sitting on for over half a year.

2) Release the results in a timely manner to the rate payers.

3) Have an honest discussion with the rate payers. Ensure you include these points:
  • These assets improve our communities, not only for us now, but for our kids and grand kids. We should be proud of them, not hold them in contempt.
  • These assets were, in the main, requested by the communities.
  • There are costs associated with these keeping these assets.
4) Be real about the manner in which these costs are going to be paid for. Rate increases need to be part of this (stop trying to pretend they wont be).

I could go on and on about this. But I wont.

Over to you. What do you think?