In August 2020, a report to Central Coast Council suggested that it should not borrow more money until its operational performance improved.
The report was commissioned in April 2020 by the since-sacked CEO, Gary Murphy, into how Central Coast Council should respond to the then looming Covid crisis.
The draft report from Grant Thornton came in two parts, with the first part being used by councillors in a June 2020 meeting to prepare to cut costs by $200M.
Councillors made the decision in response to the risk, that the collection of rates and charges would be materially impacted as both business and household income reduced during the economic crisis.
The second phase of the report, presented to Council officers in August 2020, identified the need for greater cash flow reporting and in the planning of Council’s loan position.
This report has only just been made public as a result of the Public Inquiry asking for the report and the consultants not objecting to the public release.
“While Council had reduced their external borrowings from $288.8M at June 30, 2017, to $233.2M at June 30, 2019, there has not been sufficient consideration of the cash position and forecast,” the report said.
“As a result, Council is now in a position with cash flow constraints and limited ability to borrow further funds.
“Given the operating deficit, TCorp (NSW Treasury Corporation) will not advance any funds which resulted in commercial banks being the only available lenders, albeit at a high cost.
“However, based on the debt service cover ratio, there is also limited ability to borrow further based on the current performance and existing debt profile.
“It should also be noted that we do not encourage additional borrowing until such time as operational performance is improved and there is a culture of financial sustainability and responsibility.’’
The report said that increasing debt should be a last resort while a restructure was being undertaken.
Since the Council has been in administration, the Council has added $150M to its borrowings.
It has also been restructured.
The councillors were suspended and the Council put under administration in late October 2020 after Council revealed it had urgent and serious liquidity problems due to discovering that restricted funds had been used for operational needs.