Councillors warned: Retirement village a ‘risky project’

Councillors were warned that if the Seniors Living Precinct went ahead, the council may have to apply for significant rate increases through the state government’s Special Rate Variation (SRV) process.

There was also concern at the pressure the project, to be called Edward River Village, would place on council’s general fund.

The revelations come as council considers an independent financial report which recommends applying for SRVs of seven per cent a year for six years.

Mayor Peta Betts last week said council’s current financial situation was due to what it had inherited (from the previous council), of which she was a member.

The Seniors Living Precinct has been a long-time aim of Deniliquin and Edward River Councils and throughout its planning phases there was strong community support, with council’s CEO Phil Stone stating last year that when expressions of interest were sought from prospective residents in 2021 there were 50 respondents.

However, that was before details of the cost structure had been finalised. The asking price, known as an ‘entry fee’, for a two bedroom unit starts at $475,000, with a $130 weekly fee also payable.

Only 65 per cent of this is refunded when the tenant vacates.

The village will be 32 units and, according to project manager, Mark Goode only 21 enquires have been received since marketing with the entry price began.

Of those, none has gone to contract.

In June last year, Mr Stone said the entry price would strike the balance between it being a viable project and “encouraging people to come in”.

He also said the village would be a “cost neutral” exercise, predicting its operational budget would be in the black once council started collecting exit fees when units were ‘turned over’ to new residents.

Mr Stone responded to speculation at that time that a report had warned the project was not feasible, saying “if there is a report that says it is not feasible, I have not seen it”.

The Pastoral Times has seen advice, sent to Mr Stone and forwarded to all councillors in February 2022, that states “from a financial and governance perspective the SLP is a risky project”.

The advice goes on to say if the project goes ahead, given the position of the General Fund, council may need to look at a SRV.

“This could draw the attention of the minister on the seniors living project and its viability and how/why the decision was made to proceed with the project,” the advice reads.

“The old council had gone a long journey with this project and the new council may not have seen all the relevant information to make a decision so early in their term.”

Councillor Shirlee Burge, who resigned from the Seniors Living Precinct council committee due to what she claimed was a lack of financial disclosure, confirmed having seen the advice.

Speaking to the Pastoral Times as an individual councillor, not on behalf of Edward River Council, Cr Burge said the warnings were clear.

“The forecasts of that report were bleak, and the report particularly requested the seven new councillors be made aware of the situation, stating it was a risky project and could result in drawing attention to ERC by the minister if we asked for a SRV.

“This appears to be a position we have ended up in today.”

Cr Betts, however, would not confirm if she was aware of the advice.

“This question refers to unnamed ‘senior staff’ apparently expressing an opinion. Any question regarding staff is a matter for the CEO to respond to,” she said.

Mr Stone also would not confirm whether he had seen the advice, instead saying he found the Pastoral Times’ questions “frustrating”.

“There is no link between a possible Special Rate Variation and the Edward River Village,” Mr Stone said in a written response.

“The potential Special Rate Variation outlined in the council’s Financial Sustainability Review is one of nine recommendations to repair a ‘structural deficit’ in council’s general fund that has been present for many years.

“The question above is an example of my frustrations with the PTs ignorant, sometimes cynical reporting and it needs to seek a better understanding about local government finances so it can paint an accurate picture of the challenges in local government in regional New South Wales.

“What concerns, specifically? Note that council requested AEC to undertake a financial analysis and found that the project was viable and would make a modest return within 10 years.”

The independent financial report prepared for council by AEC states the Edward River Village project would be financially independent “with 100 per cent occupancy and an entry price of $485,000“. Meaning all 32 units need to be leased for $485,000 each.

Last August, amid concerns about the project’s viability, councillors had to vote on whether to proceed with stage one, at an estimated cost of $4.43 million, and it only passed with the casting vote of Cr Betts.

The mayor, along with deputy mayor Paul Fellows and councillors Linda Fawns, Tarria Moore and Shannon Sampson all voted to proceed with the project despite the advice of council staff and the Audit, Risk and Improvement Committee (ARIC) which also expressed concern regarding the lack of financial details for the project.

In December 2021, the ARIC Committee recommended to the previous council that the project was “entrepreneurial which council should not subsidise”.

The new council was advised by ARIC in April 2022 that “council should aim not to borrow to fund this project using progressive payments for building costs”.

ARIC further advised “That having considered the report and information referred by council, no further comment is possible until ARIC is presented with an updated budget as suggested”.

Cr Betts however claims the village project was recommended by ARIC.

“We are proceeding with the Edward River Village development on the basis that ARIC has thoroughly reviewed the project and provided us with advice that the project is financially sound,” she said.

“Council reviewed the ARIC advice and a decision was reached after lengthy consultation during which Council reviewed risks, including financial risk, associated with the project.”

The Pastoral Times has been unable to find ARIC’s alleged recommendation of the project in council meeting minutes.

Council referred us to minutes from May and August 2022, before the vote was held, which detailed the advice above, and minutes from October 2022, which states:

“The committee provides the following observations to council: 1. Support of the project with reservations around the current entry point. 2. How the GST is treated to be clarified. 3. Risk Mitigation strategy. 4. Further costings will need to include the community centre.”

An ARIC committee member, when contacted by the Pastoral Times, said the committee had requested more financial details and clarification of the impact of GST on the project but could not recall seeing remodelled figures.

“At the time, there were new councillors and new ARIC committee members reviewing the project with not a great deal of detail in the numbers provided,” the committee member said.

Due to concern with the Seniors Living Precinct’s potential impact on council’s financial situation, Cr Burge has insisted she will not be voting on ERC’s 2023-24 operational plan and budget.

“I will not vote on the operational budget unless I see, prior to that vote, the detailed figures of the seniors living project from inception to mid-June 2023 this year - including all advertising, consultancy, site clean-up and decontamination costs, architects and all latent and non latent variations and forward projections.”

All other councillors were asked to comment for this story but declined due to allegedly being warned they may be in breach of council’s media policy.

One councillor, who the Pastoral Times will not name, said “We’ve all been sent out a media policy reminding us about chain of response. The councillors are the governing body, and our obligations are outlined under the Local Government Act.”

The councillor emphasised the CEO reports to the governing body, that being council.

Council reports claim $3.66 million has been spent so far on the project. Construction of the first dwelling commenced just last week.

“My personal opinion is we should sell off the first six dwellings as private dwellings,” Cr Burge said.

“Then sell the remainder of the land to a professional developer like Ryman, who do this for a living and who will create a beautiful village in a minimum time frame and at a cost-effective price, possibly half what we are needing to ever become cost effective.

“We could specify as part of the sell off that local contractors be engaged as part of the deal. This would both boost and free up council funds to then provide better services like a new heated swimming pool and other projects currently on hold because of the commitment to the SLP.”