Financial recovery plan charts 10-year path for Shire of Coolgardie to repay debt if workers village not sold

The Shire of Coolgardie says it will take 10 years to pay off the crippling debt at the centre of its current financial crisis — unless it can sell the Kambalda workers accommodation village. And it says this “is occurring” before the end of next month, with a “conservative” price of $19 million being forecast. The council considered the shire’s draft financial recovery plan at Tuesday’s ordinary meeting — the same day Local Government Minister Hannah Beazley issued a show-cause notice giving it 21 days to demonstrate why it should not be suspended. The notice outlines the State Government’s serious concerns regarding the shire’s financial management and governance that has led to its current financial position. It also expresses the government’s concerns about the shire’s governance decisions, long-term financial planning, and ability to restore financial stability. However, the shire’s financial recovery plan executive summary stated that by following the plan the shire “will demonstrate to the community, State Government and external partners that it is financially sound, well-governed, and capable of delivering on its commitments”. “The plan sets out clear strategies to reduce debt, improve cash flow, rebuild reserves, and strengthen financial governance while maintaining essential services and community infrastructure,” it stated. “It provides a structured road map for addressing current challenges, meeting financial performance benchmarks and demonstrating to the community, State Government and other stakeholders that the shire has transitioned back into a financially responsible, resilient and well-managed organisation.” According to the agenda item report presented to the meeting, the plan was put together on the basis the shire was not able to sell the Bluebush Village workers accommodation facility in Kambalda. The plan stated the shire’s debt — which it said would fall to $25.8m by June 30 next year from $27.52m at June 30 this year — would be paid off in 10 years if the village was not sold. However, the report stated that if the council was able to sell Bluebush Village, it would bring the shire into financial sustainability “immediately” and this would then be reflected within the financial recovery plan, which would be updated. The plan stated “the disposal of the asset is occurring” in the first quarter of this financial year — that is, by the end of next month. It stated if the village was sold — with a conservative price of $19m assumed — this would deliver $10.68m in positive cash flow derived from surplus sale proceeds, $1.12m in rates revenue, $5.47m in interest savings, and $1.09m in investment income. “The overall difference compared with operating (the facility) is $20.73 million over 10 years,” the plan stated. The plan confirmed the “most substantial increase in debt occurred from 2022-23 when, over a three-year period, $27.3 million was borrowed (inclusive of a $3.8 million lease) to fund the construction of Bluebush Village”. “Loan repayments have escalated dramatically over the past seven years, rising from $68,253 in 2017-18 to a projected $8.34 million in 2024-25, which includes the repayment of a $1.48 million overdraft during 2024-25,” the plan stated. “In just the last three years, total borrowing repayments have reached $17.67 million, placing a substantial burden on the shire’s cash flow. “This high level of debt servicing has been a major contributor to the current cash-flow predicament.” The shire this year refinanced its loans with the Commonwealth and ANZ banks, changing the $12.96m loan to 10 years with three years interest-only, and the $8.42m one to 10 years with five years of interest-only payments, while also borrowing an extra $4.08m within this five-year interest-only period. “Placing loan repayments on hold for the first three years . . . provides the shire with greater flexibility in managing its cash flow during these early years,” the plan stated. “This approach enables the repayment of outstanding debt to be phased across the later years of the plan while also allowing sufficient funds to be directed toward maintaining existing infrastructure and continuing the delivery of essential community services. “This strategy ensures the debt is cleared by 2034-35 without compromising the shire’s capacity to maintain essential community infrastructure and services.” The plan shows debt repayments of more than $4m will take place in each of the four years from 2031-32 to 2034-35, peaking at $4.719m in 2033-34. The plan also highlighted interest payments had risen substantially in recent years — from $45,171 in 2018-19 to a forecast $1.62m in 2024-25. “Over the last three financial years alone, total interest payments have totalled $4.07 million,” the plan stated. “When combined with borrowing repayments of $17.67 million over the same period, this results in a total of $21.47 million directed solely to debt servicing. “This substantial outflow of funds has placed immense pressure on the shire’s liquidity, leaving limited capacity to meet operational needs, rebuild reserves, or invest in essential infrastructure. “As such, redirecting this cash flow in early 2025 by refinancing has greatly improved the sustainability of the shire, allowing for financial recovery while planning to recommence interest and principal repayments in the near future.” However, the plan stated that while loan refinancing had provided immediate relief, it had also meant higher overall interest costs across the life of the loans. “The loan portfolio is structured with an approximate 50:50 split between fixed and variable lending,” the plan stated. “This provides the shire with flexibility to make additional payments on the variable component when cash flow permits, while the fixed-rate borrowings provide certainty and stability. “Although variable loans expose the shire to potential fluctuation in interest rates, this is not considered a significant risk given the balance nature of the portfolio.” The agenda item report stated the plan should be considered a “living/working document that will be reviewed regularly and has measurables that can be reported on”. “This document is also proposed to be open to the public for their understanding so that council . . . are being open and transparent and communicative to the shire community as to its direction and expected future over the life of the draft (plan), being 10 years,” it stated. “In addition to the financial recovery plan, there is a strong focus that also considers ongoing direction needed to reinforce the continued development foundational skills within the administration in financial management and governance and this included additional training for the elected members to oversee the administration.”