Call to suspend Blue Haven sale process 'not lawful', says CEO

Kiama Council’s CEO Jane Stroud has issued a blistering response to a councillor’s attempt to “pause” the tender process for the sale of Blue Haven Bonaira.

Council will hold an extraordinary meeting on Thursday (1 February) to discuss the tenders for the purchase of the aged care complex.

A Notice of Motion (NoM) lodged by Councillor Kathy Rice before last December’s meeting was deferred to council’s February meeting and is on the agenda for Thursday’s meeting.

However, Ms Stroud has warned council that the motion to “suspend all action” on the sale of Blue Haven Bonaira is not lawful and should not be considered by councillors.

The sale has been a controversial and long-running issue in council and parts of the community. Council agreed on the sale of Bonaira more than 12 months ago and Ms Stroud said councillors had since made a series of decisions on other council strategies and long-term financial plans based on the plan to sell it.

In a lengthy response to Cr Rice’s NoM to be tabled at Thursday’s meeting, Ms Stroud said in her view, “the circumstance of this NoM is intentionally politically motivated and not in the greater public interest”.

“In regard to the NoM it is abundantly clear that council has lawfully resolved its position on the Blue Haven Bonaira divestment on many occasions,” she said.

The two-part NoM put forward by Cr Rice was copied from a 4 December open letter to the Mayor and all councillors from former mayor Sandra McCarthy and former councillor Howard R Jones.

The motion is that council:

1. Suspends all action on the process of the divestment of assets located at Blue Haven Bonaira, on the basis that the process lacks a social licence, has not been transparent, has been flawed due to incorrect and changing financial statements during the course of the debate, and that the process has lacked any serious reference to the historical corporate knowledge of what has been a successful model of operation of the service by Kiama Municipal Council over decades.

2. Following a suspension of action (as per 1. above), seek an intervention by the Minister for Local Government to independently review the entire process (reclassification and proposed sale) so that both councillors and the community can be fully informed before such a major decision is made.

Ms Stroud said there was no such term or allowance made for “pausing” a tender in the Local Government Act, so the wording of the recommendation could not be lawfully considered by council.

“As the Blue Haven Bonaira public tender is currently active and under consideration, this NoM poses a material and significant risk to destabilising the tender process and negatively impacts on selective tenderers’ confidence in council’s decision-making and is not in accordance with the act for tenders.”

Referring to the open letter, Ms Stroud said council often received such letters on a range of matters, such as stormwater, tree management, noise complaints or budget related matters, but they were typically replied to by staff and personally by councillors.

“It is not usual practice to table such a letter in the form of a councillor NoM, nor for a councillor to agree precisely with the recommendations suggested in the complaint,” she said.

“Usually the councillor would consult with the CEO and give sufficient consideration to the financial, legal and strategic risks and implications for the organisation, and costs associated with the NoM.

“In this term of council, it is the first time a letter of complaint or disagreement with previously made council decisions has been tabled as a NoM by a councillor.”

Ms Stroud also warned that the attempt to suspend the tender process would have serious financial, legal and contractual impacts. She said as there was no option under the Local Government Act to pause the tender, council would need to end the current tender process and commence a whole new process, incurring a duplication of costs.

She is blunt about the financial necessity for council to sell Blue Haven Bonaira and the likely repercussions if the sale did not proceed.

“To put it in the most rudimentary of terms, council borrowed $60 million, spent $105 million on construction and used over $20 million of internal reserves and cash to fund shortfalls in construction costs,” she said.

“Consequently, there is recurring cash shortfall, a drain on reserves (that forces council to dip into reserves) and repeated deficit annual budgets. That is the definition of an unsustainable financial model for any business and is the situation that requires immediate correcting.

“It is likely that if a pause was called for, and the completion of the review of work (as proposed in this NoM) occurred, that by May or June 2024, council would again place itself at risk of accessing internally restricted reserves in order to remain in a positive unrestricted cash position.

“Given the dire circumstances of the organisation I can empathise to an extent with the reaction to the financial circumstances of council but take exception to assertions made in the open letter concerning historical expertise in aged care missing in current administration, ideological positions and lack of impartiality in officer decision-making, lack of fiduciary responsibility and accusations of using confidentiality provisions inappropriately or financial mismanagement.”

To read the full letter from Ms McCarthy and Mr Jones, the response from Ms Stroud, and to access the agenda for Thursday’s meeting (starting at 5 pm), click here.