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City council pandemic hit blows out to $30m

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Adelaide City Council could lose up to $30 million in income over the next three months as a result of COVID-19, prompting its executive to consider raising the council’s debt ceiling and pausing projects and services to deal with the “massive” financial blow.

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InDaily reported last week that the city council estimated it would lose between $10 million to $20 million in revenue by the end of June as a result of the coronavirus pandemic.

That estimate has now increased to between $16 million as a “best-case scenario” to $30 million as a “worse-case scenario”, with the council’s executive warning those figures could still increase as the full impacts of the coronavirus become known.

CEO Mark Goldstone described the council’s balance sheet as “really strong”, but he said the council might need to increase its debt ceiling and “rationalise and reduce” services and staffing as part of the coronavirus recovery process.

“There is no doubt that financial impact scenario of $30 million for three months is massive,” he said this morning.  

“That’s not to say that won’t recover immediately after the three months – there will be an ongoing impacts to our income. 

“It puts us in a position where we simply have to respond and adjust our business.”

Goldstone said the city could was in a unique position compared to other metropolitan or regional councils as a “significant” portion – about 45 per cent – of its income came from commercial revenue streams such as parking and community services that are now closed.

“The circumstance has created pressure on that income because we have… hardly anyone around, hardly anyone parking, there’s no Aquatic Centre, there’s no golf course,” he said.

“Forty-five per cent of our income is under question, which is a concern and is unprecedented because no one would ever dream that this would ever happen.”

 The remaining 55 per cent of the council’s income – rates – is also under strain as more ratepayers seek deferrals or hardship provisions following job losses and business closures.

As of the end of last week, the council received 76 requests for rates deferrals relating to 199 properties.    

“We expect there to be more (deferrals), to put it bluntly,” Lord Mayor Sandy Verschoor said.

Goldstone said “decisive” action had already been taken to close down some of the council’s key revenue-generating services such as the Aquatic Centre and the Golf Links, but “further harder decisions” would need to be made to ensure the council remained financially afloat.

The council plans to review its services to determine which should continue or be reduced and whether staffing levels need to change.

One of the services up for consideration is the 50-year-old Aquatic Centre in North Adelaide, which has been flagged for redevelopment.

“As a council in the near future we’re going to need to look closely at what the model of the Aquatic Centre looks like going forward,” Goldstone said.

“At the moment… the centre is closed as we’re looking at what maintenance can be put in place right now.

“But, a really strong key strategic decision needs to be made and I’m optimistic the council is well-informed now to make those decisions going forward.”

Goldstone said the council would also consider increasing its debt ceiling, which he described as “very cautious” and “currently set on an historic consideration rather than the current consideration”.

The limit is currently set at about $90 million and is expected to be breached by early next year.

“There are other metropolitan councils with significantly more borrowings on their books than we currently have,” Goldstone said. 

“The intention for this would be to borrow for recovery, not for operations.”

The council says major infrastructure projects such as the Central Market Arcade upgrade and redeveloping the long-vacant old Le Cornu site at 88 O’Connell Street would go ahead as scheduled.

ICD Property – the council’s development partner for the $400 million Central Market Arcade redevelopment – told InDaily in a statement the project was on track to have demolition start in May next year ahead of a construction start date in October.  

But other capital projects, such as the $15 million Market to Riverbank laneway project, have been put on hold until the new financial year.  

“That gives us an ability to take a breath really, along with every other business in South Australia,” Verschoor said.

She said the council was doing “what it can within its means” to provide support to ratepayers, including spending $4 million on a support package that provides three months of free rent to Central Market traders and tenants of council-owned buildings.  

About 5000 people who still need to travel into the city have also signed up to an $8 all-day, touch-free “UPark Plus” card since the scheme was launched earlier this month.  

Elected members will be briefed on the council’s financial position tomorrow night at a special online meeting.

Verschoor said councillors would be presented with “frank and fearless advice” from the council’s executive about which projects and services should be reprioritised.  

“It’s clear that we must now all share the burden to successfully navigate the biggest social and economic challenge of our time,” she said.

Meanwhile, about 400 staff who were asked by Goldstone to stop work for one month will resume working either from home or on-site at the end of this week.

The council gave the affected staff two weeks of paid leave, with staff asked to take annual leave for the remainder of the break.

The Australian Services and Workers Unions took the council to the Employment Tribunal over claims the move was unlawful, with hearings still underway.

Goldstone said this morning he was prevented from saying anything about the hearings due to confidentiality.

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