Documents foretell financial doomsday

NEWCASTLE City Council’s financial situation has become so desperate the organisation is considering bulldozing park benches and toilet blocks to save on maintenance costs, leasing city hall to lawyers and selling parkland.

Internal financial documents reveal the city is spiralling towards a $64million annual deficit by 2022.

The documents reveal NSW Treasury Corporation, the state’s public financier, warned the council last year  it would likely become illiquid – effectively forcing the city to default on its loans – if it adopted a ‘‘business as usual’’ approach over the next decade.

The city’s then general manager, Phil Pearce, said in a statement yesterday before his resignation  the city faced ‘‘possible insolvency’’ if nothing was done.

Mr Pearce announced a $255million program of revenue-raising and cost-cutting in November last year, but would not say at the time which specific services were facing cuts.

The basis for those cost-cutting measures was an internal strategic financial plan, obtained by the Newcastle Herald, and detailing doomsday-like financial forecasts.

The financial plan modelled the ‘‘cessation or reduction’’ of 15 unidentified city services. It also gave suggestions of specific cuts, such as saving $1.5million by outsourcing services performed by the Tourism and Economic Development Services unit.

The document suggests leasing City Hall to a private operator, for ‘‘activities such as lawyers’ offices’’. 

The operator would then sub-let rooms to the council for civic use.

In order to reduce infrastructure maintenance costs, the plan proposes selling assets.

Structures like park benches and toilet facilities would have their numbers ‘‘reduced’’ and community halls would be closed.

Parkland could be reclassified and sold, partly in order to drop a parks maintenance team from the budget.

Beresfield Golf Course was listed as an example of a potential ‘‘service area cessation’’. The council could outsource maintenance, develop adjacent land or sell the course.

The plan also argues managers and directors should be held accountable for implementing cost savings.

‘‘During the budget cycle the service unit manager and director would agree and sign off on a savings target.

‘‘If budgets fell short of their target other savings would have to be found.’’

It is unclear  whether the cost-cutting process will proceed now or be halted to allow a new general manager to guide direction of the city.

Mr Pearce said yesterday the document ‘‘is the starting point for discussions’’.

He said staff would put together a range of scenarios to present to councillors.

‘‘I have been clear that council faces a significant sustainability issue and possible insolvency if it doesn’t act on the current situation,’’ Mr Pearce said.

‘‘Senior managers are now identifying where savings can be made and what impact those savings might have on council’s services and staff numbers.

‘‘These will form the basis of scenarios that will be presented to councillors to consider at the end of next month to consider.

‘‘There are some things though that are clear. There will be some reductions in services and staff numbers.  If we don’t have the money to pay for it, we can’t provide it.’’

Newcastle City Council.

Newcastle City Council.