CONSCRIPTED INVESTMENT THE WAY TASMANIA GETS ITS MONEY

The fiscal landscape in Tasmania is starting to be very concerning. When government administrations collude to cut corners, and for the benefit of who knows who, you have to worry. However, it gets worse when the perpetrators of what appears to be fiscal delinquency place themselves beyond accountability and then you know its going to get seriouser and seriouser.

At the Glamorgan Spring Bay Council’s Annual General Meeting, a unanimous motion from the floor was passed querying the state of the Council’s finances. There was also overt criticisms of the processes in play where the General Manager, apparently acting alone, took a decision to apply for a $6Mil loan from Treasury. Now, clearly this is a bridge too far and especially so when management starts making ‘strategic decisions’ – governance’s preserve – and the State’s Treasurer, Peter Gutwein entertains the whole idea – indeed seemingly endorses the concept.

The Glamorgan Spring Bay $6Mil loan will be substantially directed towards the construction of a dam and the associated infrastructure to supply water for a controversial fish farm. However, what income will this farm be called upon to provide to Council if the infrastructure is funded by a $6Mil loan to the council. Glamorgan Spring Bay Council has a a $7Mil rate base? Indeed, has the issue of affordability been addressed in any way at all?  

Given the size of the loan and there being such a small rate base, it appears that a full assessment of the costs and benefits to the ratepayers has never been provided to the wider community. It would also seem that the General Manager, perhaps operating under SECTION 62 of the Local Govt. Act, has not seen fit to present councilors with a fiscal plan nor any other details relevant to the loan that, in the final analysis, ratepayers will pay off one way or another – quite likely via a rates increase or even a reduction of services.

The Glamorgan Spring Bay motion called for the engagement of an external, independent risk assessment and expert advice. That advice would be on the viability of providing commercial-scale quantities of fresh water to the Solis and Tassal companies. Interestingly, the General Manager under SECTION 65 of the Local Govt. Act is required to guarantee that councilors make their decisions based on “expert advice”. Here it appears as though he has deemed his own advice to be both expert and appropriate –and the lender has accepted it. 

Moreover, the Treasurer, the lender, seems to have done so knowing that ratepayers, or their representatives, have had only scant opportunities to interrogate their fiscal position from a strategic standpoint.

Indeed, did the General Manager have the Delegated Authority to approve a loan of the size he apparently has and has anyone asked him or anyone else about this? That’s something one might think that Peter Gutwein acting as the Treasurer and Minister for Local Govt. might have wanted to satisfy himself about but it seems not.

However, the Glamorgan Spring Bay situation is not an isolated one. In Launceston, by all accounts, the General Manager has been playing similar fiscal games that are equally risky for ratepayers. Just before the last meeting for 2016 it became clear that ‘Launceston’ was borrowing $9Mil for the redevelopment of the CH Smith Building and quite apparently on the initiative of the General Manager and seemingly operating under the aegis of SECTION 62 of the Local Govt. Act. 

While the aldermen, it seems, were on side they were also in the dark as to how this loan was to be serviced in five years. In effect 30 thousand ratepayers have been conscripted to invest in the development with their ‘pay-off’ being a 300 car parking station with questionable income prospects.

If this infrastructure is going to earn the income to repay the loan in the required five years it will need to make a $5,000 per week profit in the timeframe. Presumably Tasmania’s taxpayers will be picking up the interest bill – the same people really. The rhetoric embedded in the notion that suggests that this money is coming from somewhere else – Mars or its equivalent(?) – is quite concerning and deceptive to say the least.

Bach in December when the numbers started to be done in the community Council packed up for the year in the hope that their critics would head for the beach or the bookshop and forget about the issue of ‘doing the numbers’. Then suddenly enough it was 2017 and the borrowing had apparently grown to $20Mil, for an even larger shopping spree, surprise, surprise! This too is apparently the GM’s work and a strategy put together whilst the aldermen were away from the scene and out of sight and out of mind – if they were ever on anyone’s mind.

Apparently Launceston’s aldermen believed that they had to go with the GM’s strategy and there hasn’t been the slightest hint of descent. However, did they  have to and do they have to?

Somewhat curiously this whole process has been expedient and perfunctory. Also, missing is any semblance of the prudential elements one might expect, elements like tendering and consultation that would normally go with a $6Mil public expenditure exercise. Evidently, it’s a cut-corners approval process. It is also a process that raises a raft of uncomfortable questions. Likewise, accountability it seems has been deemed to be discretionary.

Back in Glamorgan Spring Bay, and given the background, and given all the questions to do with a large dam’s social impacts, contention abounds. And, that's not to mention the very well founded community concerns to do with financial risk the Council is exposed to. And that's not to mention the risk they are exposed to as residents and ratepayers.  If residents and ratepayers are outraged at the premature and imprudent approval of a $6Mil loan to assist a controversial and as-yet unapproved private commercial operation that ratepayers have been conscripted to fund – and by stealth – it is totally understandable that they might be. 

Ratepayers are worried, and quite reasonably they expect that they will ultimately carry the financial and social burden – and that's the case for Launceston and Glamorgan Spring Bay. Concerningly, in Glamorgan Spring Bay it will be the cost of a loan to subsidise a corporate development the majority don’t want that will be the burden.  Those who might support the development are, reportedly, very concerned about the lack of fiscal risk assessment not to mention the opacity around the whole process.

If all this smells a bit fishy then there might be a reason for that? 

If the noxious odour is so strong it might well be time to stop, think and thoroughly investigate the whole process in play – and from a state-wide perspective. The circumstances are such that any such investigation needs to be independent and transparent. 

Here is the rub, can anyone see the Treasurer or Local Govt. bureaucracies lining up for any such thing as an open and transparent investigation? More to the point, its not especially likely if anything resembling rigorous accountability is involved. Nonetheless, it should happen!

Ray Norman

Launceston Jan 2017