Slings and Arrows:
Great City Fire Sale looms

Emergency workers in Australia know that summer is a bad time for fires. But it will be different this winter for emergency city bean counters, as the 2020 Great Fire Sale of the City of Adelaide looms. This is the sale that the City Council is now planning for titles in its strategic property portfolio, itemised under the most secret of lists kept by the council’s property managers. Of course, fire is not driving this sell-off. It’s been economic pandemonium triggered by the coronavirus lockdown and the federally enforced economy shut-down. All of the council’s revenue forecasts have collapsed. Cashflow from operating activities forecasts earlier this year were $47.4 million, but now are now expected to be only $20.8 million.

It’s a sobering revelation of how vulnerable our capital city corporation is at times like this when much of its income depends on rates (56 per cent) or parking station tickets and street parking fees and statutory charges (42 per cent). That 42 per cent – parking infrastructure – is its Achilles heel by comparison to many other councils. Council’s budget has been revised from $213 million to $196.4 million, facing expenses of $214.2 million, leaving a $17.8 million deficit. Added to that is a borrowings problem, caused by years of risky financial management decisions. A current net financial liabilities ratio (net amount owed compared to operating revenue) of 42 per cent is set to jump to 60 per cent in the coming year. A self-inflicted wound is being compounded by a shutdown catastrophe.

Secret sales chatter

In recent years there’s been council chatter about its property portfolio valuations. One ultra-secret summary was revealed to councillors on 12 December 2016 and ran to 474 pages. That’s a lot of bricks, mortar or dirt. Council also has community land holdings: titles it owns but leases to communities and commercial operators for myriad reasons. Some of these may be up for grabs.

As an update to earlier property summaries, there’s been a culling (on paper) and the titles more likely to attract quick cash were, on 14 April, listed across 167 secret pages. By now every property speculator and developer with an interest has made assumptions about what the city might be considering selling. Although many are clinging on by their fingernails themselves, a bargain could draw out cash reserves that more patient speculators have tucked away. Moreover, if they already have property collateral, money has never been cheaper to borrow.

Alarm bells ringing

Only one city elected member recently publicly noted the likelihood of disposals, posing a question on notice at a 14 April council meeting. It’s curious no other elected member appeared interested. His queries summed up concerns held among many other major commercial city ratepayers, anxious that a big sale could have major, long-term financial and development consequences for their own property investments.

North Ward Cr Phillip Martin asked: “In a number of documents subsequent to a Motion on Notice in open council, the Administration has publicly advised it has been conducting a Strategic Review of Council Property Assets. At a recent City of Adelaide Audit Committee meeting it was proposed that the sale of such assets is one of the levers available to council to manage the city’s burgeoning debt. Could the Administration assure ratepayers:

1. That in the current economic circumstances created by the COVID-19 pandemic, which is putting downward pressure on property prices, there will be no sale of property assets at less than pre-pandemic market valuations?
2. That any council property asset sale will take place on the open market rather than through private negotiation?
3. That any proposed sale of property assets acquired as a result of the financial acumen of previous Councils will be preceded by community consultation?”

Assurances fall short

A prospect of sales at below-market valuations, or sales deals arising from little more than a private chat at Town Hall, would be well out of order for a council usually highly conservative in its property dealings. Unfortunately, there are few legal checks and balances in place to guarantee public – and especially ratepayer – transparency about procedures leading up to disposals. So what assurances did administrators give? Unfortunately, there was more ambiguity than clarity. Neither question 1 nor 2 got meaningful answers, except for a claim that any sales proposition would be examined by the council’s elected members (but in secret, of course, because of commercial-in-confidence provisions). No transparency there, and a process simply subject to a show of hands behind closed doors. Only the response to question 3 might have given some comfort, but only because it related to any proposal for community land, in which case council would have to publicly consult first. But only about delisting, not about any foreshadowed subsequent sale. Are such sales being contemplated? Possibly.

Administrators wrote: “Land classified as community land will require revocation from its classification … prior to sale. This will be undertaken in accordance with the requirements of the Local Government Act 1999 including the required community consultation.” Administrators’ choice of wording (‘will’) suggests that some of the city’s community land holdings will be up for grabs. Which ones?

Despite the high level of secrecy about the council’s strategic property and land holdings, you can freely access the ‘Adelaide City Council Register of Community Land’ on the internet. It’s a little dated (the market arcade land has already been delisted), but it’s a revealing list of other properties and city places. Long-term consequences of a sale? Ask the adjacent landowners. In these crazy times, there’s only one certainty. Sales will have been driven by a budget structural problem largely of the council’s own self-induced income vulnerability – as well as its self-inflicted borrowings problem – both established years before the coronavirus arrived.

If our capital city corporation is supposed to be setting the SA local government standard for best practice, it’s not fooling anyone.

Note: The council’s financial summaries are sobering – see ‘The Committee’ agendas of 22 April – Item 3.1, COVID 19 ‘Update and Impacts’; in particular, Attachment B: COVID 19 Financial summary; and 5 May, Item 5.3 ‘Quarter 3 financial report’.