THE airport is in the hole by $1.2million for 2021-2022, plus needs to find $538,475 in loan repayments each year. And the Council has predicted that it will make a loss of at least -$981,593 for this financial year.
To put this in context, a loss of $500,000 was pointed out by Daryl Dutton as being equivalent to a 5% rate rise. So being behind projections by $1.5million is equivalent to a 15% rate rise and $3million next year a 30% rate rise. Every year the original projections aren’t achieved, the more financially off-course we head, and the more ratepayers may have to pick up the final bill.
So why isn’t it making the income we were promised? My questions to Council typically go unanswered, so I’ve trawled through finance papers and cross-checked figures with some well-known financial brains in our community. Here’s what’s been found.
Where it began:
The airport was costing us approximately -$300,000 each year. The current project was to upgrade the airport and generate income to cover operational costs and deliver a profit.
For the record, that is a strategy I support. What I have never supported is a massive spend, with no concrete business plan, merely ideal outcomes, and wishful thinking.
Emotional financial decision: It’s like buying a 4-door Maserati on After-Pay when we could only afford a 2-door Kia. You might be in love with the Maserati, your friends may want to go in joy rides, enthusiasts may want to have their photo taken with it, but if you can’t afford it and your income projections prove wrong, it’s going to end in tears.
Now that the projections are proving VERY wrong, and I see no concrete plan for it to be realised. What I’m still hearing from Council is how much some people love it, how great it looks, how rare it is, how people are going to work hard to make it profitable, and they just need more time. As Cr Abbott once said, blind optimism is not a business plan. Nobody seems willing to even consider an objective measure of where to draw a line under this. What is the exit plan if this continues to go pear-shaped and when do we call it?
The loan repayments on the airport are approximately -$538,475 each year.
If Council isn’t hitting predicted income, money still must be found to cover the operational losses and loan repayments. If that direction continues, losses compound, debt gets deeper, and even more income needs to be generated to claw out of the red.
Breakdown of the loans:
- 2009: $352,820 to redo the runway, approximately is $52,000 remaining.
- 2020: $3million, approximately $2,763,007 is remaining.
- 2021: $4,796,108, approximately $4,610,419 is remaining.
Council already needs to find another $2.49million to redo the runway in hot mix asphalt. The original specification was for hot mix asphalt, and the original budget was $3.66million. However, Mayor Collison announced to Council and the media that they were going to save more than $1million on the runway! There was in fact a saving of $2.9million. They only spent $730,835 on the runway. I’m no aviation specialist, but I was skeptical the runway was the place to cut costs, and the results were predictable.
- Asphalt v bitumen
The original runway specification was hot mix asphalt. It’s the gold standard for runways, a very smooth surface, that doesn’t have stones and is built for heavy traffic.
However, Council changed the runway to bitumen, which has stones. Stones can destroy multi-million jet engines. The risk to ratepayers is a jet lands, a stone writes off the engine and the bill is sent to Council. CASA has previously brought the issue of stones to Council’s attention as a safety risk. So, Council purchased a special machine to remove the stones from the runway. I’m unaware how much it cost, but it wasn’t in the original budget.
Not long after opening, the runway began to fail, including melting in the heat. People have reported the landing zones are breaking down and parts of the runway are down to the original 2017 surface. Even though the Council signed-off the contractor’s job, they now say the fault lies with the contractor.
At the February 2022 Corporate Services meeting I asked if this problem would be occurring if hot mix was used and the Project Manager responded, “no it wouldn’t”. Cr Abbott also raised her concerns for the safety of pilots and passengers if the runway was sub-standard.
If you’re having flashbacks to the Merriwa-Willow Tree Road, so am I. In fact, on A Current Affair when Mayor Collison was asked how can the ratepayers trust you to build a runway if you can’t build a road? This was Cr Collison’s response: “We’ll bring outside workmen in to do the job, I mean there was money spent on that airstrip in 2012, which had failed already, and I believe that was done by Council back then, or contractors. So all we can do is learn by our mistakes, but we can’t learn on mistakes with the ratepayer’s money,” said Mayor Collison. Brady Halls said, “because they are costly mistakes.” Mayor Collison agreed, “yeah it’s not just a little bit of a muck up of $100, it’s millions of dollars.”
Oh the irony of Mayor Collison chiding the previous job in 2012 “already” failing, when the one built under his Mayorship in November 2020, is already needing another $5million.
Well now Council needs to find another $5million to redo the runway in hot mix! In January, Barnaby Joyce MP gave Scone another $2.49million for the runway to be done properly. Council now needs to find another $2.49million.
Where will the money come from? Well, where did the $2.9million saved on the original runway budget go? At the Council meeting in February 2022 the Mayor said, “rumours that Council took the money from the runway and put it on the Attraction Centre is completely wrong.” Ok, so can the saved $2.9million now be used to fix the runway?
It’s three years later, the Merriwa-Willow Tree Road is still completely impassable, the brand new runway already needs to be redone.
The last airshow was -$420,000 in budget revenue. The airshows were meant to generate a profit of $320,000. At the outset Cr Abbott pointed out airshows are a high-risk proposition, in terms of weather causing a cancellation, and highlighted why overseas airshows were no longer held over built-up areas due to the risk of incidents, insurances and potential damages.
The first airshow planned at the airport for 2020 was cancelled due to Covid. Council incurred a loss of -$13,000, but also didn’t realise the projected $320,000, meaning it was off-track by -$333,000.
I distinctly remember Cr Abbott asking what happens if we have two or three airshows cancelled? But Council deemed the risk was acceptable and continued with the plan. To get back on track the Council needs to make $320,000 at the third airshow + the losses from the first two airshows, which didn’t go to plan.
Hunter Warbirds Centre
The warbirds museum is currently behind revenue budget by –$438,000. The reason given was “slower than anticipated traffic through the facility to date. Review to be undertaken.” In the meantime, loan repayments still must be made and revenue still needs to be recouped.
- Visitor numbers:
In December there was an average of 65 visitors per week to the museum and in January 150 per week. It is a far cry from the 1,000 visitors each week Council projected during the community meeting at the Scone Aero Club in September 2019. In July 2022, Council advised they were now aiming for 400 visitors per week.
When I pointed out visitor numbers were well short of the 1,000 predicted, staff said they didn’t know where that “rumour” of 1,000 started. It was at the AeroClub in 2019 and the words came from Council staff directly. People at the meeting challenged the figure as unrealistic and we were told there would be busloads of people coming, in fact we were told that it wasn’t unrealistic to expect 200 visitors arriving on buses each day! I was at the meeting and specifically asked if there were at least memorandum’s of understanding in place with bus companies, and I was told that they were working on it.
In the Corporate Services meeting this month I again asked for the visitor figures and Cr McKenzie volunteered that she had phone numbers for bus companies which may assist. Here we are three years later, the buses aren’t rolling in, there is not even one Memorandum of Understanding with one bus company, and Councillors are offering to provide phone numbers to contact bus companies.
During December the café averaged 70 customers per week and in January 176 customers per week. Space for a café was to be leased by Council, with rental return of $16,000 per annum. A tender was put out for a business to operate a café; however, it was seen as unviable, and Council then went into the café business. So now we need to recoup the $16,000 annually lost in lease revenue, plus cover the costs of Council running the café.
I’m yet to see any cost/revenue breakdown specifically for the café. I fail to see how those numbers could sustain a café, much less start clawing back the debt on the airport project. While the toasties may be sensational, Council should not be in the business of using ratepayer’s money to subsidize said toasties!
To date we are -$360,000 on hanger rentals. Hanger rentals were to be a stable source of income for the airport redevelopment. There was $1.5million budgeted to build four hangers, which would return $180,000 each year. At year 5 another 6 hangers were to be built, with Council banking on taking out another loan for $2.5million to build them. Hangers were projected to return $616,000 per year by year 10.
No hangers have been built to date and we are now in year three of the project.
The airport is NOT meeting projections, in the order of millions already. The losses are compounding. There is no concrete business plan. There is no contingency plan to at what point and how we exit from this fanciful exercise. All I am hearing from Council is that it will turn around. It’s just more blind optimism as we stare down the barrel of ratepayers being left holding the can.
Cr Elizabeth Flaherty
All of the above are my perspectives, opinions and beliefs as a Councillor on the Upper Hunter Shire Council, are my own, which may not (in fact probably don’t) reflect Council’s position, but which as an elected representative I am supported in law to freely express.