Fears Over $4m Loan

Newcastle Herald

Monday December 15, 2008

BEN SMEE PORT STEPHENS

DOUBTS have surfaced over Port Stephens Council's ability to pay back a $4 million loan for roads and drainage works.

The council approved the loan at a meeting last month, despite objections from five councillors and a minute from Mayor Bruce MacKenzie that effectively said the council had not secured an income source to fund repayments.

"During the last month, council has been working towards securing an alternate revenue stream in the amount of approximately $600,000 per annum for the next five years," the minute said.

The council's preferred option to service the loan is understood to be income from a proposed commercial development on the sports fields behind council chambers at Raymond Terrace.

But that deal has all but collapsed, with its major backer pulling out due to the economic crisis, and the council now finds itself running out of options.

The council's communications manager, Stephen Crowe, said the sports fields development was "one of several options we're looking at" to service the loan.

But he could not provide any details on those options, other than suggesting the council may be forced to sell parts of its property portfolio.

Without an additional income source, the loan's repayments would take a $600,000 chunk out of the council's yearly operating budget.

Many within the council hope the sports fields development deal can be saved.

Several months ago, the council came to an agreement on the development with a group of investors, headed by Challenger Diversified Property Group, that would see it receive a $5 million up-front payment and rent of about $1 million a year.

But Challenger has since withdrawn from the deal, which will be scrapped completely unless two remaining partners come up with another way to finance the project by early next year.

Some councillors have now lodged a rescission motion against a confidential decision to move the Raymond Terrace Leisure Centre to a vacant Bi-Lo building.

The centre's current building would have been lost to the sports fields development.

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