Coffs Harbour Airport lease proceeds cause debate

The confidentiality of information surrounding future Coffs Harbour Airport lease proceeds was debated by local councillors recently. Photo: Emma Darbin.

 

FUTURE proceeds from the recent leasing of Coffs Harbour Airport to Palisade Investment Partners and confidentiality issues surrounding these proceeds caused debate among local councillors recently.

At Coffs Harbour City Council’s (CHCC) meeting on 26 November 2020, after a four stage process, Council resolved to enter into a long term lease of the Coffs Harbour Airport with Palisade Investment Partners.

On 9 December the Implementation Agreement, Equity Commitment Deed and Independent Certifier Deed were executed.

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The lease process is expected to be completed shortly.

After much debate at Council’s Ordinary Meeting on Thursday 25 March, councillors unanimously decided to approve a motion by Cr Sally Townley to adopt a separate internal reserve/fund governance approach to hold the airport lease proceeds and conduct a Councillor workshop to discuss parameters for the governance of the investment and expenditure of the funds.

A recent report undertaken by KPMG on the holding and governance of the airport lease proceeds stated the 50 year lease, plus a 49 year option, is expected to provide Council with ‘proceeds’ of up to $131m, including $81.5m in fixed payments (received in 2021 and 2027), and a further $61.5m in revenue sharing mechanisms over the full lease term.

The value of the airport lease to the community is forecast at almost $500m over the term of the 50 year lease and 49 year option.

“The Lease proceeds are to be paid in stages to CHCC by way of an upfront payment on lease execution, deferred fixed payments and a number of revenue sharing mechanisms and outperformance payments,” the report stated.

Cr Sally Townley stated at the Council meeting that this was “probably one of the biggest decisions that we’ve made.”

“It’s a large amount of money, it’s a very very long commitment,” Cr Townley said.

“It opens up a whole realm of possibilities for use of that money in ways which are going to benefit the community for the next 100 years.”

Cr Townley said she, “would guess that all councillors would be in agreement that the monies accruing from the airport certainly deserve to go into their own separate internal reserve.

“I don’t think that there’s necessarily a big hurry to nail down what we would like to do with this money and the money is going to come in different forms, there’s going to be some up front payments and then over the next coming years there’s going to be profit sharing,” Cr Townley said.

Cr Townley stated that this year’s incoming Council may like to have some input into how the lease proceeds were used, as well as the local community.

Cr Paul Amos agreed with Cr Townley and said it would be up to the incoming Council’s over the next 100 years as to how to spend the airport lease proceeds.

“It won’t be up to us, it will be up to each individual Council for the next 100 years, we’ve just got to trust them,” Cr Amos stated.

“We’ve just got to be prepared to have the next 100 years of councillors taking the reins and spending it as they wish, because it’s a fact that they’ll be able to do that.

“I would certainly add that as an act of good faith that we would undertake not to spend any airport funds in this term of Council.”

Cr Amos questioned when the timing and amount of the lease proceeds would be made available to the public, and no longer remain confidential information.

Council’s Director of Business Services Andrew Beswick replied that the revenue from the Airport lease would be made public once it is received by Council as it will be disclosed through Council’s accounts.

“The revenue shares are an annual payment, so they will be received on a yearly basis, but the amounts and when they are received won’t be disclosed until they are received,” Mr Beswick said.

Cr Tegan Swan questioned whether it was Council who was dictating the confidential terms of the lease proceeds, or the lessee.

Mr Beswick replied that the lessee did not want the information to be made public.

“It could prejudice their negotiations of other leases into the future, and they (the details) are not made public generally with these sorts of leases in any case,” Mr Beswick said.

“It was an expectation of the lessee that they (the details) would remain confidential at that level of detail.

“The quantum that is received will be disclosed, what other information is made public around that we would need to consult the lessee about that.”

Mr Beswick said the amount of released public information about the financials of the lease transaction “is actually probably more than what has been released in a couple of the recent leases.”

“That is even potentially a greater disclosure than what has been given previously, and we sought that from the lessee,” Mr Beswick said.

 

By Emma DARBIN

 

Cr Paul Amos has stated that the current Council should not spend any airport lease funds in this term of Council as an act of good faith to the community.

One thought on “Coffs Harbour Airport lease proceeds cause debate

  1. I am getting tired of saying this: The initial lease term of 49 years is the only sure income that we have. The option is totally at the discretion of the tenant. When assessing future rental income one never, never, ever ,includes the rental from an option ,because the tenant has no moral, no legal, no anything suggesting that they should sign the option. It is an embarrassment that Council staff and Councillors even mention the option. It is meaningless.

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