Blue Haven Bonaira sale - FAQs

From a financial perspective, Kiama Council is struggling to operate an aged care business and continue to fulfil its core local government responsibilities.

This is made clear in Council’s Budget and Long-Term Financial Plan, endorsed at the extraordinary meeting of Council on 23 May 2022 and unanimously re-confirmed at the subsequent extraordinary meeting which took place on 28 February 2023. 

A sale of Blue Haven would go towards settling Council’s outstanding debts from the construction of the Bonaira facility.

As well as this, supporting Blue Haven at its current size, while continuing to fund our current high level of Council services to the rest of the community, looks increasingly untenable.

The complexity of the aged care sector due to new reforms and reporting requirements introduced since the Aged Care Commission, plus issues caused by the ongoing pandemic, such as high staff turnover, means Council is struggling to provide the funds and resources to run Blue Haven, which poses a significant risk to Council’s liquidity and solvency.

Blue Haven is a 24-7 business and comprises three main parts:

• Residential Aged Care Facility (RACF)
• Independent Living Units (ILUs)
• Community Services/ Home Care Packages

Over the years, clear and formal delineation of cash reserves position between Council ‘core’ services and Blue Haven has not occurred. As a result, we were unable to produce a Balance Sheet with “retained earnings” for Blue Haven which would show the exact financial position of Blue Haven since commencing operations. Given the size and impact of Blue Haven on the whole of Council, this would have been very useful information over the years and in this current context. 

The funds from the Blue Haven Residential Aged Care Facility’s refundable accommodation deposits (RADs) and the Blue Haven Independent Living Unit (ILU) deposits have been used to support the operations of the business as a whole (Kiama Council). Likewise the funds of ratepayers and Council’s operations have previously been used to support Blue Haven. This is because the ledger was not separated and in effect all monies over the last 40 years have been used as one and the same. It is not possible to identify the extent that one has supported the other or has benefitted from the other.

This fact has been widely communicated in the State of the Organisation Report, the Strategic Improvement Plan and many other council reports since January this year.

However, Council acknowledges that, in the past, communications went out, including Reports to Council, that implied there were separate accounts for ratepayer funds and Blue Haven. We apologise for this. From July 2022 we have a clearer indication of the financial performance of Blue Haven and also the use of Resident Deposits, this latter issue is a clear and specific requirement under the Aged Care Act and permitted uses under the Fees & Payments Principles. 

The Monthly Financial Report gives a picture of how we are traveling. The April Report that was submitted to Council in June shows a deficit Year to Date of $2.445m. 

The breakdown into the financial statement areas of expenditure are also contained in the Monthly Finance Reports.

The Blue Haven Bonaira construction cost $105m. We took out a TCorp (NSW Treasury Corporation) loan for $60m to fund part of this. 

At Council's Extraordinary Meeting on February 2023, Council resolved to:

1. Approve the repayment of borrowings of $30 million to TCorp by 9 August 2023, supported by restricted funds (reserves) of $29.248m, with the balance of funding to be identified in the March QBRS.
2. Delegate the Chief Executive Officer to negotiate agreeable terms for the renewal of loan funds of $15 million with TCorp.
3. Seek approval from the Minister for Local Government to renegotiate a loan of $15 million.  

At 30 June 2023, Council announced it had made several repayments and renegotiated terms with TCorp for the remaining $15 million.

No aged care provider reserves 100% of these funds. Blue Haven has used the Refundable Accommodation Deposits (RADs) and Independent Living Unit (ILU) entry payments in the same way other Aged Care Providers in our area use theirs. With any new aged care or independent living development of significant cost, the first use of RADs and ILU loans is to repay external financiers such as the bank or in our case, TCorp. Cash reserves in the first 10-15 years of that specific development are generally low or tight.

Under legislation, repayment of capital or using RADs for capital purposes is allowed. It is also perfectly legal to only reserve certain amounts of these deposits. The RADs are covered by Council’s Aged Care Prudential Standards Policy.

There is no policy or legislative requirement for ILU reserves under the NSW Retirement Villages Act. The TCorp loan, borrowed for the construction of Blue Haven Bonaira, has a requirement for the restriction of all ILU entry payments at the Bonaira site to be used as payment on the loan.  

Kiama Council has recently updated its Aged Care Prudential Standards Policy governing not only RADs from the residential aged care service but also a special inclusion for its ILU residents (despite it not being a legislative requirement).

The new policy requires Blue Haven to hold a minimum amount of cash reserves to assist if required with the refund of any deposit, bond and entry payments falling due in the following 12 months. The policy recommends Blue Haven hold a minimum $4.75m to cover deposits and bonds of residents in the Aged Care Home, and $4.28m for the entry payments of the residents in ILUs. As well as ensuring we have enough available cash or liquidity to cover our refundable deposits etc., the updated policy covers strong requirements for record-keeping, governance and disclosure. The new policy also requires Blue Haven to regularly report to its residents and the Australian Government.

This includes an audited annual Prudential Compliance Statement with information about refundable deposits accommodation bonds as well as other fees and information as required under the Aged Care Act.

The Blue Haven Aged Care Prudential Standards Policy can be found online: https://www.kiama.nsw.gov.au/Council/Council-Policies/Blue-Haven-Aged-Care-Prudential-Standards-Policy 

In Council’s recent Budget and Long Term Financial Plan, you will see the figure for ‘bonds and deposits’ is zero. Because these are constantly in flux, it’s common practice not to put a figure in this column, due to the assumption that any bond or deposit we have to repay for an outgoing resident will be recouped within a very short time, when the unit, room or bed is sold to an incoming resident. 

Our RADs (refundable accommodation deposits) and Independent Living Unit (ILU) monies are accounted for in Payables as a liability. 

Deposits are accounted for as both Current and Non Current Payables in the Liabilities section of the Balance Sheet. 

As at the end of the 2021 Financial Year, the RAD balance was $29.533m and the ILU amount was $92.519m.

The overall liability to residents of Blue Haven is approx. $120m.

In the Annual Financial Statement of 2021 this is shown in Payables – Current $32m and Payables – Non Current $88m.

In the Annual Financial Statement of 2022 and beyond, due to an accounting standard change, this amount is show in Payables as Current.

No. Blue Haven Care Services for residents and community will not change immediately.

Blue Haven continues to operate its Residential Aged Care Facility (RACF), Independent Living Units (ILUs) and Home Care as usual and the care and wellbeing of our residents and clients is paramount.

Blue Haven has a long and proud history of providing high-quality aged care services to our community for more than 40 years. This will not change. And it will continue regardless of the sale process.

As per the Council resolution:

The high standard in quality of care for the residents and families of the Blue Haven Residential Aged Care Facility be maintained, protected and uninterrupted and continue to meet the requirements of the Federal Government Aged Care Act 1997 requirements.

Also:

The good reputation and care invested in our Blue Haven Independent Living Community and Home Care Support Services be maintained, protected and uninterrupted and continue to meet the requirements of the Retirement Villages Act 1999. 

The resolutions of Council has specifically stated

2.     Undertake to sell Blue Haven Bonaria (Lot 2 DP1215276) subject to the completion of the required notice in accordance with Section 34 of the Local Government Act (public notice to classify or reclassify public land) and the associated planning proposal process, which council has previously resolved to allocate funding towards at its June ordinary meeting.

3.     Continue to inform and engage with the community, including those who are cared for by Blue Haven, to reassure all parties that the quality of care and standard of service of the Independent Living Units and Residential Aged Care Facility will be maintained, regardless of ownership.

Yes. The resolutions of Council has no immediate change to employment terms for any of our Blue Haven employees. 

Council has previously indicated their sentiment that the good reputation, working environment and conditions for Blue Haven Staff of Kiama Municipal Council be maintained and protected. This will be factored into the tender.

We are aware that in many cases where business are acquired by others there is a new ‘transfer instrument’ that will detail entitlements will be recognised, transferred and maintained for a temporary period or ongoing by the purchaser, other entitlements may be required to be paid out.

Appointment of probity lawyers and engagement with unions are an essential step in ensuring entitlements are managed correctly.

The sale process could take up to 12 months. We have now completed the reclassification of the land.

On 18 August 2023 Council announced an Expression of Interest (EOI) to participate in the open tender to purchase Blue Haven Bonaira. 

The sale will be run through an open selective tender process in accordance with the Local Government Act and it is illegal to interfere with this process. The decision to sell to the successful tenderer, identified via the tender process, will go back to a Council.

Council will make their ultimate decision after considering all the various factors and conditions proposed by respective purchasers.

Council has already stipulated that any sale must be to an approved Aged Care Provider. Further, in the clear acknowledgement of its intention that the operations continue, it has stated the provider needs to operate under the Aged Care Act and Retirement Villages Act. Other criteria may and will be considered before any definitive action is taken.

The Bonaira Aged Care Home and Bonaira Independent Living Units is situated on land zoned low density residential. At Council's Ordinary meeting 20 June 2023, elected Councillors voted to reclassify the land from community to operational. 

The reclassification of the land means Council can proceed with the divestment of Blue Haven Bonaira, as it resolved to do in October 2022 and confirmed at its extraordinary meeting on February 28, 2023.

Council has already stipulated that any sale must be to an approved Aged Care Provider. Further, in the clear acknowledgement of its intention that the operations continue, it has stated the provider needs to operate under the Aged Care Act and Retirement Villages Act.  

The money from the sale will go towards settling Council’s outstanding debts from the construction of the Bonaira facility.

If additional funds exist, these may go toward reviewing and/or increasing the minimum cash reserves held with respect to RADs and ILU deposits.

No. Blue Haven is currently running at a loss of approx. $3.5m per annum (since commencement). (Please see Council’s recent Budget and Long Term Financial Plan in the agenda and minutes from 23 May for more information.

The recently released UTS Aged Care Sector Report 2021-22 shows that more than 60% of residential aged care homes in Australia are operating at a loss and the financial performance of home care services declined by 26% compared to the previous year.

Further, Blue Haven is lacking asset management plans, which means the costs of maintaining the facilities, replacing beds and equipment and the cost and resources that will be needed to decommission the old facility at Havilah Place have not been properly accounted for in previous budgets. Kiama Council and Blue Haven are currently hard at work to rectify this omission and include it in our 2022-23 and beyond. 

Blue Haven's asset management plan is in the process of being updated and we anticipate it to be finalised by the end of this year. 

Larger aged care providers with multiple sites and therefore operating and economic scale will very likely see Kiama as a key strategic acquisition in their portfolio.

According to the UTS Australia Aged Care Sector report: “In residential care, where the financial viability issues are most acute, the worst operating losses were reported by homes with lower occupancy and low average ACFI revenue per resident, as well as those that were smaller in size and located in regional, rural and remote communities.”

Not only could an established provider bring much needed funds to the business, they will be aged care experts running at scale. This operating scale can bring benefits in terms of shared knowledge, staffing stability with ability to move staff around sites in times of shortage, and also stability in operations and processes (where standalone providers struggle due to over-reliance on 1-2 key individuals to determine core underlying operating processes, and staff turnover can lead to re-occurring changes to operating processes and work practices.

“Homes that are not able to maintain financial viability are at risk of ultimately being withdrawn from (or transferred within) the sector, although those owned by large providers may continue to operate at a loss if this can be offset by margins earned across other parts of their businesses,” said the UTS report.  

Community Services will be part of the sale. Whichever aged care provider purchases Bonaira Residential Aged Care Facility and Bonaira ILUs will also take over the running and daily operations of the Community Services.

Clients with Home Care Packages will be informed when the provider is due to change and will be given information as to what this may entail closer to the time.

Kiama Council will be working hard to ensure a seamless transition. 

Council has stipulated that the sale of Blue Haven Bonaira will be to a registered Aged Care Provider.

More information about exiting residents from residential aged care and legislation can be found online: Exiting residents from residential aged care | Australian Government Department of Health and Aged Care

The NSW Retirement Villages Act is consumer legislation enforced by NSW Fair Trading. The following protections are provided under this Act for Village Residents, which also apply when a Retirement Village is sold to a new owner.

Sec 29 Variation or replacement of village contracts 

The current operator of the Village cannot make an existing Resident sign a new contract. 

Sec 40 Contractual rights of residents against new operator   

After the Village is sold, the existing contract between the resident and the former operator may be enforced against any operator for the time being of the village. Clauses 29 and 40 together mean that Residents will not have to sign a new contract. 

Sec 41 new operator to convene meeting of residents   

A person who proposes to become an operator of an existing retirement village must, at least 28 days before the person becomes the operator, hold a meeting with all residents to report on   

(a) their financial ability to operate the village, and   

(b) their plans for the future management and operation of the village (including any proposed changes)   

Sec 60 Variation in services or facilities provided at village  

The services and facilities provided at the village are not to be varied unless the residents of the village, by a special resolution, consent to the variation.  

If the operator considers that a proposed variation in services or facilities will impose a cost on the operator additional to that allowed for in the approved annual budget, the operator must seek the residents' consent to an amendment to the approved annual budget.   

If residents refuse to consent to the amendment, the operator may appeal to the Tribunal 

Sec 106 Recurrent charges varied otherwise than by fixed formula--exceeding variation in CPI  

The operator must give residents at least 60 days notice before any proposed variation, including an explanation of the reasons for the proposed variation.  

Sec 107 Residents' consent to variation  

A variation does not take effect residents unless consent to the variation, or the Tribunal orders that the variation take effect.   

Sec 108 Determination by Tribunal  

An operator of a retirement village may apply to the Tribunal for (and the Tribunal may make) an order in respect of a proposed variation of recurrent charges if residents do not consent to the proposed variation.   

The Tribunal may--   

(a) order that the proposed variation is to take effect, with or without modification, or   

(b) order that the proposed variation is not to take effect.   

The Tribunal may have regard to the following in reaching their decision--   

(a) the general market level of recurrent charges paid at similar retirement villages in the locality of the retirement village concerned or a similar locality,   

(b) the level and cost of services and facilities provided in the budget  

(c) any proposed variations to which the residents have consented,   

(d) the cost of general services required to be provided by the operator,   

(e) the frequency and amount of past variations   

For further information about the Retirement Villages Act please visit: Retirement Villages Act 1999 No 81 - NSW Legislation

The forensic report is a confidential internal report Council commissioned to give our executive team and the Councillors a full picture of Council’s financial position. Legal advice and the advice of professional officers noted concerns with releasing the full report. Likewise the NSW Audit Office noted concerns, as did the authors of the report, Forsyth’s. 

Kiama Council is committed to transparency and in May 2022 resolved to release an executive summary of the report as soon as possible.

Kiama Council resolved to release an executive summary of the Forsyth's report on 18 July 2023.

Blue Haven Bonaira development - cash position review

This reviews historical council reports relating to the design, construction and funding of Blue Haven Bonaira between May 2003 and December 2017.

Many of the reports were not made public at the time due to commercial-in-confidence reasons, which have now lapsed.

This review was provided to Councillors at their meeting of 28 June 2022.

Councillors passed the following resolution:

That Council

1. Notes the information regarding the Blue Haven Bonaira development, funding, feasibility, history and resultant cash position.

2. Notes that the documents prepared by Council relating to the history of Blue Haven would have been subject to changing legislative requirements.

3. Whilst undertaking further work on sourcing and releasing information related to the Blue Haven Bonaira Project Build, provide a report to Council.

Blue Haven Bonaira development - cash position review

This reviews historical council reports relating to the design, construction and funding of Blue Haven Bonaira between May 2003 and December 2017.

Many of the reports were not made public at the time due to commercial-in-confidence reasons, which have now lapsed.

This review was provided to Councillors at their meeting of 28 June 2022.

Councillors passed the following resolution:

That Council

1. Notes the information regarding the Blue Haven Bonaira development, funding, feasibility, history and resultant cash position.

2. Notes that the documents prepared by Council relating to the history of Blue Haven would have been subject to changing legislative requirements.

3. Whilst undertaking further work on sourcing and releasing information related to the Blue Haven Bonaira Project Build, provide a report to Council.

The entrance road to Blue Haven Bonaira is completely contained within Lot 2 DP 1215276. Therefore, it is a private road that is there to serve as a driveway only. If Blue Haven Bonaira is sold as is, it will be the responsibility of the property owner to maintain this entrance road. As it is effectively private property (and not a public road), enforcing road or parking rules is also not possible.

Barroul House is a heritage listed item in the Kiama Local Environmental Plan 2011 (Listing No: I81) here. 

The NSW Retirement Villages Act 1999 sets out particular rights and obligations of residents and operators of retirement villages and establishes mechanisms for the resolution of certain disputes between residents and operators of retirement villages. The full Act can be accessed here.

Separate to the NSW Retirement Villages Act 1999, Council is committed to ensuring the purchaser of Blue Haven Bonaira will be an aged care provider. At an Extraordinary Council meeting held on 12 May 2022, Councillors resolved that:

• The high standard in quality of care for the residents and families of the Blue Haven Residential Aged Care Facility be maintained, protected and uninterrupted and continue to meet the requirements of the Federal Government Aged Care Act 1997; and

• The good reputation and care invested in our Blue Haven Independent Living Unit Community and Home Care Support Services be maintained, protected, uninterrupted and continue to meet the requirements of the Retirement Villages Act 1999.

Council is committed to open communication regarding the public tender process for the sale of Blue Haven Bonaira, in line with legislative requirements. Council anticipates the process could be resolved by the end of the year. Council understands that residents will want to be kept informed throughout the process, and information will be shared as permitted by legislation and the public tender process requirements.

Ensuring Blue Haven Bonaira residents are fully updated on the progress of the sale of Blue Haven Bonaira is a priority. Our commitment to open and consistent communication is demonstrated as follows:

• Distributing regular Bonaira Bulletin emails 
• Offering face-to-face 'Bonaira Banter' sessions to residents
• Holding regular face-to-face meetings on-site with residents and families, hosted by Kiama Council's Mayor, CEO and executives, where residents’ concerns and questions have been noted, considered and answered
• Posting Bonaira Bulletins to residents without access to the internet
• Ensuring all issues of the Bonaira Bulletin are available in print format at Blue Haven Bonaira Reception
• Regular news updates to the Blue Haven and Kiama Council websites on aspects of the sale
• Quarterly Blue Haven Newsletter distributed to all Blue Haven Bonaira and Terralong residents, as well as copies at Blue Haven reception, at Kiama Libraries and via Council's customer service desk.  

The wellbeing and care of Blue Haven residents and their families remains the highest priority of Council during the various stages leading up to and during the sale process.

Kiama Council is adhering to a competitive and open tender process. A tender is required to sell Council property under the Local Government Act. This will allow for due diligence, probity and conflicts of interest to be appropriately managed.

StewartBrown Advisory, who are highly regarded within the industry and the Department of Health & Aged Care, has been appointed to coordinate the tender and divestment process on behalf of Kiama Council. In addition, probity lawyers are also appointed to act in Council’s interest and sound tender processes are used to ensure compliance with the Local Government Act.

The Open Competitive Tender Process is as follows:

1. Expression of Interest (EOI) to tender is announced and potential tenderers invited to submit
2. Once EOI closes, Tender Evaluation Panel (TEP) reviews EOIs and makes shortlist (all tenderer names published by Council)
3. Probity checks carried out
4. Shortlisted tenderers invited to put in tender proposals
5. TEP evaluates tenders against predetermined evaluation criteria
6. Highest scoring tenderer is recommended in a report to the elected Council
7. Elected Council decide whether to award the tender to the recommended top tenderer
8. Winning tenderer announced
9. Sale contract signed and exchanged
10. Settlement and transfer

The wellbeing and care of Blue Haven residents and their families remains the highest priority of Council during the various stages leading to the sale.

A tender is required to sell Council property under the Local Government Act. This will allow for due diligence, probity and conflicts of interest to be appropriately managed.

The Department of Premier and Cabinet (Local Government) - Tendering Guidelines for NSW Local Government stipulates: “The development of tendering procedures and implementation of the tendering process are operational matters and therefore should be undertaken by council staff.”

Blue Haven Bonaira residents will be provided with regular updates as permitted by legislation and the public tender process requirements. Bonaira residents will also have the opportunity to collect and prepare information that can be passed on to the new purchaser and owner.  

See our Blue Haven Bonaira - sale by selective tender - project page

Council is aware of the repairs and defects rectification required at Blue Haven Bonaira and thanks its residents for providing a consolidated list of requirements.  

An external Project Manager from Trademark Consulting is working closely with Richard Crookes Constructions (the builder of Blue Haven Bonaira), providing monthly updates to Council which are then shared with the Blue Haven Bonaira ILU Residents Committee.

Progress is being made and Council thanks residents for their patience.

Please email any questions or further feedback to council@kiama.nsw.gov.au