Blue Haven Illawarra - sale, lease, joint venture, retain

Blue Haven Bonaira aerial

Kiama Council is exploring options for its aged care business, Blue Haven Illawarra.

The decision was made at an extraordinary council meeting on 23 May to analyse all options (lease, sell, joint venture, or retain) of the component parts of Blue Haven:

  • Residential Aged Care Facility (RACF)
  • Independent Living Units
  • HomeCare packages.

Read the full text of the resolution

Frequently Asked Questions

Why is Council exploring the option to sell / lease / joint venture or keep Blue Haven Illawarra?

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.

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)
  • Home Care

Why has Council separated the ledgers of Council and Blue Haven?

Separating our ledgers is the first step towards ensuring that both Council and Blue Haven can continue as separate successful organisations.

No matter what Council and the community decides in terms of sell/lease/keep/joint venture Blue Haven, the two businesses require separate accounts.

Over the years, 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 been used to support Blue Haven. This is because the ledger has never been 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 supports the other, or has benefitted from the other, they are the same. As a result, we are 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. 

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.

How much is the Council in deficit?

The Monthly Financial Report gives a picture of how we are traveling. The April Report that is going up 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.

How much does Blue Haven owe in loans for construction of Bonaira and when is payment due?

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

We have already repaid $15m of this TCorp loan, so we currently owe $45m.

The $45m balance of the TCorp loan is due to be repaid in August 2023. However we are in negotiation to restructure the payments and will update the public and this page as the process moves forward. 



What happened to the Blue Haven RADs and ILU entry payment money?

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 with the amount reserved as $4.4m. 

There is no policy or legislative requirement for ILU reserves. 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. 

As noted in the State of the Organisation report, auditing of Blue Haven’s Prudential requirements and its representation in Council’s financial statements have been insufficient or not complete.

This year’s auditing process, currently being undertaken, has recently highlighted that our Aged Care Prudential Standards Policy for Blue Haven (latest version 2018) states “Kiama Municipal Council holds all refundable deposits and accommodation bonds in Trust.”  We understand this wording may imply the funds are held in a separate account (Trust) and not used. This is not true.

We apologise unreservedly for this. It was not our intention to mislead our clients or residents.

The Policy also lists as a requirement that Kiama Council: “Maintain at all times access to refundable deposits and bond monies required to be refunded. The minimum amount to be held at all times is $4,400,000.”  This is correct and has been done.

Council will be updating our Aged Care Prudential Standards Policy for Blue Haven. In doing so, we will undertake consultation with our residents, clients and community, in the same way we do for all council policy updates. This process will ensure transparency and will outline clearly how the RADs and ILU entry payments are held and used. 


Where are the amounts shown in Council’s recent Budget and Long Term Financial Plan?

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.


What is the overall liability to residents and why is it reported differently in 2021 and 2022 financial years?

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.

Should residents be concerned about the RADs and ILU entry payments?

As stated above, no aged care provider holds 100% of the RADs (Residential Accommodation Deposits) or ILU entry payments. The Aged Care Act requires that all Approved Providers must comply with the Prudential Standards as set out in the Fees and Payments Principles 2014. This essentially states a provider must maintain a Liquidity Management Strategy that supports a minimum amount of cash reserves that is required to be held for the purposes of refunds as required. (Blue Haven maintains a minimum of $4.4m in a restricted reserve for our RADs).

We are currently working to split the ledgers of Council and Blue Haven and are on track for this to happen from 1 July 2022.

We have also created an updated draft Prudential Standards Policy, which will be exhibited for 28 days. The community, Council staff and Councillors may indicate it is prudent for Blue Haven to retain more than the RADs $4.4m minimum in restricted reserves.

The Aged Care Act also has a Guarantee Scheme covering all RAD payments made by residents, in the event of the provider being unable to meet the refund.

We don’t want any of our residents to worry. We continue to fully support our Blue Haven operations. We understand that many of our residents are concerned and we will continue to meet with them and talk with them and go through any issues as they arise. Kiama Council has been and will continue to be as transparent as possible as we work through our financial issues. 

As per the decision by Council, if any sale of Blue Haven is to occur, it would be on the basis that all the operations, assets and liabilities, of Blue Haven would be transferred as a going concern and continuing aged care business, but under the responsibility of another aged care provider operating within the Aged Care Act and Retirement Villages Act, so the financial position or security of residents is absorbed by the new provider. 

Will separating the ledgers affect how staff are paid?

No. Blue Haven staff will continue to be paid by Council, and their awards will remain the same. Separating the ledgers is only a prudent internal accounting initiative that will provide everyone with improved and more accurate information and reporting. It will not affect staff wages or the day-to-day operations of the business.   

Are any Blue Haven services changing?

No. There will be no change or interruption of services until if and when it changes hands or is taken over by a new leaseholder (Prior to this happening, the community will be consulted and Council would need to vote to agree to the sale or lease of Blue Haven.)

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 /lease/keep process and whether there are new owners, operators or leaseholders of Blue Haven.

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.


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. 

Are Blue Haven staff still employed?

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

What about staff entitlements, job security, future contracts?

There is no immediate change to entitlements.

The resolution of Council stipulated that, in the event of a sale, the contract will include the condition that:

The good reputation, working environment and conditions for Blue Haven Staff of Kiama Municipal Council be maintained and protected.

And that:

Probity lawyers are appointed to act in Council’s interest.

This and engagement with unions are an essential step in ensuring entitlements are managed correctly.

As part of any potential sale process, normally a ‘transfer instrument’ will detail what entitlements will be recognised, transferred and maintained (either for a temporary period or ongoing) by the purchaser, with other entitlements required to be paid out.

Should redundancies be applicable, then the relevant respective award process and requirements must be followed.

If Blue Haven is to be sold, how long will it take?

It is anticipated that a sale process would take 6-12 months from the time Council resolves to sell. 

Note: Council has not currently resolved to sell Blue Haven.


Can Council control who buys Blue Haven?

If Council resolves to sell Blue Haven, the sale will be run through a public procurement 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.

What will happen with the money from a sale?

If Council resolves to sell Blue Haven, 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.

This is all contingent on if a sale occurred, and then the amount realised from the sale. Hence why we are reviewing potential sale valuations as part of our overall work in reviewing all of the options. 


What about any profits from a sale?

It is too early to speculate on this. But see previous question for comments regarding sale proceeds.

What other Council assets are being considered for sale?

Council is reviewing its divestment portfolio to identify other opportunities for the sale of assets to address its deficit. 

Isn’t Blue Haven making a profit for Council?

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. 


Who will be interested buying or leasing or joint-venturing a non-profitable business?

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.  


Does Blue Haven get grant funding?

Blue Haven has some grant funding for business improvement (to address accreditation issues). 

Blue Haven also gets grant funding for Residents Packages. 

We are working with our Grants Officer to identify more grant funding opportunities for Blue Haven. 

Why has Blue Haven recently appointed a new COO if it might be sold or leased?

Joe Gaudiosi was appointed as interim Chief Operating Officer (COO) of Blue Haven in May 2022. He replaces Kerrin Hunter, who resigned in April 2022.

Since Blue Haven will continue to operate as normal throughout the process of exploring sale/lease/ keep and beyond, the business continues to require strong leadership.

Mr Gaudiosi’s extensive executive experience in the aged care sector provides Blue Haven with the critical operational leadership needed to meet the challenges facing Blue Haven and the industry as a whole.


What about land use - can the Bonaira or Terralong sites be used for anything other than aged care?

The Bonaira Aged Care Home and Bonaira Independent Living Units are on land zoned low density residential but classified as community land. Under the Local Government Act, Council must reclassify community land to operational land in order to sell it.

For this reason, any sale process will include a public hearing to provide community. The existing consent and the low density residential will determine any future uses of the land. It is our intention and a clause of the potential sale or lease that Blue Haven remains an aged care business.

Why can’t we see the confidential forensic report the sale is based on?

The forensic report is a confidential internal report Council requested 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 report. Likewise the NSW Audit Office noted concerns, as did the authors of the report, Forsyth’s. 

Kiama Mayor Neil Reilly has stated that Council will release as much information from the forensic report as is legally allowed, and as much other information that we can, now and as we move forward.

Council is committed to transparency but we are also required to follow the advice of our lawyers, the NSW State Government Audit Office and rules around commercial-in-confidence. 

What Blue Haven documents are available?

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.

Council has now published the review and historical reports to provide our community the facts of the planning, funding and building of Blue Haven Bonaira:

What if I have more questions or feedback?

Please email any questions or further feedback to