FREMANTLE COUNCIL NOT IN BED WITH AirBnB

PUNITIVE TAX WILL FURTHER DAMAGE FREMANTLE’S ECONOMY

The Fremantle Herald recently published a story related to AirBnB (7th July ’18) which suggested Fremantle Council may have been pressured by hotel industry lobbyists to levy a rates surcharge on small accommodation rentals.

That punitive tax, which  raises only $35,000, will inflict further damage to the city’s battered economy.  Another levy on small business will not help the city or its retailers out of their financial crises and it’s doubtful it will help the ailing hotel market.

Visitors who choose to stay in AirBnB establishments may do so because they prefer not to stay in hotels. The offering of comfortable home accommodation to visitors is not necessarily a great deal cheaper than a hotel. Some travellers, often couples or family groups, may have been attracted to visit the city for something other than another festival but simply to enjoy the sights, the variety of restaurants and cafes and also the remaining retailers. Any saving in relation to accommodation costs frees up expenditure for enjoyment in other city attractions.

Hoteliers have a vested interest in encouraging guests to patronise hotel facilities which frequently include restaurants, cafes, spas, bars and small retail outlets. Visitors’ money spent in a hotel’s  in-house attractions is detrimental to local businesses.

Retailers in Fremantle’s West End who  offer a variety of  particularly funky shops are already paying elevated rates, ostensibly to be used by council to promote their businesses. That differential rate levy , originally established to support the BID scheme, has been diverted to a hand picked Destination Marketing committee by the cash strapped council.

One AirBnB operator, Alison Roberts, told The Herald: “All Airbnb and Homeaway owners already use their websites to promote Fremantle as a destination, recommending local eateries, tourism operators, retail outlets and artists”.

TAX CONCERTS INSTEAD

It would have been expedient and a greater revenue raiser for council to levy music festivals and other large scale ‘visiting businesses’ such as Winter World. Minutes from a SW council indicate Sunset Events festivals in their region were levied $20 a ticket. That’s not done here presumably because it was never considered or, as the Mayor publicly demonstrated, one of the Sunset company directors, David Chitty is a ‘mate’ of his. Also a  Chitty family member placed considerable funds into the mayor’s election  campaign.

A $20 per ticket levy to a music festival which attracts 10,000 patrons would raise $200,000 for council. Even a smaller festival of  2,000 patrons would raise  $40,000, considerably more than the Council’s punitive impost on the AirBnB businesses.

Most companies who operate festivals and other events are not based in Fremantle. They arrive, utilise the city’s amenities, make truck loads of money, and leave.  Festival patrons add little to the city’s retail businesses other than to booze barns, cafes (and possibly drug dealers). They also leave expensive clean up liabilities.

AirBnB hosts  offer friendly alternative accommodation services to the city. They attract people who may have responded to the council’s revised Destination Marketing program which, by coincidence, has hoteliers on its advisory board in addition to Chris Lewis. Lewis is the spin doctor who was instrumental with a few members of the G4F group, including Councillor Sullivan, in organising fundraisers for Brad Pettitt’s mayoral campaign.

ELECTED COUNCILLORS SHOULD ASK “DO THESE CONNECTIONS INDICATE CRONY CAPITALISM?”

Lewis’s company, LewiCorp PLC, was paid $22,000 by Fremantle Council for ‘Strategic Services’ rumoured to have been connected to the Keep Dockers in Fremantle campaign spearheaded by Lewis and his confrère, former WA Inc Premier Peter Dowding.

Lewis, Dowding and Pettitt  appeared unworried that to retain the team in the city would  cost city ratepayers in excess of $100,000,000.  The campaign failed as did Lewis’s attempt to gain a position on the Dockers’ board.

Fremantle has a Council, many of whose elected members appear to be unwilling or incapable of thinking outside The Square but apparent respond to  pressure from ‘mates’ in business or those who facilitate and lobby on behalf of businesses, including developers. It could be Crony Capitalism at its worst, a reflection of the corruption endemic during the governments of WA Inc. It is becoming clear that councillors should investigate who is behind the scenes, driving the city and advising the Mayor and some colleagues.

Note:
Crony Capitalism is defined as: “An economic system characterised by close, mutually advantageous relationships, between business leaders and government officials.”

 

Roger Garwood

Editor: backchatfremantle@gmail.com

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SUNSET: CONCERT CASH WENT INTO BACKPACKS

SUNSET’S EVENTS : CONCERT CASH FILLED BACKPACKS : PARLIAMENTARY INQUIRY INTO EVENT FAILURE : AUDITED ACCOUNTS : CONFIDENTIAL REPORT INTO CONFLICTS OF INTEREST
A music industry insider has informed Fremantle Backchat that within Sunset’s Business structures it was normal practice to sell surplus tickets at entry gates for cash. Most entry tickets were sold online through booking agencies but it is estimated as many as 2000 tickets, normally available to events online, may have remained unsold. Depending on the event these were sold for cash at prices of “$120 to $150”.
As cash registers filled a Sunset director, James Legge, “would empty them, putting the money into a backpack. As the tills refilled he would return and empty them into the backpack again”.
Fremantle Backchat’s informant explained that, if there were people still waiting to gain entry when tickets were sold out, Sunset’s volunteer workers were instructed to recover ticket stubs from waste bins. The tickets were then recycled “restamped” and sold again. It was impossible to know exactly how many cash tickets were sold but “anything from 1000 to 2000” was estimated.
This indicates that within the directors’ matrix of companies there could have been cash sales of $120,000 to $300,000 at any particular event.
It is not illegal to sell goods and services for cash but it is unknown whether all of the cash  collected at events went ‘through the books’ or was kept aside, possibly to avoid being used to pay creditors. Sunset has recently attempted to negotiate settlements with creditors.
Fremantle Backchat has been supplied with information which indicates the Sunset directors are secured creditors. This would mean that before other creditors are paid the directors have first call on funds.
PARLIAMENTARY INQUIRY INTO EVENTS FAILURE
In September 2011 a parliamentary inquiry was held into the dealings of One Movement Pty Ltd, Sunset Events and the three directors with Events Corp, part of Western Australian Tourism Commission. One movement had been sponsored by Events Corp for a series of three events which  failed financially.
‘Sunset’ has become an umbrella term which covers a matrix of companies. Each company ran events controlled by the three directors, David Chitty, Andrew Chernov and James Legge, each registered with ASIC as individual one dollar companies.
In summary it was proposed by the three directors that One Movement Pty Ltd should host an event in Perth each year for three years. The event was managed by Sunset Events, in itself a partnership operated by the three directors.
The events were planned for 2009, 2010, 2011 and involved agreed sponsorship by Events Corp of nearly $3m. The event of 2009, the first in the planned series of three,  did not meet expectations. Audited accounts of One Movement Pty Ltd showed sponsorship of $1,683,035 which included State Government sponsorship of $995,500.
Ticket sales were recorded in the company audit at $134,893 online and $23,023 in cash
AUDITED ACCOUNTS OF ONE MOVEMENT PTY LTD
The audited accounts of One Movement Pty Ltd, for an 18 month period ending on 31st December 2009, were submitted and reveal a net loss of $1,361,439.
Expenditure showed administration costs Of $202,667 and consultants’ fees of 364,083 were paid. It is not known who the administrators or consultants were but it may be reasonable to assume they may have been one or more of the three company directors. During the inquiry the directors claimed $400,000 was spent on due diligence at the event’s planning stage.
(A link to the audited accounts is shown at the end of this article)
It is reasonable to conclude that, in spite of $400,000 claimed to have been spent on due diligence, which presumably included calculations related to adverting and sales, the company did not follow its own research advice. Did they spend as little as possible to ensure the event’s attendance reached expectations?
A final report was made to Parliament in December 2011 (see link below). The report included many observations, among them:
“Total revenue was approximately $1.26m below that budgeted, with the largest variance being ticket sales which was $908k below that budgeted”.
The report continues “Total expenses were approximately $47,485 below that budgeted with the largest variance attributable to marketing expenses”.
The audited reported, under the heading “Emphasis of Matters Regarding Going Concern” said “One Movement Pty Ltd has a deficiency of Working capital and a deficiency of net assets of $1,361,588.  The liabilities of the company include borrowings from Sunset Events which is related to equity. The owner directors have pledged their ongoing financial support for One Movement Pty Ltd”
The Parliamentary Report said “The Committee views the Auditor’s “Emphasis of Matter” as significant”. (see Note below)
The Committee cast doubt on the liquidity of One Movement Pty Ltd, spoke of the considerable financial distress shown in the financial statement and outlined the directors’ explanation of delays in paying creditors. The auditors said: “This situation indicates the existence of material uncertainly that may cast significant doubt on the companies ability to continue as a going concern and therefore the company may be unable to realise assets and discharge its liabilities in the normal course of business. The financial report does not fully disclose this fact.”
One Movement Pty Ltd ceased trading on September 5th 2011.
CONFIDENTIAL REPORT : CONFLICT OF INTEREST WITHIN EVENTS CORP
In a separate report into matters surrounding government sponsorship of events, questions were raised in relation to a manager within Events Corp resulting in the Report on Allegations of a Conflict of Interest Involving a Tourism WA Employee and the One Movement Music Festival.
The report is relevant as a number of Fremantle City Councillors have expressed a conflict of interest in relation to Sunset Events.
There were several conclusions in Commissioner Wauchope’s report to the acting CEO of Tourism WA.
The principal conclusion was:
“There was both an actual and perceived conflict of interest … This presented a situation which raised competing interests and a perception that there was the potential for the individual concerned and or Sunset Events to receive an unfair advantage”
(Fremantle Backchat has a copy of the confidential report).

THE PUBLIC HAS A RIGHT TO KNOW

A 21 year was lease awarded to Sunset by Fremantle Council Chamber in the face of considerable public opposition. It seems reasonable to ask Council’s Administration to reveal what due diligence was conducted into the Sunset matrix of companies in relation to the application for the lease at Unit 1 J Shed. Fremantle ratepayers are subsidising the lease.

Did Council Administration have knowledge of these Parliamentary Reports, transcripts, financial statements and reports related to conflicts of interest?

If they did how much information was relayed to councillors and/or were complete reports made available to them?

If these reports were relayed to councillors did evidence of systemic failures within Sunset Events and government departments influence councillors decisions?
NOTE : Emphasis of Matter paragraph (EMP) has been defined in International Standards on Auditing (ISAs) as follows:
A paragraph included in the auditor’s report that refers to a matter appropriately presented or disclosed in the financial statements that, in the auditor’s judgment, is of such importance that it is fundamental to users’ understanding of the financial statements.
LINKS:
One Movement Pty Ltd Audit:
http://www.parliament.wa.gov.au/publications/tabledpapers.nsf/displaypaper/3813489a0c12182a799c6d77482578b6004e0f55/$file/3489.pdf
Inquiry into WA Tourism Commission/One Movement:
http://www.parliament.wa.gov.au/parliament%5Ccommit.nsf/(Report+Lookup+by+Com+ID)/822360D9A7CAF4CB482579590024EFD4/$file/ef.mte.111201.rpf.035.xx.pdf

Roger Garwood

editorbackchat @gmail.com

 

SUNSET PAY $400 A WEEK

SUNSET PAY LESS THAN SMALL HOUSE RENTAL IN FREMANTLE
Sunset Venues received the keys to J shed’s number 1 studio today (Thursday 6th July) and will pay only $402 per week on the prime property, representing a lower rent than many families pay for a small home or apartment in Fremantle.
The rent, described by Fremantle Council as a ‘startup’ figure, is granted under a scheme designed to help companies establish new businesses in the city.
Sunset’s 21 year lease over no.1 J Shed was activated last Saturday morning, the rent will not increase until 1st July 2018. They will then pay $800 per week and will not pay the full rental figure, $1616 a week, until July 2019. The rent has been described as ‘too low’ and a ‘peppercorn rent’ by critics of the plan.
Had council insisted the site was activated, with full rent, in 2015 ratepayers would have been better off by about $255,000.
The council will only receive approximately $60,000 over two years.
Mayoral candidate Ra Stewart, has mentioned that council should not be responsible for Sunset’s poor management.

ARE THEY SUITABLE TENANTS? – NUMEROUS COMPLAINTS
At a public information meeting in the Council Chamber two years ago David Chitty, a director and principle spokesperson for a number of related companies, was asked, ‘What will you do with regard to public behaviour after your concert events?’
He replied, “I have no responsibility for the behaviour of people when they leave the venue”. In fact he does but seems to be blissfully unaware of laws related to licensed premises.
There have been numerous complaints in relation to concerts held in Fremantle, including those held by Sunset at the J Shed venue. Fremantle residents spoke of people vomitting, defecating and urinating in the streets and doorways after the concerts. There were also complaints of vandalism and excessive noise. Anecdotal evidence suggests that immediately Sunset’s concerts finished security guards, who searched concert patrons before entry to venues, were stood down.
Chitty was also asked what he would do in relation to people listening to concerts from public spaces. He replied that he would ‘call on the police’ to remove people from those locations. That is an indication he may only be interested in guarding profit margins at the expense of legal considerations for public behaviour.

FUTURE CONCERTS ARE POSSIBLE
A licensed bar of 400 people is not likely to be trouble free. There is also an underlying opinion that there will be concerts. The application for the site’s activities says there will be no ‘paid’ music. This could mean that unpaid musicians may be used and the potential remains to apply for professional concerts later.
The Sunset companies are struggling to pay their suppliers and have failed to reactivate the Drill Hall where Fly by Nite operated. Could this lack of activation be because the Sunset companies have a reputation for not paying their suppliers and artists and musicians are not prepared to work for them? Sunset had applied for a delay of lease activation for 12 months. A principle reason was related to financial instability.

COUNCIL APPLY PRESSURE: FICRA  SAY ‘SUNSET IN BREACH OF LEASE’
Council placed Sunset under pressure to perform following a unanimous vote to refuse an additional 12 months grace before the lease’s activation.
The Fremantle Inner City Residents Association (FICRA), in a submission to Council, outlined a number of issues related to Sunset’s inability to manage the site successfully. They say Sunset is already in fundamental breach of the lease by failing to “use its best endeavours” to secure necessary approvals by the required time. They also say, “Given that Sunset have known since the lease was signed in 2015 that they have had no financial success in the interim period it is unlikely they will gain large investment funding”.
It now rests with Fremantle Council to ensure the lease is implemented and, in the event of default, take rapid action, possibly to evict the company and revoke the lease.

CONTINUING FAILURE ‘ALMOST CERTAIN’
FICRA outline, ‘There will almost certainly be a continuing failure by the lessee to meet fundamental obligations saying, ‘The unwillingness or incapacity of [Sunset] to pay the already reduced rent (25%) does not suggest willingness or capacity in the future to provide substantial investment as the lease contemplates’.

HAVE YOUR SAY
A few days remain to contact council and express your opinion in relation to the revised plans for J Shed.

This link will take you to the web site.

[http://mysay.fremantle.wa.gov.au/jshed-unit-1-fleet-street-fremantle]

Roger Garwood : Editor

editorbackchat@gmail.com

SUNSET  SHAMBLES

COUNCIL ADMINISTRATION ADVISE ‘KILL THE LEASE’

RA STEWART:  ‘COMPANY’S LACK OF DUE DILIGENCE SHOULD NOT BE COUNCIL’S PROBLEM’

Tomorrow night (Wednesday, 28th June) Fremantle council will consider what to do with the troubled Sunset Venues’ lease.
As a result of financial issues the company’s  request for a 12 month period of grace before their lease is implemented will be decided by the full council.

SUNSET ‘LOOK LIKE MOBSTERS OF ROCK  – THEY’RE ON THE NOSE, FROZEN FREO’S LIVE MUSIC SCENE’

A critic of the Sunset companies, Robby Lang, said in a comment to Fremantle Backchat: “Sunset have frozen the live music scene in Freo for the past 3 years with their inaction on the old Fly by Nite site and J shed.
“These sites should be given to people whose actions will benefit the community. Sunset is on the nose and for council to prop them up is bullshit. Unfortunately they are looking like the Mobsters of Rock, Not paying their sub contractors etc.”
Sunset have admitted to financial problems in settling outstanding debts and now wish to implement the J Shed lease on 1st July 2018. However Sunset Events are a different company from Sunset Venues but it appears that Sunset Venues, who have a lease on the old Drill Hall in central Fremantle, are not in a position to activate plans for the former location of the ‘Fly By Nite’, a popular music venue.

COUNCIL ADMIN ADVISE CONDITIONS MUST BE MET OR KILL THE LEASE

The lease is due to be activated this Saturday, 1st July. Sunset Venues have said they hope a 12 month extension before activation may trigger investment. They offer no guarantee that granting extra time will succeed in attracting investors.
Council administration have recommended an alternative suggestion to councillors which includes granting additional time but concluding that if conditions are not met : “ [by] the deadline of 1 December 2018 … the lease is terminated”.
Councillor Doug Thompson who voted against the company’s request for an extension at Council’s Finance, Policy, Operations and Legislation Committee  meeting on 14th June feels the administration’s alternative proposal is preferable. He said: “This would also mean that Sunset Venues must show they have the financial capacity to deliver the Lessee works to Council’s satisfaction. Subject to hearing the debate I have a view that an earlier date than December 2018 for conditions to be met has merit. Of course Sunset Venues would have to agree to any condition precedent being included in the lease.”

$105,000 SUBSIDY ISSUES

The issue of a $105,000 subsidy has been raised and compared to the withdrawal of $97,000 funding from the Wirrawee Woman’s Refuge. The term ‘subsidy’ was challenged by a reader on the Freo Massive Facebook page.

Whichever way this reduction in rent is considered it is a subsidy. It is designed to assist Sunset Venues establish a brewery. The  term ‘assist’ is a direct translation of the Latin ‘subsidium’ from which our language gets the word ‘subsidy’.

City Ward Councillor Rachel Pemberton explained there is no comparison between the withdrawal of Council funding from a womens’ refuge in 2015 and the funding of Sunset’s project.
She said: “The State Government significantly cut funding for Warrawee and so we decided not to tender to run the service and allow a specialist service provider take over. The operator that won the tender has taken over the management [Warrawee still exists and operates in Fremantle] and has other refuges so can  provide a better service more efficiently than we could”.
Ms Pemberton continued, “Council was committed to direct its previous funding to Warrawee to provide specialist legal advice at the Fremantle Community Legal Centre to help people, including women fleeing domestic violence, avoid becoming homeless”.

RA STEWART: ‘PRIORITY IS TO SUPPORT THE VULNERABLE : NOT IN COUNCIL’S BEST INTERESTS TO SUPPLY CONCESSIONS ON LEASES’

Mayoral candidate Ra Stewart commented: “The Warrawee Women’s Refuge provides safe, affordable and supported crisis care accommodation for women and children subjected to domestic and family violence. This service was managed by the City of Fremantle until 2015, after which time Council decided not to reapply to run the service thereby saving approximately $100,000 per annum. Given the recent focus on domestic violence at both State and Federal levels of government, and its social impact on our community, my priority would most certainly have been to continue to support these vulnerable members of our community”.
Commenting on the J Shed brewery proposal Ra Stewart said: “It is important to attract interesting and viable businesses to the City of Fremantle for the enjoyment of all, it is not in Council’s best interests, nor the ratepayers it represents, to provide concessions on lease agreements, or absorb the costs of a company’s oversight in regards to the due diligence around its commercial arrangements”.

 

Roger Garwood : Editor

editorbackchat@gmail.com

SUNSET’S J SHED SUBSIDY

SUNSET HAVE GAINED RATEPAYERS’  $105,000 ‘SUBSIDY’

In a lease approved by  Fremantle Council  for  Sunset Events ratepayers will fund a  $105,000 subsidy to help the financially troubled company to establish their micro brewery and 400 seat bar in J shed.

 

An extension of 12 months for the time in which Sunset implement the lease has been applied for and will be considered by council tomorrow, Wednesday 14th June.

In an application lodged with Fremantle Council   (7th July 2017) Benson Studio for Sunset outline a proposal which reveals a rent reduction of $105,000 in the first two years of the Sunset lease.

The rent for the lease  of the J Shed studio, situated on Arthur Head below the Round House and site for Sunset’s proposed micro brewery, is $83.950 per year. Over the first two years rent would have totalled  $167,900. Sunset are requesting they pay only $62,962 in that period. This represents a shortfall of $105,000 which effectively forces ratepayers to subsidise a private company’s startup. Several observers have commented that even without the subsidy the  rent is very cheap.

Buried deep in the 62 page lease the relevant clause states:

Item 8.       Rent: (clause 3.1)

$83,950.00 per annum plus GST

14.6     Rent Reduction

The Parties acknowledge and agree that during the period commencing from the Commencement Date and ending 24 months after the Commencement Date, the Lessee will pay Rent at a reduced rate and in the following manner

(a)        for the first year of the Term, the Lessee will pay 25% of the Rent; and

b)         for the second year of the Term, the Lessee will pay 50% of the Rent.

FINANCIAL CLOUD OVER SUNSET : ONLY ‘HOPEFUL’ THEY CAN PAY RENT

A number of  media outlets  have outlined some members of the events industry in Western Australia have had trouble paying creditors. Those businesses include Sunset who have been arranging financial settlements with their creditors.

Sunset are only ‘hopeful’ that extra time will help. The Application says: “Sunset has advised that it would be difficult in current circumstances for them to pay rent from July 2017 without the approvals they require to trade effectively. Sunset are hopeful that once approvals are gained, it will trigger investment and the ability to cover the rent and finalise the “Lessee Works”.

COUNCILLORS ADVISED  ‘REJECT EXTENSION ‘

The application for the extension also says: “Sunset Venues have had ample time to gain required approvals and that the lease considers the scenario in which approvals have not been granted by the lease commencement date. Therefore, it is recommended that the request for an extension until 1 July 2018 be rejected.”

Council officers state the proposed leasing arrangements may continue in a state of ‘frustration’. They say “In the event that the approvals are not granted, the lease will continue in a state of ‘frustration’ where no outcome is achieved other than activation …”

WHY SHOULD WE SUBSIDISE THEM?

Sunset’s management admit they are financially frustrated. Is it reasonable for ratepayers to subsidise them?

There has been considerable  angst among residents in the area of J Shed.  The issue of this lease and the request for a $105,000 ‘startup subsidy’ may have a strong influence on the outcome of council elections in October this year.

A number of councillors and organisations have been asked by Fremantle Backchat to comment.

North Ward  councillor Doug Thompson explained his considerations. He said: “Councillors are required to take into account a range of information before making a decision and to have an open mind  about decisions. My general approach to decision making is to give primacy to the information contained in the report and to the officers’ recommendation”

He continued:  “I keep an open mind ( as I am required to) in relation to information provided during a meeting and the issues raised in debate. In relation to your specific questions the decision in relation to the lease arrangements has already been made and is not being reconsidered. What I think about specific elements of the lease is irrelevant. The good governance recommendation by the Department of Local Government, and the Local Government Act,  requires me to support decisions made by Council, regardless of whether I, as an individual Councillor supported those decisions at the time.”

Ra Stewart, a mayoral candidate in the City’s October electoral said: “I am supportive of the officer’s recommendation to reject the extension of the lease commencement date. It would appear that Council has been fairly generous up to this point in time.”

‘KICKING THE CAN AROUND’

The Mayor and City Ward Councillor Rachel  Pemberton have declared a conflict of interest and feel in that circumstance they are not in a position to comment.

Maryrose  Baker and Robert Mehan of Fremantle Inner City Residents Association declined to comment saying:  “FICRA is currently preparing a formal response for Council re the latest Sunset Events J Shed proposal.  We don’t intend to issue any statements on the matter as an Association nor as individuals right now”.

John Dowson was asked to comment as  President of the newly amalgamated Fremantle Society and the Fremantle Residents’ & Ratepayers’ Association but chose to make a personal observation: “In terms of the J Shed lease Sunset may have a lot on their plate financially. Sunset and the Mayor may not want the lease to be a major election issue, raising again the question of the $5000 election donation from Chitty’s brother, and kick the can down the road until the October election is over”.

ELEPHANT IN THE ROOM A MAJOR ELECTION ISSUE?

If council approve the application for a delay the controversial elephant in the room may  be given a lease of life.  If they do not Sunset will need to implement the lease from 1st July this year, complete with the already agreed $105,000 rent reduction but still under their admitted financial difficulties.

It does seem likely that the J Shed lease and Sunset Events will become an election issue which will need to be addressed by all candidates, particularly those for City Ward and for the position of mayor.