Newspaper article Daily Examiner (Grafton, Australia)

Council Debt Explained

Newspaper article Daily Examiner (Grafton, Australia)

Council Debt Explained

Article excerpt

FROM THE SIDELINES

CRAIG HOWE

LET'S talk about asset sales and debt.

There have been various claims over the last year or so as to the size of the council's debt.

As at June 30 this year the council carried the following debt:

Sewer Fund $77,430,073 (56.67%).

Water Fund $25,068,252 (19.32%).

General Fund $19,977,693 (15.39%).

District Waste Management $7,293,451(5.62%).

That's a total of $129,769,469. To the average person that sounds huge, and it is. But it is within acceptable guidelines.

The water and sewer fund debts (which make up 75.99% of the total debt) are debts incurred to do projects such as Shannon Creek Dam, Ilarwill sewerage, Iluka sewerage, sewerage augmentation for west Yamba and the ebb tide outfall.

These have lifespans of 50-60 years so it is reasonable to apply the concept of intergenerational equity. That is, not pay up front, but borrow the money so this and future generations are responsible to help foot the bill.

There are also reserves (money in the bank) for these two funds of:

Water Fund around $15.19million.

Sewer Fund around $18.76million.

These reserves are quarantined for use on these services as the need arises for maintenance. These debts have NO NEGATIVE IMPACT on the general fund and are business operations of the council that add a funding stream and more than cover their loan repayments. In fact the water availability charge went down for the 2016/17 rating period.

The general fund debt I agree is borderline.

During the first Clarence Valley Council there was money borrowed every year for general fund, about $3million annually, which obviously is not sustainable.

The second Clarence Valley Council recognised this. It borrowed $3million in its first year then progressively reduced general fund borrowing until it reached zero.

This in itself created a gap in available funding that will be alleviated as the general fund loans are paid down over time. …

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