Bundaberg Regional Council CEO Steve Johnston.
Bundaberg Regional Council CEO Steve Johnston. Contributed

Council CEO fears state will clamp down on borrowing

BUNDABERG Regional Council executives are concerned that it may be restricted from borrowing more money from the Queensland Treasury Corporation, which could be used for large infrastructure projects.

Chief executive officer Steve Johnston said in the brief council meeting yesterday that one of the reasons the Queensland Government wanted to reduce borrowing from all councils because it affected the state budget.

"While it is only a small percent of total borrowings, clearly the debt for the Queensland State Government has been an issue for some years now,” he said.

Mr Johnston said the concern on limiting borrowing had been raised with council staff, but the matter needed to be discussed with QTC.

The issue was raised when councillors were told the council applied to borrow $7.5m from the QTC.

The Department of Local Government said it does not have any policy to limit local governments from borrowing money.

"The department assesses any borrowing application from local governments in Queensland on an individual basis, with advice from QTC,” a departmental spokeswoman said.

A QTC spokeswoman said it does not set policy, but follows the direction of the Queensland Government.

"QTC provides financial risk management advice to local governments and, in these discussions, will look at all of the financial data in an individual council's situation”, she said.

"This would include a review of council's operating cash and contingency requirements, as well as any proposed use of excess surplus cash...and future borrowing requirements.”

Council borrowings did not directly impact the Queensland Government's annual state budget, but it was one of the factors that rating agencies looked at when they decided what the state government's credit rating should be.

Mr Johnston said councils were limited from borrowing money then it failed to consider "intergenerational equity”.

It was a council policy to consider the long-term benefits of large infrastructure projects for future ratepayers which was a reason for borrowing money, so that they would pay back for projects they benefited from.

"The other thing to bear in mind is that over 60 per cent of our total debt is related to water and sewerage infrastructure so I would have some real concerns if there's a shift in policy by the government or QTC in terms of trying to force the council to use cash for long-term infrastructure,” Mr Johnston said.

"It certainly won't be something we can easily agree to because of the fact that if you look at our balance sheet, in reality, that's where the big ticket items are.

"We've got a big geographical area, a number of water and sewerage plants across the whole area, and some of them are coming to the end of use of life.”

Cr Judy Peters noted that Bundaberg's council was not the only one that would be affected by any proposed policy change.

Acting mayor Bill Trevor said "we're a lot further from the cliff than other councils”.

In May the Queensland Audit Office released a report to parliament regarding the Bundaberg Regional Council's financial position.

It determined the council was in a strong enough financial position to manage its debt of $78.3m.

Finance chairman Cr Steve Cooper said the CEO's comments and said if borrowing was restricted then the council had the right to object on the behalf of ratepayers.

"People think debt is bad, but our debt is very well managed,” Cr Cooper said.

"I don't want to put burden on the cashflow for today.

"We've got to spread it over the life of the infrastructure.”



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