2020-07-10 Special Meeting Agenda

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DEBT POLICY

Repayment Ability
8.    Council will maintain close scrutiny of debt levels to ensure that relevant sustainability
      indicators will not exceed target parameters recommended by Queensland Treasury
      Corporation and the Local Government Regulation 2012
Borrowing Sources
9.    Council will raise all external borrowings at the most competitive rates available and from
      sources available as defined by legislation. Consideration will be given to provision of loans to
      business activities from surplus cash reserves held by Council by way on an internal loan.
Proposed Borrowings
10    Pursuant to section 192 Local Government Regulation 2012, Council must prepare a debt
      policy each year that states the new borrowings planned for the current financial year and the
      next 9 financial years.
      10.1 Proposed Borrowings are outlined in Appendix A
Leases
11    Funding alternatives for asset acquisition also includes leasing. Leases are defined under
      accounting standard AASB 16 as a contract for the right of use over an asset for a temporary
      period of time.
      11.1. Any low value (under $10,000) or short term (under 12 months) leases are considered
           an operating expense.
      11.2. However, all other lease arrangements under AASB 16 are reported as a right-of-use
           asset with a corresponding liability in the balance sheet recognised with all other debt
           and loan borrowing instruments.
      11.3. Any lease arrangement greater than $2 million (other than any lease for office premises)
           are considered borrowings under the Statutory Bodies Financial Arrangement Act 1982
           and will require prior approval by the Queensland Government before they are
           committed.
      11.4. Council will also undertake a lease vs. buy analysis before entering into any lease
           contract.

Internal Loans
12.   The provision and approval of an internal loan will depend on the availability of surplus cash
      at the time of consideration and the capacity of either the business activity or operational
      activity to repay the loan.
      12.1. All decisions regarding internal loans will be made by Council as part of the annual
           budget process. The approval to establish an internal loan will only occur following
           confirmation that Council’s relevant sustainability indicators in the 10 year financial
           forecast will not be compromised.
      12.2. The term of any internal loan will be appropriate to the life of the infrastructure / asset
           being financed.
      12.3. The interest rate will be the sum of
           (a)   the equivalent QTC borrowing rate for the proposed term;
           (b)   the QTC administration charge; and
           (c)   an additional margin above the QTC borrowing rate.
           In all cases, where business activities are subject to the provisions of the National
           Competition Policy, the cost to the business will be no less than what would apply to an
           equivalent private sector business.
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