2019-05-13 General Committee Meeting Agenda

GENERAL COMMITTEE MEETING AGENDA                                                          13 MAY 2019


6                        QUEENSLAND TREASURY CORPORATION REVIEW OF COUNCIL LIQUIDITY
DOCUMENT INFORM AT ION




Author                           Manager Financial Services, Trent Grauf
                                 Corporate Services Department

Index                            ECM/ Subject/ 22.08 – Loans & Queensland Treasury Corporation

Attachments                      Nil


EXECUTIVE SUMMARY
An independent review of Council’s financial liquidity was undertaken by Queensland Treasury
Corporation (QTC) to determine the optimal level of cash Council should hold to ensure efficient
use of funds. The review identified that Council is currently holding surplus cash at bank above
optimal levels. This surplus cash currently equates to approximately $20 million, and reduces to
approximately $10 million over the next decade.
It is proposed that $10 million of cash be utilised to reduce current debt levels, with the remaining
$10 million held at bank for future investment opportunities or emergent needs. A reduction in
debt will provide net savings to Council’s operating position in future years and generate capacity
within the operating surplus for growth.

RECOMMENDATION
That Council note the report by the Manager Financial Services to the General Committee
Meeting dated 13 May 2019 regarding liquidity review outcomes, and authorise the CEO to apply
to QTC to undertake a $10 million debt repayment by 30 June 2019.

REPORT

QTC Liquidity Review
Liquidity is a key element of effective cash flow management for Council. It involves a balance
between the requirement for sufficient funds to meet short to medium term operations and capital
project delivery, versus the opportunity cost of holding excess cash as a buffer for future
opportunities. Holding too much cash (buffer) comes at a cost as it may be better applied
elsewhere and can affect profitability. Conversely, it is important to recognise holding too little
cash can affect Council’s financial sustainability.
Given Council’s sound financial position over recent years, reflected by operating surpluses,
steady cash reserves and low debt levels, Council is now in a position where it can rely on
historical performance and forecasts to reassess its approach to liquidity. Queensland Treasury
Corporation (QTC) were engaged to undertake a liquidity review, with the scope of the review to
assess Council’s 10 year financial plan forecast, determine baseline cash requirements over the
next 10 years and identify whether there is any surplus cash (above baseline requirements) that
could be better utilised.

Assessment of Cash
Council’s total cash cycle fluctuates on a bi-annual basis by approximately $26 million. This cash
cycle increases as rates are paid in February and August and then declines as cash from rates
are used to fund operating and capital expenditure. At the last peak in February 2019, total cash
on hand was $84 million. This has steadily increased from the February 2016 peak of $81 million
(maximum of $91 million in February 2018). Council’s 10 year financial plan forecasts cash
balances to remain at a peak levels between $80 - $90 million over the next decade.



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