2019-05-13 General Committee Meeting Agenda

GENERAL COMMITTEE MEETING AGENDA                                                            13 MAY 2019


Option                             Advantage                           Disadvantage
Early repayment of existing loan      Interest saved on loans           Interest on cash at bank
borrowings                              which is fixed at 6.29%             foregone at 2.7%
                                                                          Upfront early repayment
                                                                            adjustments of $1.36 million
                                                                            required by 30 June
                                                                            (difference between book
                                                                            and market value of loans)
Defer new borrowings and use          Marginal – borrowing rate of 2.7% currently equal to cash
cash instead                            investment yield being achieved of 2.7%

The recommended approach is a combination of the above, involving the allocation of half the
current surplus cash to fund an early repayment of $10 million of existing loan borrowings by 30
June 2019. The remaining $10 million existing surplus cash is proposed to be retained as cash,
allowing for annual reassessment of cash and borrowing needs as part of future budget
processes.

The $10 million repayment of existing borrowings involves:
 An upfront payment of $1.36 million in the 2018/19 year. The current 2018/19 operating
   surplus (BR3) forecasts an operating surplus of $1.4 million and indicates there is sufficient
   funds to accommodate this payment and still retain a surplus in line with Council’s Financial
   Sustainability Policy.
 A reduction in both finance costs and interest revenue in future years for the seven remaining
   years on the loan term will generate an additional net saving for the operating budget. For the
   2019/20 year this equates to approximately $270k.
 The net total benefit over the next 10 years is approximately $315k.

The following table and graph presents the net impact to the operating surplus each financial
year.

Figure 5: Impact to Operating Budget from a $10 million Early Loan Repayment




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