2020-12-08 Services & Organisation Committee Agenda

SERVICES & ORGANISATION COMMITTEE MEETING AGENDA                                8 DECEMBER 2020


Key points to note regarding table 2 are:
1.   Under either refinancing option, the average interest rate will reduce from 5.42% (current
     weighted average) to less than 2%;
2.   Funding the ERA via cash would reduce Council’s current cash balance by approximately
     $3.2 million, but would result in a net annual repayment reduction of $2.6 million with current
     debt levels remaining unchanged; and
3.   Capitalising the $3.2 million ERA would result in the overall debt book value increasing to
     $23 million, but would result in a net annual repayment reduction of $2.4 million with Council’s
     current cash balance retained.
4.   Under either scenario, Council’s 2020/21 operating position will be impacted by $3.2 million
     to account for the ERA adjustment.

Implications for Financial Plan Metrics

The 10 year financial plan (as at 30 June 2020) was updated for each scenario to determine the
implications on Council’s financial capital sustainability, particularly changes to the operating
surplus ratio and net financial liabilities ratio.

Operating Performance

Operating Position ($’000)
                                                                  Under both scenarios the operating
                                                                   position     will    improve     by
                                                                   approximately $500k in 2022 due to
                                                                   a reduction in interest expense
                                                                  Benefits to the operating position
                                                                   through to 2025 will assist with
                                                                   Council’s financial recovery plan
                                                                   objectives
                                                                  The refinancing benefit reduces by
                                                                   2027 due to ongoing interest
                                                                   expense associated with any loan
                                                                   refinancing (current debt due to be
                                                                   repaid by 2030)


Operating Sustainability Ratio (%)
                                                                  Under both scenarios the operating
                                                                   sustainability   ratio   improves
                                                                   compared to the current position
                                                                   through to 2025
                                                                  These benefits will assist with
                                                                   Council’s financial recovery plan
                                                                   objectives
                                                                  The ratio degrades and by 2028 is
                                                                   slightly negative under both
                                                                   scenarios.
                                                                  Prudent budgeting and planning
                                                                   over the next few years will
                                                                   adequately manage any outer year
                                                                   operating position risk




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