2014-06-26 Budget Meeting Attachment I

                                                                                   ATTACHMENT I



                                                                                Council Policy
                                                               2014/15 DEBT POLICY

 Corporate Plan Reference:                      A sustainable Council

 Endorsed by Council:

 Policy Author:                                 Director Corporate Services


POLICY BACKGROUND
The purpose of this policy is to ensure the sound management of Council’s existing and future
debt. The policy will provide clear guidance for staff in the management of Council’s debt portfolio
and maintenance of appropriate debt and debt service levels.
This policy applies to all Councillors and Council staff and extends to all borrowing activities of
Council and any controlled entities.


COUNCIL POLICY
Council will utilise a debt management strategy based on sound financial management principles
and ensure net debt (net financial liabilities) remains within financial sustainability targets.
Borrowing Purposes
Council will not utilise loan funding to finance operating activities or recurrent expenditure.
Council undertakes full analysis of all funding options as outlined in the Long Term Financial
Model, including a forward program of capital works, to determine loan funding requirements.
Council recognises that infrastructure demands placed upon Council can often only be met through
borrowings, but will always be mindful of the additional cost incurred by the community when
assets are acquired through borrowings which increases the cost of providing capital infrastructure.
Council will endeavour to fund all capital renewal projects from operating cash flows and borrow
only for new or upgrade capital projects, having regard to sound financial management principles
and giving consideration to inter-generational equity for the funding of long term infrastructure
projects.
Where capital expenditure is deferred from one year to the next, the drawdown of approved loan
funds will be reviewed to minimise interest expenses.
Borrowings for infrastructure that provides a return on assets will take priority over borrowing for
other assets.
Debt Term
Where capital projects are financed through borrowings, Council will repay the loans within a term
not exceeding the life of those assets, and over a term that optimises cash flow efficiency. Current
loans are planned to be repaid within a twelve (12) year term.
If surplus funds become available, and where it is advantageous to Council, one-off loan
repayments will be made to reduce the term of existing loans.
In an environment of fluctuating interest rates, and where there is a distinct economic advantage to
Council, consideration will be given to renegotiating any outstanding loans to obtain the best long-
term benefit to Council.



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