2014-06-26 Budget Meeting Attachment I

STRATEGIC POLICY - 2014/2015 DEBT POLICY


Repayment Ability
Council will maintain close scrutiny of debt levels to ensure that relative sustainability indicators will
not exceed target parameters recommended by Queensland Treasury Corporation and the Local
Government Regulation 2012.
Borrowing Sources
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
units from surplus cash reserves held by Council by way on an internal loan.
Proposed Borrowings
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. Proposed borrowings are contained in Appendix A.
Leases
Financing alternatives for asset acquisition includes the option of leases. Leases are defined as
being either operating leases or finance leases.
     Operating leases are undertaken for office equipment, computer equipment and vehicles
      under master lease facilities subject to periodic review.
     Finance leases are essentially loans and require prior approval by Treasury under the
      Statutory bodies Financial Arrangements Act 1982.
Internal Loans
The provision and approval of an internal loan will depend on the availability of surplus funds at the
time of application and the capacity of either the business or operational activity to repay the loan.
     All applications for internal loans will be made by reference to the Financial Services team for
      consideration in accordance with the Long Term Financial Forecast.
     The term of the loan will be appropriate to the life of the asset being financed.
     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.
     The interest rate applicable to internal loans relating to operational activities of Council will be
      the actual borrowing cost from QTC including administrative charges.
     Council may, upon reasonable notice being given, require repayment of part or all of the
      balance of the loan at any time, which would require the business activity to convert the
      outstanding balance of the loan to an external facility.
     The balance of the outstanding loan will be recorded as a liability in the balance sheet of the
      business activity and an asset in the balance sheet of Council.
     Provision for the repayment of the loan will be included in the annual budget for the business
      activity.

Reporting
Details of outstanding loans will be reported annually in Council’s Financial Statements and Annual
Report.




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