Meeting papers

DEBT POLICY

     7.2. 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.
Repayment Ability
8.   Council will maintain close scrutiny of debt levels to ensure that relevant sustainability indicators
     will not exceed target parameters recommended by Queensland Treasury Corporation (QTC)
     and the Local Government Regulation 2012
Borrowing Sources
9.   Council will raise all external borrowings from the QTC. Consideration will be given to the
     provision of loans to business activities and other specifically identified projects and activities
     from surplus cash reserves held by Council by way on an internal loan.

Proposed New Borrowings
10   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.
     10.1 Proposed Borrowings are outlined in Appendix A
Leases
11   Funding alternatives for asset acquisition also includes leasing. Leases are defined under
     accounting standard AASB 16 as a contract for the right of use over an asset for a temporary
     period of time.
     11.1 Any low value (under $10,000) or short term (under 12 months) leases are considered an
          operating expense.
     11.2 However, all other lease arrangements under AASB 16 are reported as a right-of-use
          asset with a corresponding liability in the balance sheet recognised with all other debt and
          loan borrowing instruments.
     11.3 Any lease arrangement greater than $2 million (other than any lease for office premises)
          are considered borrowings under the Statutory Bodies Financial Arrangement Act 1982
          and will require prior approval by the Queensland Government before they are committed.
     11.4 Council will also undertake a lease vs. buy analysis before entering into any lease
          contract.

Internal Loans
12   The provision and approval of an internal loan will depend on the availability of surplus cash at
     the time of consideration and the capacity of either the business activity or operational activity
     to repay the loan.
     12.1 All decisions regarding internal loans will be made by Council as part of the annual budget
          process. The approval to establish an internal loan will only occur following confirmation
          that Council’s relevant sustainability indicators in the 10 year financial forecast will not be
          compromised.
     12.2 The term of any internal loan will be appropriate to the life of the infrastructure / asset
          being financed.
     12.3 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.
                                                                                                  Page 2
                                                                                                 Page 428 of 476