2014-01-13 Item 6.3 Appendices 1-5

   the incremental annual recurring costs of de‐amalgamation where they were not
    already considered to be included.

QTC’s financial forecasts were based on a standard delivery model. However, where
existing assets were shared across a region (i.e., landfills), QTC assumed that a
commercial arrangement would be negotiated between the councils to continue to share
the asset. This was thought to be a more practical assumption than including the cost of
replacing the asset.

1.2.1 Sustainability ratings – Base Case forecasts

QTC’s assessment of financial viability involved determining a sustainability rating for the
Existing Council, Proponent Council and Remaining Council. This rating considers each
council’s five year forecasts against sustainability ratios and benchmarks referred to by
both QTC and the Department of Local Government (DLG).

A summary of the sustainability rating assigned by QTC to the Existing, Proponent and
Remaining Council is shown below. It should be noted that these sustainability ratings
have been determined based on information and assumptions contained in the Base Case
forecasts estimated by QTC.

Sustainability Rating             Existing Council                  Proponent                    Remaining
                                                                        Council                      Council

QTC rating (and outlook) – Base    Strong (neutral)        Moderate (neutral)               Sound (neutral)
Case


Based on the Base Case forecasts made available QTC has rated the Existing Council as
Strong, the Proponent Council as Moderate, and the Remaining Council as Sound.

The Existing Council’s Strong rating is supported by:
 historical and forecast operating surpluses in all years
 very low gearing levels throughout the forecast period and high interest and debt
   service cover ratios
 strong liquidity, and
 forecast capital expenditure of $718 million with only 14.3 per cent funded by new
   borrowings.

The Remaining Council’s Sound rating is supported by:
 minor operating deficits over the forecast period, and
 a reasonable level of borrowings which are able to be adequately serviced.

The Proponent Council’s Moderate rating is supported by:
 minor operating deficits over the forecast period, and
 adequate capacity to meet its financial commitments in the short to medium term and
   acceptable capacity in the long term.



                                        Queensland Boundaries Commissioner Report – Proposed Noosa De-amalgamation
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