One item reported in the minutes from last council meeting is certain to have major financial repercussions in the years ahead. The timing, rationale, and the potential risks this decision embraces, says much about council’s decision making of the past, and the state of its current finances.

Pages from 051716-MINUTES

Council borrowed $25 million at the astronomical FIXED RATE of 8.04% for 15 years under Newton. There is still a decade to go on this loan. Comments made in chamber over the past year or so indicated that council could not afford to get out of this arrangement without paying some hefty penalties (we believe in the order of $4 million). According to the draft Strategic Resource Plan (page 11) it will cost council $2.88 million in principal and interest repayments for 2016/17 and council would still owe at the end of the next financial year $18.71 million.

Countless questions arise:

  • Is negotiating another fixed rate contract nothing more than a long term gamble?
  • What does this resolution say about council’s current financial situation?
  • Will council be attempting to borrow another $6+ million to bring it back up to the original $25 million?
  • Will council be paying interest on the interest?
  • What penalty rates will the bank impose?
  • If repaying the loan early is so vital, then why wasn’t this undertaken years ago? Could it in fact be related to the departure of Newton? Or is council so cash strapped that it has to do this now?
  • Why is the Chief Financial Officer ALONE ‘authorised’ to ‘negotiate’ and sign off on the massive deal? Where is the full council in any such decision making?

The history of council’s financial dealings are nothing to write home about. Readers should also remember that as a result of the $25 million loan for GESAC, council was unable to borrow (as other councils did at a much lower interest rate) to repay the $7.1 million Superannuation costs and thus were paying 7.5% instead of a far reduced interest rate if they could have borrowed this money.

Ratepayers deserve nothing less than a full and comprehensive account of what is happening and why.