Clarence Valley Council (CVC) raised its debt ceiling from $131m to $197m at the Tuesday April 27 council meeting.
Councillors unanimously adopted general manager Ashley Lindsay’s recommendation to “update its loan borrowing policy to reflect the increased sustainable debt level of $197m, as outlined in the EY [Ernst & Young] March 2021 debt review update” – Cr Karen Toms declared an interest and did not participate.
Councillor Jason Kingsley moved a motion to adopt the GM’s recommendation, adding a second point, to “invite Ernst & Young to present the review to the Council following the 2021 election”.
The report to council stated that CVC’s “Draft Clarence Coast Holiday Parks (CCHPs) Strategic Plan 2020-2030 identifies the need for capital expenditure of some $24m to fund park infrastructure improvements”.
However, the EY report found that CCHPs’ assessed borrowing capacity was only $10.9m on a standalone basis – consequently, any future CCHPs-related borrowing will be via CVC’s general fund.
The council’s borrowing policy has been amended and notes that CVC has reduced its debt position “through amortisation repayments to $104M (as at 30 June 2020), whilst improving its earnings through cumulative rate increases of approximately 25% over the last 3 years, combined with $6m annual savings through a cost reduction program”.
The debt review “supports an additional $24.5 million in general fund borrowings on a consolidated basis, to fund infrastructure upgrades to the CCHPs”.
“…Applying Moody’s credit rating methodology, EY assesses the credit profile of CVC to be Aa2, which translates to rated as ‘high quality and very low credit risk’.
“This rating is one notch above the assessment from the 2016 EY report (Aa3) and is 2 notches below the Commonwealth of Australia and the State of NSW (both triple A rated).”
The amended policy will not be publically exhibited; however, councillors did not discuss this.
At the meeting, Mr Lindsay told councillors that “this decision does not mean CVC will borrow, but there is capacity [to do so]”.
Councillor Kingsley said the decision was about “potential borrowings in the future … but under no circumstances is this report endorsing that”.
Councillor Andrew Baker said he hoped the next council “can do even better financially” than the current one.
“Council’s capacity [to borrow] is far more important than its debt,” he said.
Councillor Peter Ellem said it was “quite an achievement to pay debt down by $27m and it might be better by the end of this five-year council” and praised the mayor, “who reminded us from time to time to show fiscal restraint”.
Mayor Jim Simmons said he “received an email from an upset rate payer” about CVC’s apparent intention to borrow $24m, but said he doubted, “with the time left for this council, that the matter will comeback before the elections [in September]”.