It is important that the Council minimises borrowings to decrease the interest costs and to make the Council more resilient to financial shocks.  Rural Councils, such as Colac Otway Shire, operate on tight budgets and increased borrowings generally require higher rates to fund the debt repayments.  Ironically, under the "prudential" rules, higher rates generally permit higher borrowings, as the level of permissible borrowings is a percentage of rate revenue amongst other requirements.

The previous Council made various committments that were substantially unfunded, with the payments  to be made by the current Council.  Examples include: the decision to sign the Colac joint use library agreement on the last day before the Council went into "caretaker" mode before the 2008 election and the long outstanding Apollo Bay transfer station.  In addition there were  contingent liabilities  arising from the Cressy-Shelford Road incident that occurred in April / May 2008.  

A contingent liability is one that depends on a final outcome and is not quantified.  As a result no amount was disclosed in the 2008 annual report.  Recently the Cressy Shelford Road matter was resolved with various undertakings costing $690,000 plus $200,000 (approximately) in legal costs and other costs with staff time and associated negotiations.  This follows damage caused to a protected roadside in April/ May 2008.

These substantially unfunded committments, inherited from the previous Council, meant that the current Council had to find the funds.

When the 2008/2009 budget was released in its draft form the following borrowings were proposed:

The proposed borrowings were to be repaid over twenty years.  The level of borrowings and long repayment period would have unreasonably burdened both current and future generations.  Due to the excessive borrowings and other factors I was one of three Councillors who voted against exhibiting the proposed budget.

Due to concerns about the level of borrowings the budget was changed when adopted on 22 July 2009.  Borrowings were limited as follows:

In addition, the lower borrowings are to be repaid over fifteen years or less rather than twenty years.  I felt compelled to support this revised budget ,with lower borrowings, due to the binding committments referred to earlier.

This doesn't mean that this amount will be borrowed.  It is a limit.  As at the date of writing none of the amounts have been borrowed.  I am committed to ensuring that  any of these borrowings are kept to an absolute minimum.

Even if all these amounts were borrowed, debt would still be within all prudential ratios and well below the record high amount of interest bearing debt of $6.779 million at 30 June 2000.

I am also committed to doing all I can to avoid requiring the Council  to increase  future borrowings.

Please feel free to contact me on 5237-3196 if you would like to discuss this or any other Council matter.

To comply with the Councillor Code of Conduct I need to make it clear that these comments are my personal report. I am not speaking on behalf of the Council.