West Torrens to up rates to cover $20 million in borrowings

For the first time in a decade, West Torrens Council is being stripped of its debt-free status, and a prediction of rate rises to come.

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For the first time in a decade, West Torrens Council is being stripped of its debt-free status.

The council is having to borrow at least $20 million over the next two years, a move that will force up rates by “at least 1.8 per cent”.

The council has been in the black for at least a decade, propped up by the sale of council assets that have bankrolled new projects including the Thebarton Community Centre.

But now, it is being forced to borrow money to cover infrastructure and development costs, as well as upgrading of parkland facilities.

The rates increase in West Torrens last year was 2.3 per cent.

Former West Torrens Mayor John Trainer, who was a stickler for keeping rates as low as possible during his 18 years at the helm, told the Westside Weekly: “While it’s nice to be debt-free, if you have to borrow it’s best to do this when interest rates are low as they are now.

“Borrowing can be seen as a form of intergenerational cost sharing and I believe that residents are more concerned about getting good value for the rates they do pay rather than any possible increases.”

Cr John Woodward agreed, saying the council needed to fund its major capital works program for the next 10 years.

“However, it might be preferable to spread the borrowings and repayments over a longer period to better reflect the life of the assets,” he told the Westside Weekly.

In his manifesto to voters in the mayoral race in the run-up to the November election, Michael Coxon told prospective voters: “My vision for West Torrens is to improve the lives of all our residents by, firstly, making our council rates more affordable by supporting the introduction of responsible rate capping and, secondly, introducing fixed rates for seniors.”

Despite the looming rate increases, the council remains confident of preserving its record of having the second-lowest average residential rates in metropolitan Adelaide after Port Adelaide Enfield.

West Torrens The newly elected West Torrens Council at their first meeting in November 2018. Picture: John Kruger.

A report prepared for its city finance and governance standing committee confirms that the council is currently debt-free but flags an imminent change.

“A sizeable loan, perhaps for $10 million, is expected to be necessary in the near future. A further loan of a similar magnitude may also be needed during the 2019/20 financial year,” it says.

“Both loans, if taken, will impact the rates in the upcoming budget.”

West Torrens’ corporate and regulatory general manager Bill Ross, told councillors that the expected borrowings would attract interest repayments of about $900,000 a year but added that “fortunately we have low inflation at the moment”.

The report said finance staff were assessing “when and how much” the council needed to borrow and was looking at ways to minimise the initial impact these loans would have on rates in the upcoming budget.

“At this early stage, an impact on rates of at least 1.8 per cent is expected.”

However, Mr Ross said: “The increase on account of borrowing will only need to occur once and will not be repeated each financial year.”

He said West Torrens still had the second-lowest average residential rates in metropolitan Adelaide and “this is not expected to change due to future borrowings”.

For example, he noted that “27 per cent of ratepayers are on the minimum rate ($909 in 2018/19) and a 2.5 per cent rate increase would mean these ratepayers would pay an extra $22.70 per year”.

This figure related to a property valued at $372,700.

Mr Ross said the council had borrowed only once since 2007 but had now reached the point where further loans were necessary and it was not possible to retain the historical debt-free status by selling off assets or reducing services.

“Due to commitments to major community infrastructure and building programs, it was not possible to remain debt-free at this time,” he said.

Mr Ross said before each budget the council estimated and committed to a “manageable level” of borrowing but it only borrowed amounts required by operational expenditure increases as they arose. Loans were not taken to enable further investments.