Clarence Valley Council looks to borrow another $24m

Funding for shortfall leads council to have assessor check whether debt level is appropriate

Clarence Valley Council building in Grafton.

Clarence Valley Council will consider a report which shows the result of a review into whether borrowing $24m to fund capital expenditure on caravan parks was sustainable.

In 2016, consultants Enrst and Young undertook a review of council’s debt position and detailed a sustainable debt level at June 2017 at $131m.

It was determined that their current debt position was one of moderate risk, however following council‘s pay down of debt since 2016, its actual debt position is at $104.1m, which sees it compliant as a conservative risk

The report states that due predominantly to improved financial performance, council now has additional borrowing headroom up to $197m, meaning the proposed new borrowing would fall well inside the borrowing limit.

The money is needed for capital works improvements within the Clarence Coast Holiday Park properties, including Brooms Head Caravan Park, and Calypso Caravan Park, of which upgrade plans have been released.

Council also sought a review of whether the holiday parks could service the debt as a stand-alone entity.

According to the report, the sustainable level of debt for the parks was $10.9m, well below the required $24m, and said the borrowing by the sole entity would be representative of a “high risk” debt amount.

“Should Council elect to continue viewing CCHP as financially independent, it may wish to consider whether the proposed capital expenditure amount of $24M is appropriate in view of the extended repayment profile, high level of debt leverage for a business of its kind, and risk of independently raising the debt amount, again noting that Council has sufficient headroom for the additional borrowing,” the report states.

The reports says the Draft Clarence Coast Holiday Park (CCHP) Strategic Plan 2020-2030 has not been formally adopted by Council but was presented to Councillors at a Workshop in November 2020.

Councillors will consider the report at the monthly meeting today.