Clarence Valley Council debt position, borrowing power increased

Latest report reveals just how much Clarence Valley Council can borrow, but will they take advantage of these extra funds?

Clarence Valley Council mayor Jim Simmons and general manager Ashley Lindsay have welcomed the latest debt and borrowing power review.

A review into Clarence Valley Council’s debt position has revealed there is capacity to increase their borrowing power for future projects. But will Council take advantage of these extra funds?

At the April 27 Council Ordinary Meeting, a review of Council’s debt position and capacity to increase borrowings conducted by Ernst & Young revealed a new sustainable debt level of $197 million as at June 30, 2021. This is an increase of $67 million from the last assessment which was conducted in 2016.

“The decisions made by this Council have resulted in an improved sustainable debt level,” Mayor Jim Simmons said.

“We have made a point of paying down debt in recent years, putting future councils in a good position to utilise loans for projects.”

In 2016, Ernst & Young were engaged to undertake a review of Council’s debt position and an assessment of Council’s capacity to increase borrowings. The report detailed a forecast sustainable debt level as at June 2017 of $131 million and at the time Council were considering borrowing an additional $5 million in the General Fund to assist with reducing Council’s infrastructure backlog.

Council did not proceed with this borrowing, however.

Instead, they elected to pay down existing loans as a priority, especially after a Local Government review found Clarence Valley Council financially unsustainable.

But, five years on, Council’s current debt level of $104.1 million, as at June 30, 2020, sees it compliant with the ‘conservative risk’ debt range calculated under the same methodology as the 2016 report.

As a result of these findings, Clarence Valley Council now has an additional borrowing headroom of $92.9 million.

However, CVC general manager Ashley Lindsay said while the current report provides a better understanding of its borrowing capacity, an increase in borrowing does not automatically follow.

“The recent review of our current debt level shows we have the capacity to increase our borrowing in order to deliver projects to the community, but to do so will require extensive consultation with the community about how we fund projects over time,” he said.

Members of the outgoing Council made it clear during the debate that any decisions to borrow additional funds is one for the new Council, in accordance with the Borrowing Policy of Council.