Council budget shocker: Debt expected to blow out by $200m

A shock new forecast shows the Gold Coast City Council’s debt ballooning by a huge sum over the next five years. But it’s not because of COVID-19.

DEBT is expected to blow out by more than $200 million in the next five years, according to the Gold Coast City Council’s latest annual plan.

Released as part of the 2020 Budget today, the plans reveals debt will increase from $615 million in 2019 to $663 million this year, after trending downwards from a peak of $730 million in 2011-12.

City leaders — Mayor Tom Tate and CEO Dale Dixon. Picture Glenn Hampson.

“Total debt is forecast to increase over the next few years from $615 million in June 2020 to a peak of $825 million in June 2025 as council delivers a number of major infrastructure projects to reduce congestion on roads, expand the public transport network and to meet demand for new and improved community facilities,” the annual report said.

“Debt is then projected to decrease back to $612 million by June 2030. Despite the increased debt outlook in the medium term, council will remain well within debt ratio benchmarks set by the State Government and Queensland Treasury Corporation.”

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The report highlighted the QTC’s 2019 credit rating for council which was “sound” with “positive outlook”.

The council’s capital expenditure for 2020-21 is $575 million, which compares to $549 million in 2019-20.

Service and operating costs remain similar — $1.1 million in 2019-20 compared to $1.06 million for this budget. Reports for both years maintain debt repayments remain at $80 million.

Ground floor view of HOTA art gallery on the Gold Coast — one of the big expenses.

The Bulletin asked council CEO Dale Dickson whether COVID-19 had played a role in the increased debt forecast, whether a decrease would occur in potential revenue due to unpaid rates and whether an increase in service costs play a role.

“COVID-19 will not impact on the City’s borrowings in the short or long term,” Mr Dickson said.

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“The notional borrowings over the next decade are directly related to the planned provision of growth related, city-building economic and social infrastructure.

“The timely provision of the right public infrastructure is a key to ensuring the future liveability of the Gold Coast as it grows over time.

“The City has the overall financial capacity to adjust and respond effectively to external opportunities and circumstances such as COVID-19, the Commonwealth Games, natural disasters and much more.”

When asked given the debt projections whether council could keep its credit rating with the QTC of “sound” with “positive outlook”, Mr Dickson said:

“QTC will take into account external economic factors including those relating to COVID-19 when it undertakes its next review in late 2020, and issues a rating and outlook.

Light rail construction — another big expense. Picture: Adam Head.

“I am supremely confident in the City’s capacity to manage its overall finances to deal with any and all current and future challenges. We have the track record to back this up.”

The Annual report noted that in accordance with the 2022 corporate plan, average rates increases throughout the ten year forecast “have been kept as near to CPI as possible”.

Mr Dickson in his response said this was achievable.

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“Yes. All local governments in Australia aim each year to keep average rates as close as possible to CPI,” he replied.

“Some are more successful than others in balancing rates and charges, debt, service and infrastructure delivery and asset renewal over time. The City of Gold Coast compares very well with any other local government in this regard.”