3.5 Borrowings

Due to the inherent difficulty in forecasting future interest rate movements a conservative approach has been taken in the forecast of interest on investments. A rate of 2% has been used for the term of the LTFP.

3.5 Borrowings Council has increased borrowings significantly over the past ten years to fund infrastructure works. Council balances the need to achieve inter-generational equity with maintaining a consolidated debt service ratio close to 10%. Council’s practice is to restrict use of loan funds to asset purchases/construction, ensuring the loan term is closely tied to the life of the asset. Loan terms for future borrowings are set at a maximum of 20 years.

In 2014 Council established a $15m line of credit to develop a parcel of Council owned land – the Gateway - to provide economic development opportunities within the Shire. The line of credit has since been reduced by $2m through the utilisation of part proceeds from sales. In 2018/19 the line of credit matured and was extended for a further 5 years to allow flexibility in debt reduction. Council will again investigate the most appropriate funding options at maturity in March 2026. Future sales of lots within the Gateway development will be utilised to further reduce this debt.

In future years should cash surpluses allow, Council will consider paying down debt to allow greater fiscal flexibility in future years.

Councils forecast loan liability by fund is shown below.