March 17, 2016
Claims aired by some candidates during the election campaign that the South Burnett Regional Council is carrying a $62 million debt are untrue.
South Burnett Mayor Wayne Kratzmann said this week the claims appear to have come from a misunderstanding about how Council’s finances are structured and reported.
“If you define debt as ‘borrowed money’ that we have to pay interest on, our debt is $40 million,” the Mayor said.
“But since $2 million of that will be repaid by Memerambi Estate property owners, the real debt ratepayers are paying interest on at the moment is $38 million.”
The Mayor said a further $12 million of what has been called “Council debt” was the Council’s depreciation fund, money that has been set aside in a cash reserve to upgrade or replace Council assets as they age.
“It is something that was mandated by law when Councils were amalgamated in 2008, and it’s really an asset, not a debt,” the Mayor said.
However, because of the nature of local government accounting, it has to be listed in the Council’s accounts as a liability.
No interest is paid on this money; instead it actually earns interest for the Council.
The remaining $10 million is in current liabilities from day-to-day operations. This is balanced against an almost equal amount of current assets from day-to-day operations, and it carries no interest component, either.
The Mayor said the Council’s $38 million debt had been raised to fund long-term infrastructure projects.
These included the new Kingaroy Waste Water Treatment Plant, the Gordonbrook Water Treatment Plant upgrade, Blackbutt CBD infrastructure upgrades, several bridge replacement projects and similar works.
He said it made better sense to borrow money for these projects than raise rates sharply in order to fund them without borrowing, since the benefits would be enjoyed by ratepayers over many generations.
The Council’s loans come from Queensland Treasury, and before issuing them the Council was put through a rigorous financial analysis by Treasury officials to ensure the SBRC had the capacity to manage the repayments without difficulty.
The Mayor said Council had come through the pre-loan approval process “with flying colours” and the debt represented less than 4.65 per cent of Council’s total assets.
The Council currently has $35 million cash in the bank, which is sufficient to fund five and a half months of normal operations.
Each year the Council repays around $3.7 million in principal and interest on its loan borrowings.
