Sparks fly over council’s budget

But a majority of councillors believe that borrowing in times of low interest rates is the best way of getting projects initiated in the shire and even completed earlier than would normally be expected.

Cr Allen however is concerned that the repayments for the loans mean that other projects, in particular, roadworks around the shire, do not get the level of attention that ratepayers would like to see. It is, he said, “dramatically affecting council’s ability to do the basics”.  

“My concern is about the way the budget has been modelled and now we are making repayments to cover the borrowings, massive borrowings from the general fund,” Cr Allen said.

In 2012, at the beginning of the current council term, council agreed to adopt a particular strategy that would see capital expenditure on big projects through borrowing rather than increasing rates, asking for special variations or completing works over a longer term. Cr Allen believes that if more money is needed for projects, it should be raised through the rates or a special variation.  

At the June 29 meeting mayor Michael Britten, councillors, Sharon Tapscott and Kristy McBain spoke in favour of council’s strategy saying that because the cost of borrowing was at an all time low, it was a good opportunity to get large projects completed more quickly.

During a terse debate Cr Allen was told he had run out of time to speak, as he had exceeded five minutes, was told he was off topic and also accused of electioneering. Cr Allen’s concerns revolve around the money council has borrowed over the last four years.

In speaking against the motion to agree the budget, Cr Allen said that while he recognised the work by staff and the constraints, his concerns were about the model used. 

Having asked director of strategy and business services, Lucas Scarpin, to list his qualifications, Cr McBain said that council employed professional people to which Cr Allen replied that the facts were the facts.

General manager, Leanne Barnes interjected to say that it was all part of the long-term plan’

Councillor Bill Taylor said Cr Allen’s speech contained a number of “unsubstantiated allegations” and that he would like to go through and find out how he arrived at them. He also asked whether Cr Allen should be making a speech like this and whether council was in pre election mode but Ms Barnes said: “No not on an item like this.”

Mr Scarpin confirmed council’s borrowings are $22.1m at the end of June 2016 and that in the last four years council had borrowed in excess of $20m. Mr Scarpin also confirmed in the 2017 budget there was an allocation of $3.6m in debt repayments.

On February 24 council agreed to accept a loan of $11,420,000 from NSW Treasury Corporation (TCorp) after being advised that as a council considered Fit for the Future, it would have access to low interest loans to support council’s capital programs.

Council had budgeted to borrow $3.17m in 2014/2015 and $6.5m in 2015/2016. Once council was made aware of the TCorp program a decision was made to defer the borrowings scheduled for 2015 until 2016 to take advantage of the lower borrowing costs.

Subsequent to the agreed $9.67m in borrowings council agreed to add to two additional projects, the Littleton Gardens Masterplan was accelerated from 2018 to 2016 resulting in the planned borrowings being brought forward in time and council agreed to acquire land in Bega which would be funded by borrowings. This land was purchased to be provide additional car parking.

These additions brought the total loan drawdown in 2016 to $11.42m. The borrowing costs budgeted against $9.67m was $1.36m. The borrowing costs for the TCorp facility at 3.25 per cent against $11.42m was quoted as $1.35m for a borrowing rate of 3.25 per cent.

Since then the rate has decreased and council secured the loan fixed at 2.6 per cent for 10 years.

The borrowings are used to fund the following projects:

·     Merimbula Bypass

·     Bega Valley Commemorative Civic Centre

·     Littleton Gardens

·     Bega Valley Regional Learning Centre

·     Bega Depot

·     General Road and Bridges Upgrade program

All councillors agreed that council should take up the loan facility.

Cr Allen said that roads were a number one priority for residents and now those services would be cut or not completed because of the cost of borrowing.

Mr Scarpin said that next year’s transport budget was $14.72m and the current year’s budget for transport was $12.678m.

But Cr Allen in his prepared document said: “Council has approved a policy of improving the road network highlighting the collector roads. These roads will not now receive any new bitumen and, in addition, the advice of the engineers is that the quality of our grading of the gravel road network will be reduced by 20 per cent.

“In the meantime, tens of thousands of dollars have been spent from the general fund preparing master plans and doing reviews of community assets.

“All this work has built huge community expectations that will have to be addressed by the new council. But, my concern is that the general fund’s capacity to borrow to fill one, let alone many, of the expectations which have been created by this consultancy work will not be able to be met as the general fund’s capacity to borrow has been all but exhausted,” Cr Allen said.

Councillors were told at the June 29 meeting that council was well within the financial benchmarks for its borrowings. The repayments on borrowings should not exceed 20 per cent of the fund. Council currently uses 7 per cent of the general fund to pay for loans, Mr Scarpin said.

Cr Tapscott said: “Every council must do what it thinks right at the time. It was conservative but interest rates have never been so low. So we have a short period of time to take this up and do something with the money. We will never have chance to do this again.”

“We are well below benchmarks; I’m very confident and comfortable,” Cr Tapscott said.

Cr Allen wasn’t the only councillor to speak against the motion. Councillor Keith Hughes also spoke against it.

“I tend against this motion. I object to the way council raises its rates. People whose property is valued the least pay the most.”

He said that council had pushed the envelope with the cost of the Merimbula bypass.

Click here to read Cr Tony Allen’s prepared document on the budget