CoGG: Candidate Media release Debt

Candidates say
24 October 2017

INTRODUCTION.


More from Candidates


By Denis o”Bryan, candidate for Bellarine Ward

STATEMENT

Press Release
CoGG inherits huge debt from Administrators – New Councillors must
reconsider its benefit to Ratepayers

Contact Denis for the graph

CoGG loan balance was once low and stable
In June 2008. a $3.125m loan for the Bellarine Aquatic Centre
In June 2009 a $12.675m loan for the Leisurelink Facility Replacement, followed by a final
loan of $12.5m in February 2010.
In May 2013, a loan of $10.85m for Community Facilities and to commence funding of the
Geelong Library & Heritage Centre.
In October 2013, a loan of $11.8m was taken out to fund Unfunded Superannuation payment
and Lara Town Centre project.
In September 2014 a loan of $16.5m for Community Facilities, Geelong Library and Heritage
Centre and the Drysdale Landfill Cells.
In 2016/17, CoGG’s debt reduced to $44M, after a payment of $9M. In that year, there was an
asset sale of $10M.
Budget statement 2016/17 “Council plans to borrow $50.6M in 2016-2017 to fund the
Central Geelong Action Plan, Corio Landfill Rehabilitation, Drysdale Landfill Cells,
Armstrong Creek Projects, Hendy St Reserve Redevelopment, Community Facilities,
Geelong Ring Rd Employment Precinct, Drysdale/Clifton Springs Sports Precinct and Shell
Rd Reserve Masterplan”.
Budget statement 2017/18 “Council plans to borrow $39.3m in 2017-18 to fund the
net capital expenditure on the Central Geelong Action Plan, Drysdale Landfill Cells,
Armstrong Creek Projects, Hendy St Reserve Redevelopment, Community Facilities,
Geelong Ring Rd Employment Precinct and Drysdale/Clifton Springs Sports Precinct”
They assure us the debt burden is within the Government guidelines, but to my
knowledge, the debt burden is based on interest repayments only, not interest and
principal. If true, new Councillors will have to take a closer look, because their
principal repayment program is three times the interest repayment.
105 119 124
73
17/18 18/19 19/20 20/21
Why did the Administrators embark on such a high cost program?
They believe CoGG has been “allocating insufficient resources to renewal / upgrade
capital expenditure relative to new”. I presume this means more money has been spent
on new assets than on maintaining existing assets. It has to be noted that the value of
assets (currently $2.9B gross), has been rising steadily because CoGG spent $40 –
80M per year on new assets. But their words do not match what they do. They plan to
spend $72M in Armstrong Creek on new assets over the next 4 years. The size of this
spend is worrying enough, but its focus in only one area is even more troubling.
Where is the balance for the other parts of CoGG?
Top eight items in the capital works list (2017/18 budget)
Why choose debt and not other funding sources?
CoGG uses an artificial calculation of asset depreciation to indicate how much
revenue should be diverted to capital works. But the Administrators only have enough
cash for around half of this high cost program. They choose loans to fund the gap, so
therefore in 4 years time, they will leave ratepayers with $124M debt and an annual
repayment program of up to $20M = $5M interest and $15M from the principal.
In hindsight, they had a choice to fund the gap from loans or from asset rationalisation
or from external investors.
Asset rationalisation: Council’s assets have a gross value of $2.9B, but $2B of it is
mainly roads and drainage. Unless they charge tolls, those assets cannot generate
revenue. The assets with earning potential are $600M of land and $300M of
buildings. They could have reviewed these assets and sold off the ones that give a
poor return to the taxpayer and set up funding models with the others to provide the
greatest return to the ratepayer via renting or part sale or partner investors.
Private investors: They should have been practical about using the influential
contacts at their disposal. Eg, the Administrators could have gone to their Labour
leaders to get a good hearing from the industry super funds whose Boards are
populated with Labour allies. Surely, at least one of the Victorian based funds would
see investment in infrastructure in a regional growth city as worthy of consideration.
Options for the new Council
One option available to the new Councillors is to reassess the administrators’ capital
works program, and advise the CEO to cut it to workable size to reduce debt and
balance it across the CoGG.
Another option is to accept this program and use it as a chance to rationalise our
assets. Instead of seeing assets as a permanent fixture that have a limited life, let’s
have another look at them though the lens of value to the community. A productive
asset produces a return to its owner, whether monetary or non monetary. The assets
that have no or low value can be written off or rented out or sold off for reinvestment
in new assets that will generate a better return. Let’s get creative. Let’s aim to abolish
debt in five years and start the next period with a mass of highly productive ratepayerowned
assets that generate an ongoing highly productive socio economic return to our
ratepayers, businesses and visitors.
A third option is to approach external investors with deep pockets and propose a deal
that benefits both the ratepayer into the long term and the investors.
In conclusion, I therefore call on new Councillors to reject this debt legacy as an
unacceptable burden on the ratepayer, and request the CEO to come up with a suitable
asset funding model that provides on going returns to the ratepayer.
Denis O’Bryan
29/9/17
Candidate for Bellarine Ward
If further clarification is required, please call me on 0412 710331
Authorised by Denis O’Bryan, 18 Margaret St, St Leonards

 

 


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