Local Government Borrowings for 2010-11
This bulletin is to advise Local Governments of the procedure for borrowing applications for the 2010-11 financial year.
The Statutory Bodies Financial Arrangements Act 1982 provides that statutory bodies must have the Treasurer’s approval to obtain borrowings. Under a general approval of 23 May 2003, the Treasurer’s approval is granted for Local Governments to borrow from Queensland Treasury Corporation (QTC) subject to the approval of the Department of Infrastructure and Planning.
Separate approval of the Treasurer is required for borrowings other than from QTC. The process for approval of non-QTC borrowings is not covered in this bulletin.
Some key points for the borrowing program for 2010-11 are as follows:
- Application timeframes are consistent with 2009-10, to encourage Local Governments to submit borrowing applications earlier in the financial year.
- The borrowing application checklist is again to be used to help Local Governments prepare their applications. This checklist is to be signed and attached to all borrowing applications.
- Documentation is to be submitted to the department via post. Electronic submissions will no longer be accepted due to email size constraints.
- The financial forecast model should be consistent with Council’s long-term financial forecast as required under section 104 of the Local Government (Finance, Plans and Reporting) Regulation 2010.
- The evaluations undertaken as part of the sustainability and reporting process will inform loan borrowing evaluations.
- The department encourages Local Governments to work closely with QTC in using or updating their financial forecast model.
If Councils are intending to seek borrowings it is recommended that they do this early in the financial year. Early submissions will enable assessments to be undertaken and approvals issued as soon as possible.
Once borrowing approval has been granted by the department, Councils can actively work with QTC in order to time their draw downs.
A Local Government’s completed borrowing application must be received by the department with reasonable and sufficient time to process the application and obtain the requisite approvals. In order to ensure that borrowing applications are processed and funds are available prior to 30 June 2011 Local Governments must submit completed applications prior to close of business Friday, 31 December 2010. Applications received after this time will continue to be processed but cannot be guaranteed to be finalised by the department before 30 June 2011.
The department requires the following information in order to assess borrowing applications:
- completed and signed checklist ( 492 KB)
- QTC financial forecasting model completed in all respects and aligning with the long-term financial forecast (as required under section 104 of the Local Government (Finance, Plans and Reporting) Regulation 2010) and showing 2010-11 as the budget year
- debt policy for 2010-11 (refer to section 133 of the Local Government Local Government (Finance, Plans and Reporting) Regulation 2010) which must be consistent with the amount being requested for borrowings in the financial forecast
- any other information the Council considers relevant to the application.
Local Governments should submit by mail the required documentation to the department in the following way:
i. the completed and signed checklist ( 492 KB)& at the front of the application
ii. CD copy of QTC financial forecasting model and any other soft documents
iii. hard copy documents.
See contact us for the address details of the department.
Any applications which do not contain all of the required documentation or the completed and signed checklist will not be considered complete and returned to Council for their attention.
Please note that electronic applications can no longer be accepted by the department due to email size constraints. Local Governments are therefore advised not to email their forecast model to the department as they may have done in previous years.
The borrowing application, including the financial forecast, is required to be certified by the Mayor and the Chief Executive Officer. The certification confirms that the borrowings will be used for lawful, capital purposes and that a native title risk assessment has been conducted on any relevant land.
A project that constitutes more than 50% of a Local Government’s capital expenditure in any one year, or has a value greater than $10 million, should be identified separately in the detailed list of capital works projects as a ‘significant project’ and a brief explanation of the project should be provided.
QTC financial forecasting model
All Local Governments are to use the QTC financial forecasting model for the borrowing application. The forecast model is to include five years of historical values (2005-06 to 2009-10) and ten years of forecast values (2010-11 to 2019-20). Local Governments which are yet to access the forecast model should contact QTC directly on 3842 4745. QTC can directly assist Local Governments with using the model and undertake an informal review of Council’s model to ensure accuracy and completeness. QTC can also assist Local Governments with debt structuring.
Assessment, approval and draw down process
The department will assess the financial forecast to determine whether the Local Government has the capacity to meet its proposed loan servicing commitments. The department may request further information to assist in substantiating the forecast or the Local Government’s financial position.
If a Local Government significantly revises its financial forecast after lodgement but prior to approval, the details of the revisions should be clearly communicated to the department.
When the assessment has been completed, the department will advise the Local Government and QTC as to whether the borrowings have been approved. If the borrowings are approved, the Local Government may then contact QTC directly to arrange draw down of the borrowings up to the approved amount. All borrowings will be approved for a maximum loan term of 20 years, however a Local Government may choose a shorter term.
Borrowings approved in the 2010-11 financial year will not carry forward to subsequent financial years. Borrowings which are not drawn down prior to 30 June 2011 will be unavailable to the Local Government in future years. Should undrawn borrowings subsequently be required in future financial years, it will be necessary for the Local Government to submit a new borrowing application.