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Local government borrowings for 2014-2015

Local Government Finance and Funding

Purpose

This bulletin is to advise local governments of the procedure for submitting borrowing applications for 2014-2015.

Background

In accordance with the Statutory Bodies Financial Arrangements Act 1982 (SBFA Act), a local government is required to obtain the Treasurer's approval to undertake borrowings. Under a General Approval dated 23 May 2003 and issued by the Queensland Treasurer under the SBFA Act, the Department of Local Government, Community Recovery and Resilience may grant approval for local governments to borrow from Queensland Treasury Corporation (QTC).

Separate approval of the Treasurer is, however, still required for borrowings not sourced from QTC. The approval process of non-QTC borrowings is not covered in this bulletin.

Key points

* To receive a priority response, local governments must ensure that the Department receives a completed application by 30 September 2014. For applications received by this date, the Department will endeavour to provide a response to Council by 31 December 2014.

Application timeframes

Submission deadline

Applications for borrowings can be submitted for consideration by the Department up until close of business, Friday 30 January 2015.

This deadline takes into account the timeframes needed to undertake an assessment, make any necessary enquiries of Council, and allow for the draw down of any approved borrowings through QTC. However, the Department strongly encourages local governments to lodge borrowing applications as early as possible in the financial year. In doing so, this will ensure that applications are processed in a timely manner and any approved funds are available prior to 30 June 2015.

Timing of application assessments

Applications for borrowings are assessed in order of receipt by the Department, except for those local governments nominated to be subject to a QTC Credit Review in the 2014-15 financial year, or for those that advise of an urgent need to access any approved borrowings by a specific date. The Department cannot, however, provide an average estimated turnaround time for the assessment of borrowing applications.

Factors that will impact on the amount of time needed to undertake an assessment include:

Detailed information for those local governments nominated to be subject a Credit Review for the 2014-15 financial year, can be found in the QTC Credit Review section of this bulletin.

To promote the quality and defensibility of the projections in the long-term financial forecast, Councils should ensure:

This may require the inclusion of additional notes or supporting documentation, as Council deems necessary.

Once approvals for borrowings are granted by the Department, Council can actively work with QTC to determine an appropriate timeframe for the drawdown of any approved borrowings. There is no requirement that approved borrowings be drawn down immediately.

Priority response by 31 December 2013

Whilst the Department cannot provide an average estimate turnaround time for application assessments, a priority response option is available to those applications that the Department receives by 30 September 2014. For these applications, the Department will endeavour to provide a priority response to Council by 31 December 2014. To avoid confusion, this submission date only applies to those local governments seeking a priority response. Please see above for the 2014-15 borrowings application submission final deadline.

Assessment, approval and drawdown process

The Department will assess the supplied long-term financial forecast for completeness and reasonableness, and to determine whether the local government has adequate financial capacity to meet its proposed loan servicing commitments. The Department may request further information to assist in the completion of the assessment.

If a local government significantly revises its financial forecast after lodgment but prior to approval, the details of the revisions must be communicated to the Department.

When the assessment has been completed, the Department will advise the local government and QTC of the outcome. If the requested borrowings are approved, the local government may then contact QTC directly to arrange the draw down of any approved borrowings.

Key conditions attached to any borrowings approved in the 2014-15 financial year include:

Should undrawn, approved borrowings subsequently be required in future financial years, a new borrowing application will need to be submitted.

QTC credit reviews

As part of the Local Government Loan borrowing program, the Department engages Queensland Treasury Corporation (QTC) to undertake a comprehensive rolling, annual credit review program for a select number of local governments that are considered to be facing significant challenges and/or are undertaking large borrowings.

The Credit Review process is conducted in conjunction with the Department's borrowing application approval process where possible, in order to reduce the duplication of efforts and consequently, reduce the administrative burden on local governments in seeking loan approvals.

The Department will process borrowing applications for those local governments selected to undertake a QTC Credit Review in 2014-15 once the relevant Credit Review has been finalised. However, applications can be processed before the results of the Credit Review are available, in the event a local government advises of a need to draw down on any approved borrowings by a specific date.

Documentation required

The Department requires the following information in order to assess an application for borrowings (please also refer to the notes below table):

Please also include any other information Council considers relevant to the application.

Note 1: Long-term financial forecast

The long-term financial forecast must:

The QTC long-term financial model (QTC LTFM) to be included with the borrowings application for 2014-15 should include five years of historical values (from 2009-10 to 2013-14) and ten years of forecast values (from 2014-15 to 2023-24). The Department encourages local governments to work closely with QTC in using or updating the QTC LTFM.

QTC can also undertake an informal completeness and reasonableness review of a local government's long-term financial forecast, and assist local governments with debt structuring. QTC can be contacted directly on 1800 641 057.

Note 2: Adopted Debt Policy

A copy of the Adopted 2014-15 Debt Policy (refer to Section 192 of the Local Government Regulation 2012 and Section 184 of the City of Brisbane Regulation 2012) must be included. Council must ensure that the total borrowings requested for 2014-15 is consistent with the Adopted 2014-15 Debt Policy.

Note 3: Schedule of Capital Works

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.

Note 4: Application checklist

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.

The 2014-15 Loan Borrowings application checklist contains 2 pages. Sections marked with an asterix are mandatory. Please ensure that both pages are completed.

Breakdown of borrowings sought into major project areas

As the Department does not currently undertake loan borrowing assessments at the individual project-level, the amount of loan borrowings requested for 2014-15 does not need to be allocated to the each individual project listed on the Schedule of Capital Works. However, it is mandatory that Councils complete the "Requested Borrowings breakdown" section on the application checklist. This section helps the Department understand to which major project areas the proposed 2014-15 borrowings are planned to be allocated. Where Council does not know the exact dollar ($) breakdown by project area, the % approximation column can be used instead.

It is expected that the projects proposed for funding via borrowings form part of a local government's asset management planning process and the whole of life costs of the project have been considered.

Submission

The completed application (see "Documentation Required" section) should be compiled in the following manner:

The completed application should be submitted by mail to:

Attn: Local Government Finance and Funding
Director-General
Department of Local Government, Community Recovery and Resilience
PO Box 15009
City East QLD 4002

Please note that electronic applications are unable to be accepted by the Department due to email size constraints. Local governments are therefore advised not to email the forecast model to the Department as may have occurred in previous years.

Further information

Any further enquiries on this matter should be directed to:

Mark Snow
Senior Project Officer

Phone: (07) 3452 6719
Email: This email address is being protected from spambots. You need JavaScript enabled to view it.

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