Managed use of debt supports upgrades of community assets
19 Oct 2015
Media Release - Mayor Brian Hanna
I wish to clarify the true position of WDC’s borrowings, which have been a topic of
discussion in two recent letters to the editor.
WDC borrows money to pay for large projects that will provide essential services to the community for a long period of time. The borrowing is done so that today’s ratepayers do not have to pay for assets that have long lives and will be in use for between 30 to 80 years at least.
Our District’s water supply, wastewater and community infrastructure must be maintained in order to ensure it will be of good quality and safe and benefit the people who live in and visit our communities now, and for our future generations. This is done through regular maintenance and upgrades. We have also needed to carry our upgrades to support environmental and public health outcomes.
Upgrading assets of this nature comes at a significant capital cost. In the last financial year 2014/15 (ending 30 June 2015), WDC has invested $10.66 million on various capital projects.
This level of capital expenditure cannot come from rates funding. We use reserves where we can for renewal works and source loan funding for priority new works. We also ensure that any increase in debt is carefully managed.
WDC’s debt was forecast to be $52.1 million by the end of 30 June 2015 in the Long Term Plan 2012/22. The actual debt was $46.14 million as at 30 June 2015. That is almost $6 million less than the original forecast.
Over the last 3 years, actual debt has continued to reduce, from $47 million at July 2012 to $46.14 million as at June 2015. This is despite the significant capital investment that we have carried out over this period ($32.8 million in the last 3 years).
This reduction didn’t happen by itself in the face of the significant capital works. It has happened because we have been using other sources of funding like subsidies and grants and our Reserves. Due to our careful and consistent building up of reserves we have been able to use these for renewals where possible instead of borrowing.
Subsidies and grants for the 2014/15 year were $6.7 million and $7.1 million for the year before. This funding has assisted in providing infrastructure and community asset upgrades in our District.
Reducing debt remains a key priority and guided by our debt reduction strategy, we are confident in our ability to reduce public debt by $14 million by the year 2025.
At present, WDC is completing the 2014/15 Annual Report and this document will be adopted by Council at the end of October, which can be further referred to for our financial performance.