Adopted by Council on

Background

Loan borrowing is accepted by Council as an appropriate and responsible funding method to be applied in order to meet Council’s long term strategic objectives and financial responsibilities as it spreads the payments for such assets and responsibilities across the generations who benefit.

The Local Government Act 1989 (the Act) provides Council’s the power to borrow and sets out the legal requirements to be followed when Council is seeking to borrow funds, and Council will also pursue the highest standards of financial probity.

Objectives

This policy sets out to:

• Establish objectives and principles that outline when it is appropriate for Council to undertake borrowings within a sound financially sustainable framework;
• Ensure any new borrowings will only be considered if the prudential ratio guidelines (as advised by the State Government’s Local Government Performance Reporting Framework (LGPRF) continue to be observed, and
• The level of debt, gearing and servicing ratios are considered satisfactory by Council.

Scope

This Policy applies to all new borrowings undertaken by Council, as well as existing borrowings (where significant long term benefits of refinancing exist and the cost of breaking existing borrowing contracts is affordable within the short and longer term financial plans.

The policy applies to all Council employees and Councillors with responsibility for making decisions on borrowings and carrying out the functions of undertaking new borrowings or refinancing existing borrowings.

Principles of management

1. New borrowings will only be used to:
   • fund new assets, or
   • lump sum funding calls by the Trustee of the Local Authorities Superannuation Fund (LASF) associated with the Defined Benefits scheme, or
   • provide bridging finance for Development Contribution Plans (DCP’s) where interest costs can be recouped by Council through the DCP scheme.
2. Council will only consider any proposed new borrowings through the budget process or a formal revised budget process.
3. Details of any proposed new borrowings will be provided to the community through the budget or revised budget process.
4. Total interest bearing loans and borrowings will not exceed the LGPRF upper limit of 60% of annual rates & charges revenue.
5. Total loan and borrowings annual repayments will not exceed the LGPRF upper limit of 5 % of annual rates & charges revenue (excluding principal repayment of interest only borrowings).

Accountability and responsibility

Accountability and responsibility for this policy is outlined below.

1. Council
   • Responsibility to ensure this Policy is consistent with Latrobe City Council
   • Strategic Direction and other Latrobe City Council Policy
   • Responsibility for the decision to approve this Policy by Council Resolution
2. Chief Executive Officer
   • Overall responsibility for compliance with this policy
   • Overall responsibility for enforcing accountability
   • Overall responsibility for providing resources
   • Overall responsibility for performance monitoring
3. General Manager
   • Responsibility for compliance with this policy
   • Responsibility for enforcing accountability
   • Responsibility for providing resources
   • Responsibility for performance monitoring
4. Manager Finance
   • Develop frameworks and procedures in compliance with this policy
   • Enforce responsibilities to achieve compliance with frameworks and procedures
   • Provide appropriate resources for the execution of the frameworks and procedures

Evaluation and review

This policy will be reviewed on request of Council, in the event of significant change in the Executive team, significant changes to legislation applicable to the subject matter of the policy or, in any other case, during each Council term (generally four years).