Debt may double under new plans
WHILE councils throughout Queensland were last week warned to rein in their spending, a relatively cashed-up Gympie Regional Council is considering almost doubling its debt over the next few years.
Queensland councils have been challenged to find efficiency savings as the Queensland Treasury Corporation and the Department of Local Government warned debt levels were in danger of spiralling out of control.
Between 2008 and 2012, the collective debt of Queensland's 73 councils quadrupled from $1.8 billion to $5.3 billion, driving rates up 27%, or 10% in real terms.
The Gympie region has shouldered rates rises averaging 30% since amalgamation but the council is now in better fiscal shape than many others, mayor Ron Dyne said this week.
This could change though as the council pencils in an additional $24 million in loans to fund the new Gympie aquatic centre, burgeoning waste management costs and the Toolara landfill.
ITS debt currently stands at about $26.25 million, almost a tenth of the Sunshine Coast Regional Council's.
On top of this, Gympie has a cash reserve of $77 million, which Cr Dyne says is a buffer against urgent expenditure such as the replacement of the council's two oldest assets - the Kilkivan and Goomeri sewage treatment plants.
The council is positioned to borrow $1 million this financial year, if needed, to help fund waste management and another $7 million next financial year for big waste projects like the Bonnick Rd transfer station and the Toolara landfill.
Under its 10-year plan, it could borrow $8 million in 2014-15 for the Gympie aquatic centre, and another $8 million the following financial year for the same project.
Whether or not the council goes into that amount of debt depends on the performance of its investments and the generosity of the Federal Government, Cr Dyne said.
"The Federal Government might walk down the road and say: 'here is $20 million for an aquatic centre'," he said.
"You have got to plan 10 years in advance to know where you are going to go with your expenditure.
"All in all, I believe that we are in good shape, and to get into that good shape I recognise that the residents of the Gympie region have had a financial impact from amalgamation and the rates that were levelled accordingly."
Queensland Local Government Association president Paul Bell told mayors and their deputies at a forum on the Sunshine Coast last week the cost of living was the biggest issue at the recent council elections and behind 44 new mayors and 250 new councillors winning seats in the biggest electoral clean-out since the Second World War.
He said most of the increased debt occurred in the top 25 high-growth councils in Queensland.
The Sunshine Coast council's debt stood at $220 million, an amount covered by cash held in short-term markets.
Mr Bell said if councils stuck to their current path, debt would rise by about $1 billion a year, reaching an unsustainable $23 billion by 2031.
Local government raised 80% of its own revenue compared with less than 50% by the State Government.
He said the Federal Government had the money, the State Government the legal power and councils had the problem.
Mr Bell said the challenge for local authorities during the next four years was to do more, and better, with less.
"The fundamental issue for us in local government is that councils do not have a growth tax and, as a consequence, do not prosper in booms," he said.
"Indeed, we suffer in trying to keep up service and infrastructure provision - but perversely feel the chills of recession and downturns as State and Federal Governments wind in whatever support they offer us when their budgets are under pressure.
"There is, and continues to be, a fundamental mismatch in the Australian federation between the taxing and spending powers of the three levels of government.
"As was put to me by a sage councillor early in my local government career: 'son, Canberra has the money, the state has the legal power and councils have the problem'."
Local government was faced with having to drop its standards, cut back on capital spending and reduce - or pull out of - social services, economic development, sport, recreation and cultural pursuits.
The alternative was to embark on wholesale reform to reduce costs of operation by about 12% in real terms.