2017–18 Local Government Borrowing Program
This bulletin is to advise local governments of:
- the Queensland Treasury Corporation (QTC) annual borrowing assessment (ABA) process for all local governments with existing borrowings or intending to borrow in 2017–18
- the procedure for submitting borrowing applications for 2017-18.
As part of its role under the State Borrowing Program (SBP), the QTC conducts an ABA for all local governments that have existing borrowings or intend to borrow in 2017-18.
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 issued by the Queensland Treasurer under the SBFA Act, the Department of Infrastructure, Local Government and Planning (the department) may grant approval for local governments to borrow from the QTC, subject to the borrowings complying with the SBP.
Annual Borrowing Assessment (ABA)
The QTC undertakes a comprehensive ABA process of local governments with existing or proposed QTC borrowings to provide it with information about:
- the ability of a local government to service existing debt as well as any new debt requested, or
- whether a more detailed credit review is required to determine the ability of a local government to service existing debt as well as any new debt requested.
The QTC may determine a credit review is required if the local government is facing significant challenges and/or is undertaking large borrowings.
The format of the long-term financial forecast required by the QTC to complete the ABA process is the same as required by the department to assess loan applications, therefore reducing the duplication of effort and administrative burden on local governments in seeking loan approvals.
Process for new borrowings
Applications for borrowings can be submitted until close of business, Thursday 30 November 2017. This will ensure applications are processed in a timely manner and any approved funds are available prior to 30 June 2018. The department may consider borrowing applications submitted after the cut-off date for emergent needs on a case-by-case basis.
The department will assess any borrowing application for completeness and reasonableness to determine whether the local government has adequate financial capacity to meet its proposed loan servicing commitments. In undertaking its assessment, the department will refer to the advice provided by the QTC as a result of the ABA process and may also request further information from the local government.
If the long-term financial forecast included in a local government’s borrowing application is significantly revised when compared to the long-term financial forecast provided to the QTC by 29 September 2017, the details of the revisions must be communicated to the department and QTC. These revisions will need to be reviewed and assessed against the information used for the ABA process and may lead to the QTC determining a credit review is necessary.
Key conditions attached to any borrowings approved in the 2017-18 financial year include:
- Maximum loan term of 20 years. A local government may, however, choose a shorter term.
- Must be drawn down prior to 30 June 2018.
- Approval does not carry forward to subsequent financial years.
Should undrawn, approved borrowings subsequently be required in future financial years, a new borrowing application will need to be submitted.
Borrowing application assessments
Applications for borrowings will be assessed in order of receipt by the department, except for those local governments required to participate in a QTC credit review in the 2017-18 financial year. Please note that the department will process borrowing applications for local governments required to participate in a QTC credit review in 2017-18 when the relevant credit review has been finalised.
The department will process complete borrowing applications within 10 business days. A complete application is defined as:
- an application which meets all the necessary administrative requirements
- includes all required documentation
- is submitted without errors
- provides justifications for any anomalies and assumptions.
The 10 business days to process applications, by the department, does not include time:
- prior to the release of the QTC credit review nominations for 2017–18
- correcting incomplete applications or financial models submitted by local governments
- awaiting local government responses to department queries
- where a long-term financial forecast is revised which results in a QTC credit review.
The quality and defensibility of the long-term financial forecast supplied by council may impact on the 10-business day turnaround and the borrowing assessment. Councils are strongly encouraged to work with the department in developing and submitting their applications for borrowings.
Following assessment and determination of a borrowing application, if the application is approved by the department, the council can actively work with the QTC to determine an appropriate timeframe for the drawdown of any approved borrowings. There is no requirement for approved borrowings to be drawn down immediately.
|Submission date||Submission requirements|
|COB 29 September 2017||Stage 1. Long-Term Financial Forecast
(For any local government with QTC borrowings as at 30 June 2017 and those seeking to borrow in 2017-18, a copy of Council’s latest Long-Term Financial Forecast is required to be submitted to the QTC by 29 September 2017 to enable the QTC to complete the ABA process.)
|COB 30 November 2017||Stage 2. Borrowing Application
(The department may accept applications past this date where borrowings are required for emergent issues. These will be assessed on a case-by-case basis.)
The department requires the following information to assess an application for borrowings:
Long-term financial forecast
Council’s long-term financial forecast must:
- be based on the QTC long-term financial model (LGFM Version 3.0.2 or later)
- be complete and consistent with the long-term financial forecasts requirements under section 171 of the Local Government Regulation 2012 and section 163 of the City of Brisbane Regulation 2012
- show 2017-18 as the budget year
- contain the borrowings sought for 2017-18, together with planned borrowings in forward years (consistent with the adopted 2017-18 Debt Policy). Loan terms and associated repayments are also to be included in the financial forecast.
The QTC long-term financial model (QTC LGFM Version 3.0.2 or later) to be included with the borrowings application for 2017-18 should include five years of historical values (from 2012-13 to 2016-17) and ten years of forecast values (from 2017-18 to 2026-27). The department encourages local governments to work closely with the QTC in using or updating the QTC LGFM.
The QTC will undertake a completeness and reasonableness review of a local government’s long-term financial forecast as part of the ABA process. A borrowing application will not be processed by the department until the QTC confirms the financial forecasts submitted as part of a local government’s application have been reviewed.
To promote the quality and reliability of the projections in the long-term financial forecast, Councils should ensure:
- historical figures correspond with data contained in the relevant audited financial statements
- growth rates are appropriate
- any substantial fluctuations in projections are explained or substantiated.
This may require the inclusion of additional notes or supporting documentation.
Adopted 2017-18 Debt Policy
A copy of the adopted 2017-18 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. The council must ensure the total borrowings requested for 2017-18 is consistent with the adopted 2017-18 Debt Policy.
2017–18 Schedule of Capital Works
A project constituting 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.
Certified Borrowing Application
The borrowing application, including the financial forecast, is required to be certified by the Mayor and the Chief Executive Officer. The certification confirms the borrowings will be used for lawful, capital purposes and a native title risk assessment has been conducted on any relevant land.
Note: Councils are requested to include any other information considered relevant to the application.
Requested borrowings breakdown
As the department does not currently undertake loan borrowing assessments at the individual project level, the amount of loan borrowings requested for 2017-18 does not need to be allocated to each individual project listed on the Schedule of Capital Works. However, it is mandatory councils complete the ‘Requested Borrowings breakdown’ section on the checklist. This section helps the department understand to which major project areas the proposed 2017-18 borrowings are planned to be allocated.
It is expected 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. Local governments are required to have asset registers and asset management plans in place for all asset classes held.
Any further enquiries on this matter should be addressed to:
Mr Mark Snow
Senior Project Officer
Department of Infrastructure, Local Government and Planning
P: (07) 3452 6719