Central Coast Council plans to borrow $50M this financial year.
Council’s debt portfolio totalled $233.2M of external borrowings a year ago and about $235.4M at the end of June this year was forecast.
All existing loans are due to mature by May 2037.
The majority of these loans were established when interest rates were far higher than they are now, pre-dating the Global Financial Crisis, Council said in its operational plan.
The average rate on these loans is higher than present market rates but the costs associated with breaking the loans and refinancing have been judged to be prohibitively high.
Instead, Council has been paying down the debt steadily.
The majority of current debt was established to finance long-term water and sewerage network assets and is held as a liability within the Water Supply Authority functions.
The average duration of the loan portfolio is reducing at a faster rate than the depreciation of the corresponding infrastructure assets and will require refinancing in the short to medium term, Council said.
“We undertake regular debt reviews to determine the costs and benefits associated with extinguishing existing debt and investigating favourable refinancing options,” the operational plan says.
“New borrowing requirements in recent years have been satisfied by borrowing internally from the other funds (General and Sewer funds) that have sufficient unrestricted cash.
“In 2020-21 Council does expect to require borrowings from external financial institutions to refinance the maturity of current existing borrowings with material balloon repayments of approximately $43.7M.”
It is expected that Council will seek expressions from NSW TCorp and external major banks to procure the lowest cost of funding for terms of up to 10-20 years.
Natural disasters such as droughts, bush fires, storm events and pandemics have not been factored into the long-term financial plan as the financial impact will be different for each event.
“However, the financial impact will be factored into the forecasted results for the reporting periods which the natural disaster impacts,” the plan said.