The decision that could cost council $20M
CLARENCE Valley Council could go $20 million further into debt because it voted against seeking a special rate rise, according to a report to be tabled at council on Tuesday.
A report from the general manager, Scott Greensill, to tomorrow's first full council meeting of the year, was a resolution from extraordinary council meeting in November, which voted against the controversial rate rise.
The rates increase was the central plank in a proposal to the NSW Government to show how the council would meet its Fit for the Future requirements.
Instead councillors voted for a motion from Cr Andrew Baker which included a proposal that the council stop direct purchases of light and heavy fleet vehicles and enter into leasing agreements.
Cr Baker said this arrangement could free up more than $17 million in the council fleet replacement and other funds for the infrastructure repair bill.
The council hired consultants AEC, for $25,000, to look into the ramifications of the council's November resolution.
Its report found externally funding plant through leases would increase the council's debt.
Under a heading Loan borrowings, the general manager's reports reads:
"AEC Group Ltd states in their report that the act of external financing of Council's fleet will increase Council finance liabilities (ie loan borrowings) by an estimated $20 million. This will result in Council significantly exceeding the assessed debt limit of $131 million as detailed in the Ernst and Young (EY) Report as presented to Council at its meeting on 18 October 2016."
Despite the AEC Group report Mr Greensill's report said there will be further delays in preparing the council's Fit For The Future Application, which was originally due last November.
The AEC Group report also questioned the assumption the switch to leasing would improve the council's ability to tackle its infrastructure backlog. It said:
"However, while the freeing up of capital invested in light fleet and major plant may allow Council to address the infrastructure backlog in an expedited manner, it will result in a considerable deterioration in the operating position of Council and significantly increase liabilities."
Clarence Mayor Jim Simmons said the council might consider the suspension of standing orders to discuss this report.
"It's a bit disappointing councillors only get five minutes each to discuss it. We've talked about this and suspending standing orders was something we're considering," he said.