City f Gld Cast Debt Management Public Statement Octber 2015
This statement explains the City f Gld Cast s debt management apprach and psitin. It includes the fllwing: Overall Financial Psitin Prfit and Lss Statement Balance Sheet Financial Indicatrs Hw Cuncil brrws Cuncil s recent track recrd Cmparisns with ther Cuncils Cuncil s cash reserves Page 2 f 8
Overall Financial Psitin T put the size f the Cuncil int perspective: 2015-16 budget f $1.27 billin Ranked 337th in size f all Australian cmpanies, well ahead f Melburne City Cuncil (616) and the City f Sydney (695) (surce: IBIS Wrld, 2014) Is respnsible fr assets valued at $13.9 billin as at 30 June 2015 Cuncil has fur (4) main areas by which it mnitrs its financial psitin: Scpe and standards f its services Rates and charges (including user-pays charges) Debt levels The cnditin f the City s infrastructure assets Als, just like any business, Cuncil prduces a set f financial statements which includes a Statement f Cmprehensive Incme and a Statement f Financial Psitin. These statements are audited by the Queensland Audit Office (QAO). Statement f Cmprehensive Incme Its purpse is: t summarise all revenue received by Cuncil (cash and nn-cash) t summarise all perating csts and expenses, including all services prvided by Cuncil (this des nt include capital r debt principal repayments) t shw the surplus r prfit, which equals revenue minus perating csts and expenses Shws a surplus f $574.0 millin fr 2014-15 (refer t the City s 2014-15 Financial Statements) T calculate the available cash amunt (r underlying surplus ) the fllwing nn-cash adjustments apply: Subtract: Increase in value f existing assets as a result f annual revaluatins - $418.9 millin Infrastructure built by develpers and then transferred t Cuncil s wnership - $108.9 millin Add: Reductin in value f assets as a result f sme assets being decmmissined r replaced - $25.9 millin Depreciatin (calculated n a straight line basis) - $267.4 millin Net accruals and ther nn-cash items - $92.1 millin After the abve adjustments, there is $431.6 millin as an underlying surplus, which is cash available t repay debt (principal), fund future capital wrks and wrk in prgress. Page 3 f 8
Statement f Financial Psitin Its purpse is: t summarise assets that the Cuncil wns t summarise liabilities that the Cuncil wes t shw the equity r the value f the business, which equals assets minus liabilities Shws ttal assets f $13.9 billin as at 30 June 2015, including: cash at bank (including investments) - $585.0 millin mney wed t Cuncil - $148.3 millin prperty, plant and equipment (such as land, buildings, rads, drainage, water and sewerage infrastructure) - $12.8 billin capital wrks currently being cnstructed - $259.2 millin Shws ttal liabilities f $918.3 millin, including: mney wed by Cuncil (nrmal accunts payable) - $72.2 millin lan brrwings wed t the Queensland Treasury Crpratin (QTC) - $767.7 millin emplyee benefits (annual and lng service leave) - $76.8 millin The difference between assets and liabilities is $13.0 billin, which is the value f the business managed by Cuncil n behalf f the cmmunity Financial Indicatrs Cuncil s psitin in relatin t the fllwing financial perfrmance indicatrs cnfirms that its debt is quite manageable: Debt Service Rati this calculates the percentage f perating revenue that Cuncil spends n repaying lans (interest & principal) the frecast fr 2015-16 is 9% this is cmparable t a husehld with an annual incme f $100,000 spending $9,000 ($173 per week) n mrtgage repayments Net Financial Liabilities Rati this calculates ttal liabilities (mainly lans and accunts t be paid by Cuncil) less current assets (mainly cash at bank r mney wed t Cuncil) as a percentage f perating revenue the frecast fr 2015-16 is 19% this is cmparable t a husehld with an annual incme f $100,000 wing $19,000 after mney in the bank and mney wed t it is deducted Page 4 f 8
Hw Cuncil brrws Brrwing by Cuncils in Queensland is tightly cntrlled via the fllwing external agencies: Department f Infrastructure, Lcal Gvernment and Planning (DILGP) Queensland Audit Office (QAO) Queensland Treasury Crpratin (QTC) This can be summarised as fllws: Cuncil s annual prpsed brrwings are subject t apprval by DILGP based n an assessment f Cuncil s ten year financial mdel (which shws indicative future revenues and expenses, and related frecasting assumptins). This assessment is generally in the frm f a Credit Review cnducted by QTC. The credit review includes interviews with senir management and a detailed assessment f current and frecast financial perfrmance and psitin. Brrwings must be surced thrugh QTC based n DILGP apprval, and are subject t terms and cnditins. The State gvernment sets three measures (ratis) t assess the financial sustainability f lcal gvernments. These measures are audited annually by the QAO. QTC sets a further three measures (ratis) t mnitr Cuncils ability t repay debt. QTC is the central financing authrity fr the Queensland State Gvernment, Queensland lcal gvernments and State cntrlled entities. QTC brrws funds in dmestic and glbal markets. Significant ecnmies f scale can be achieved by cmbining the debt requirements f all State authrities. The cst f debt is influenced by the State s credit rating f AA+ and interest rates accessed are substantially lwer than if Cuncil had t brrw frm cmmercial banks. Cuncil s recent track recrd When the current Cuncil was elected in 2012, its grss debt was $730.0 millin and was prjected t increase t ver $900.0 millin by 2012-13 in the final lng term frecast f the previus Cuncil. On 1 July 2012, a cuple f mnths after the last electin, $77.7 millin f debt was transferred t Cuncil upn the disslutin f Allcnnex Water, taking ttal debt t $807.7m. The balance f debt as at June 2015 was $767.7 millin, including the remaining Allcnnex Water debt. The balance f debt by the end f March 2016, when a new Cuncil will be elected, will be $721.8 millin. Therefre, in the current Cuncil term ending March 2016, external debt will be reduced by $85.9 millin. In the life f this Cuncil, the City has brrwed externally $101.4m whilst delivering $1.1 billin in new capital wrks. It has als brrwed internally frm certain cash reserves. Page 5 f 8
Cmparisns with ther Cuncils Current external debt f $767.7 millin cmpares t City infrastructure assets f $11.1 billin as at 30 June 2015. In 2014-15 Cuncil s principal and interest payments f $104.0m n utstanding debt tk up 7.0% f its ttal incme. By cmparisn, the median husehld n the Gld Cast allcates 40.8% f ttal incme just n mrtgage repayments (surce: ABS 2011 Census Data) In June 2014, the City had $3,205 f external debt per rateable prperty. The fllwing graph (surce: audited financial statements fr 2013-14) illustrates the recent debt psitin fr cmparable Cuncils. Cnsideratin shuld als be given t the likelihd f future brrwings. The City f Gld Cast is well placed cmpared t ther Cuncils as its infrastructure is generally f a high standard and in relatively gd cnditin. Nte: City f Gld Cast and Lgan City Cuncil have water and sewerage debt included in the Cuncil accunts. The ther Cuncils nw perate water and sewerage thrugh separate entities. T be cmparable, the water and sewerage debt (based n participatin rights) fr the ther Cuncils has been added t the debt shwn in the Cuncil accunts t prduce this cmparisn graph. Page 6 f 8
Cuncil s cash reserves As at 30 June 2015 Cuncil had a ttal f $447.4m which is set aside fr specific purpses in varius reserve funds. A large amunt f these funds will, in all prbability, be utilised by 2018 fr the fllwing purpses: Water & Sewerage Capital Wrks ($90.8m) Strategic Pririties ($17.6m) Cmmnwealth Games ($54.2m) Wrkers Cmpensatin ($9.2m) Fleet & Plant Replacement ($8.5m) Waste Management Capital Wrks ($10.0m) An amunt f $128.1m is held in reserve being Infrastructure Charges cllected frm develpers fr the specific purpse f prviding trunk infrastructure fr water, sewerage, transprt, parks and strmwater drainage. An amunt f $104.7m was als held in the Cuncil s Investment Fund Reserve as at 30 June 2015. This reserve was established t prvide Cuncil s annual budget with a future dividend frm investments t cmpensate fr the lss f dividends frm the bulk water part f Gld Cast Water, which was taken ver by the State Gvernment n 1 July 2008. The current Cuncil has brrwed internally frm the Investment Fund Reserve fr such purpses as : $18.0m t fund the Karp Curt building purchase and refurbishment, t be repaid by savings in rent as a result f n lnger requiring the rental f the Varsity Lakes building. $2.0m t fund accelerated emergency Castal Prtectin Wrks fllwing a majr strm in February 2013. $7.5m t fund the up-frnt investment in the Integrated Parking Management System. By retaining funds in the Investment Fund Reserve, Cuncil will have flexibility t make decisins regarding future brrwings and emerging prjects, particularly when interest rates are higher than current rates and brrwing externally is nt as attractive as it is currently. Based n the decisin by the Federal Gvernment t discntinue the carbn tax, the funds held in that reserve were given back t residents thrugh a rebate n the rates ntice, with surplus funds allcated t carbn reducing initiatives at Cmmnwealth Games venues. Key Pints in Summary Based n financial perfrmance indicatrs and cmparisn with ther SEQ Cuncils, Cuncil s debt is quite lw and certainly manageable. During the term f the current Cuncil, Cuncil s debt will be reduced by $85.9m. Page 7 f 8
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