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Local Government Borrowings and Working Capital Facilities 2018–19

Purpose

This Bulletin is to advise Local Governments of the procedure for submitting loan borrowing and/or Working Capital Facility (WCF) applications for the 2018-19 financial year.

Background

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 dated 23 May 2003 and issued by the Queensland Treasurer under the SBFA Act, the Department of Local Government, Racing and Multicultural Affairs may grant approval for Local Governments to borrow from, or establish WCFs with, Queensland Treasury Corporation (QTC).

Separate approval of the Treasurer is, however, still required for borrowings and facilities not sourced from QTC. The approval process of non-QTC borrowings and facilities is not covered in this Bulletin. Please email any queries on this issue to This email address is being protected from spambots. You need JavaScript enabled to view it..

Key dates

Submission Date Submission Requirements
COB 14 September 2018 Completed Local Government Forecasting Model (LGFM) (with FY2019 as the budget year) is to be submitted electronically to QTC at This email address is being protected from spambots. You need JavaScript enabled to view it. (attention Robyn Usher) and the Department at This email address is being protected from spambots. You need JavaScript enabled to view it. (attention Mark Snow). (note: For any local government with QTC borrowings as at 30 June 2018 and those seeking to borrow in 2018-19, a copy of Council’s latest LGFM is required to be submitted to QTC by 14 September 2018 to enable QTC to complete the Annual Borrowing Assessment process.)
COB 15 October 2018 Completed borrowing / WCF application and supporting documentation is to be submitted to the Department at This email address is being protected from spambots. You need JavaScript enabled to view it. (attention Mark Snow). (note: 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.)
By COB 30 October 2018 For complete borrowing applications not subject to a detailed QTC review, the Department will approve or not approve the request within 10 business days of the program closing date.
For Local Governments subject to a detailed QTC review, the Department will approve or not approve any borrowing request within 10 business days of receiving QTC’s recommendation.

Establishing Financing Needs

To promote the sustainable management of assets and financial resources, a Local Government should establish its needs for both short- and long-term funding arrangements before applying for any type of financing from QTC. Please note: The Department will only approve loan borrowings for capital purposes.

Asset Management Planning

Local Governments are required to prepare and maintain a long-term asset management plan as part of their statutory obligations under the Local Government Act 2009 and City of Brisbane Act 2010. This plan must be part of, and consistent with, the Local Government’s long term financial forecasts.

Before considering additional funding arrangements, a Local Government should review its long-term asset management plan, its long term financial forecasts and its available surplus cash to identify any funding shortfalls which might exist. The nature and timing of these funding shortfalls should inform the type of financial arrangement being sought.

Use of Surplus Cash

Local Governments are encouraged to manage their surplus cash holdings to improve overall financial management, improve community returns on invested funds and reduce the need for unnecessary long-term borrowings. This may involve using available surplus cash to fund capital projects, reduce existing debt, and/or invest in improving the capability and infrastructure of the organisation.

Please note: Where a Local Government has accumulated significant surplus cash holdings (having considered externally restricted funds, minimum liquidity requirements and other planned expenditure), the Department will take this into consideration when assessing that Local Government’s request for loan borrowings. Therefore, Local Governments are encouraged to complete the relevant information on restricted cash balances (including forecasts) in the LGFM.

The Department also encourages Local Governments to consider applying for an ongoing WCF to manage their operating liquidity requirements as an alternative to holding excess surplus cash to accommodate for fluctuations experienced in the ordinary course of business.

Applying for Loan Borrowings

Documentation

A Local Government applying for loan borrowings must complete Part A of the 2018-19 Loan Borrowings Application Checklist (PDF icon 232 KB) and have it certified by the Mayor and Chief Executive Officer. The certification confirms that the borrowings will be used for lawful, capital purposes and that a native title risk assessment has been conducted on any relevant land.

Please ensure that all of Part A is completed and that all required information is included.

(Optional) Updated Long-Term Financial Forecast

An updated LGFM needs to be attached to the borrowing application where a Local Government’s long-term financial forecast has changed significantly since its initial submission to QTC and the Department on or before 14 September 2018, in line with Bulletin 8/18, or if a Local Government intends to borrow for the first time in 2018-19 and has not submitted a LGFM, prior to 14 September 2018.

The long-term financial forecast must be submitted in the prescribed format as outlined in Bulletin 08/18.

Conditions

Key conditions attached to any borrowings approved in the 2018-19 financial year include:

  • a loan term of up to 20 years. A Local Government may, however, choose a shorter term
  • borrowings must be drawn down prior to 30 June 2019
  • approval does not carry forward to subsequent financial years and will lapse on 30 June 2019.

Any undrawn approved borrowings will be cancelled and a new borrowing application will need to be submitted and re-assessed for future borrowing requirements.

Applying for a Working Capital Facility

Documentation

A Local Government applying for a new, extended and/or increased WCF must complete Part B of the 2018-19 Loan Borrowings Application Checklist (PDF icon 232 KB) and have it certified by the Mayor and Chief Executive Officer. The certification confirms that the WCF will be used for liquidity management purposes only, and that any temporary facility will have a zero balance by the required date.

Conditions

Key conditions attached to any WCF approved in the 2018-19 financial year include:

  • the balance of the facility must be contained within the approved facility limit at all times, including all drawn down amounts, capitalised interest costs and fees and charges incurred therein
  • for those facilities with an expiry date, the balance of the facility must be nil at the relevant expiry date
  • any other conditions imposed by QTC and/or the Department.

Should the Local Government become aware of any reason which may affect its ability to comply with the above conditions, it must immediately inform the Department.

Submission Process

Applications for loan borrowings and/or WCFs can be submitted until close of business on 15 October 2018. This will ensure that applications are processed in a timely manner and that any approved facilities will be available for drawdown prior to 30 June 2019. The Department may consider applications submitted after the cut-off date for emergent needs on a case-by-case basis.

Local Governments are required to submit completed applications and any required attachments electronically to the Department at This email address is being protected from spambots. You need JavaScript enabled to view it. (attention Mark Snow).

Applicants will receive an electronic acknowledgement from the Department to confirm receipt of the application and the anticipated decision date. Should the anticipated decision date be delayed, the Department will advise the Local Government accordingly.

Assessment and Approval Process

Applications for loan borrowings and WCFs will be assessed in order of receipt by the Department after the application period closes on 15 October 2018. All assessments will be subject to QTC’s borrowing recommendations. It is noted that selected Local Governments may be required to participate in a detailed QTC credit review in the 2018-19 financial year. These applications will be processed by the Department when the relevant credit review has been finalised by QTC.

The Department will assess applications for loan borrowings and WCFs for completeness and reasonableness to determine whether the Local Government has adequate financial capacity to maintain and service its proposed financing arrangements as well as the Local Government’s need for the proposed financing arrangements after consideration of its surplus cash position. In undertaking its assessment, the Department will refer to advice provided by QTC and may also request further information from the Local Government.

The Department will process complete loan borrowing and WCF 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, and
  • provides justifications for any anomalies and assumptions.

The 10 business days for the Department to process applications does not include the time:

  • prior to the close of the application period on 15 October 2018
  • correcting incomplete applications or financial models submitted by Local Governments
  • completing the relevant credit review by QTC (if applicable)
  • awaiting Local Government responses to Department queries.

The quality and defensibility of the forecasts supplied by a Local Government may impact on the 10-business day turnaround for processing applications. Local Governments are strongly encouraged to work with the Department and QTC in developing and submitting their applications for loan borrowings and/or WCFs.

Following assessment and determination of the outcome of a loan borrowing or WCF application, if the application is approved by the Department, the Local Government can actively work with 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 (noting loan approvals granted in FY2019 will lapse at 30 June 2019).

Customer Feedback

The Department welcomes feedback from Local Governments to inform its program development and improvement processes.

Any feedback about this program should be directed to This email address is being protected from spambots. You need JavaScript enabled to view it. in the first instance, with the Department providing an electronic acknowledgement of receipt.

Further Information

Any further enquiries on this matter should be addressed to:

Sustainability Team, Finance & Funding
Department of Local Government, Racing and Multicultural Affairs
(07) 3452 6719
This email address is being protected from spambots. You need JavaScript enabled to view it..