City to borrow $41 million for Civic Precinct

THE City of Greater Geelong council is pressing on with its plan to go further into debt to fund the construction of the Civic Precinct, authorising $45 million in new loans.
At their meeting last week, councillors resolved to authorise the city’s chief executive officer Martin Cutter to begin the loan procurement process.
The revised loan borrowings will result in a loan balance of $116.1 million as of June 30, 2021.
The city’s 2020-21 budget included provisions for new borrowings of $66.9 million, including $7.3 million in deferred borrowings from 2019-20.
Based on projected cash flow requirements, $41 million of the borrowings is sought for the Civic Precinct – which will also be partly funded by asset sales – and the remaining $4 million for the council’s LED Streetlighting and Smart Controls project.
The $41 million loan will be for a term of 10 years with fixed interest repayments, while the $4 million loan will also be 10 years but with principal and fixed interest repayments.
The council has budgeted borrowing a total of $50 million for the Civic Precinct but does not yet need to borrow the remaining $9 million.
The council’s finance portfolio chair, Cr Anthony Aitken, said the size of the loan “may scare a lot of members of the community and also councillors that are frightened by financial numbers” but the Civic Precinct now being built in Geelong’s Mercer Street was a significant investment.
“What the community should have confidence in is that the cost of money is the cheapest it’s ever been in the world at the present time, and it is prudent for us to be in that marketplace, to be borrowing money and maximising the return we can get for the community for investments.”
He said the council had the servicing capacity to start a $45 million loan as well as the operating and expenditure review capacity to pay the associated interest.
Cr Eddy Kontelj supported the motion but sounded a note of caution about “the future burden this will put onto the council”, and future councils might have a different attitude.
“While Cr Aitken is absolutely right – interest rates are low today – we all know they will not remain low forever and a day.”
He said the council had discussed future ownership models for the Civic Precinct “and owning the building is not the only model out there”.
Councillors also authorised a doubling of the overdraft in the city’s existing banking agreement, from $5 million to $10 million.
The report to councillors stated that “due to the impacts of COVID-19 and current operating environment, additional flexibility is required to meet short-term operating needs”.