Can Council’s CCS interest rate estimate be believed?

In November last year, in response to a request for information from Councillors, the management of Coffs Harbour City Council presented figures they argued represented the cost of interest on proposed loans for the new Cultural and Civic Space (CCS).

By The Editor and Rob Sturmann

Council projected that the total interest cost, over a 30-year period at an assumed fixed rate of 2.3% would be $17.9 million with $46.02 million forecast to be borrowed by Council.

More than a few residents and ratepayers questioned the assumptions behind these figures. Mainly that a rate of 2.3% over 30 years could be guaranteed given historical interest rate trends over the preceding 10 years but also that the figures presented did not seem to take account of the fact that the proposed sale of Rigby House and the Council Chambers in Castle street had not been successful and that an extra $18m might need to be loaned as a result.

What are commercial rates and practices?

We found it somewhat concerning that the estimate given to councilors did not give a range of figures based on the previous 30 year average for commercial rates nor apparently take into account what current commercial lending practices are.

The figures given to Councilors at their 12 November meeting last year therefore struck us as being both very optimistic and unrealistic, especially the ongoing 2.3% interest rate used given the proposed 30 year time frame.

Rigby House. Not sold and unlikely to be sold? But the push to build CCS goes on nevertheless?

So we thought we would ask senior commercial lending managers with links to Westpac and BCU what their commercial lending rates currently are.

This is what we found out.

Firstly they would not lend for longer than five years at a fixed rate of 5.8% without more detail. This is 3.5% higher than the 2.3% figure quoted by Council – bigger by a factor of approximately 2.5.

Although with extra detail, something that might be relevant to an organisation such as a local government authority (LGA) such as the CHCC, it might be possible to have a fixed rate for a maximum of 25 years.

We were also told the current non-fixed commercial rate is 3.19% over three years with the variable rate increasing should the lessee want to sign off on a five year agreement. This is 0.89% higher than the 2.3% figure quoted by Council.

These figures do raise doubts about how realistic the interest cost figures presented to Councilors actually are and the distinct impression we got from our discussions with the lenders was that very long term fixed rate loan periods such as those cited by council are not at all likely.

Council does argue that they will be able to get a 2% $20m TCorp (NSW Treasury) loan. Although there does appear to be some issue as to whether TCorp loans apply to new structures such as administration buildings.

CCO understands that as of yet Council may not have yet formally applied for the proposed TCorp loan.

What interest rates might really cost ratepayers

So what might the interest rate ‘bill’ be given the above?

Which ever way you look at it the interest rate bill given the above is highly likely to be quite a bit more than $17.9m.

Possibly even as much as double that depending on the rate and the loan period settled on.

More Councilors respond to open letter

Last week we published a story detailing a response for Cr Sally Townley to an open letter asking for Councilor’s positions on three issues relating to the CCS. That story can be found here;

Since then two more councilors have also responded. The first below, sent via email, from Cr Keith Rhoades is reproduced below;

And reproduced below is an email response from Cr Paul Amos;


CCO understands a number of residents and ratepayers may have been holding discussions among themselves and with solicitors canvassing options on what to do should Council vote to award a construction contract for the CCS prior to the next LGA elections on 4 September.

We understand a number of options are being looked at including the viability of legal action such as an injunction.

A last thought

In our article last week on some hidden issues relating to the airport lease we argued that; “where Council Executive wants something to happen then one off optimistic scenarios often form the basis of an ‘analysis’ for Councilors.  Medium-case and worst-case scenarios rarely get a look in. 

And when council’s executive doesn’t want something to occur a worst-case scenario is wheeled out.  In this instance best-case and medium-case scenario analysis often rarely get a look in either. 

It appears as if though SWOT analysis often appears to be something completely unknown as an analysis tool by Council management when reports to Councilors are scrutinised.”


The interest rate projections given to Councilors on 12 November last year would be Exhibit A in support of our argument.

Rodger Pryce made this point under a News of the Area (NOTA) report on the 12 November meeting when he wrote;

To project a funding interest cost, it is common practice to average the rate for the preceding years, for the length of term suggested. A 2.36% suggested rate for 30 years can only be taken seriously if there has been a funding source secured.


The NOTA story with his comment below it can be found here;


7 thoughts on “Can Council’s CCS interest rate estimate be believed?

  1. Please, don’t forget that the presence of the administration accommodation made us ineligible for Government subsidy amounting to $millions. How can our public servants have the hubris to sacrifice our rights to government money, because they want a glass castle? This is not a social game of Monopoly! This is real life!

    1. Spot on Tom.

      Not content with not selling the buildings they said would raise $20m for this vainglorious glasshouse they push on regardless. Borrowing more and more and more apparently.,

      As you point out many millions of federal and state monies have been squandered because our upper level public servants want a glass castle that added at least 110% to the cost when it was proposed to be just an art gallery and a library.

      But what the hell, its not their money.

      No its the ratepayers money. You know, ratepayers, those ‘peons’ who are clearly a pain in the butt to these pompous public servants who apparently know what is good for us even if we don’t.

      And as this article points out the assumptions and estimates being used to justify this don’t stand up to scrutiny. Not even remotely.

  2. It’s all in the hands of four ” EGOS ” (a person’s sense of self-esteem or self-importance) we have one slim chance , Sally may come to her senses.

  3. I recall previous comments that Council would not qualify for a TCorp loan due to some Government policy exclusion.

    What is it that our elected councilors don’t understand about money and the cost of it ? Apart from having no morality they clearly have no sense of financial responsibility. It seems that four of our councilors are hell bent on driving Coffs Harbour into the ground just to build some crazy stupid building that nobody in Coffs Harbour want except for a small minority. IF it does get completed and I have my doubts, it will stand as an epitaph to the inglorious heroic failure of Mayor Knight and her cohorts.
    What bothers me is the feeling that four of our intrepid councilors have little or no understanding of dealing with very large borrowings along with its causes and effects over time. Either that, or they just don’t bloody care as they’ll likely be deceased in 30 years time while the now younger generation are forced to repay the debt via rates that should’ve been spent on more pressing community matters.

    I’m not an economist but like many I have experienced borrowing large sums of money though nothing like $46,020,000. However, I do understand the complexities of long-term debt. If you lived through the 70’s and 80’s you too might have noticed stresses occurring at times when inflation rose above government target rates. Ah, there’s that nasty word – INFLATION. For now let’s not dwell on the global financial crises nor this pandemic that raging across the globe, but let’s turn to the promising Covid-free future.

    As I’m reading it, the economic forecasts now being released by the major economies are pointing towards world growth at rates not expected 6-months ago. Nightly news suggests world growth in trade and with employment levels heading up. So what; that’s great isn’t it ?
    Not if you’re a long-term fixed rate lender.
    It means inflation is creeping back into our lives. If you don’t recognize the extraordinary rise in house prices or rise in costs for your basket of fruit, veg and meat etc, then as a ratepayer you won’t understand what Coffs Harbour Council is doing with the future of your money.

    Coffs Harbour council is attempting to pull the wool over your eyes. And what they’re attempting is potentially bordering on criminality in my opinion. As I calculate, borrowing $46.02 Million over 30 years at 2.3% fixed means a total interest cost of $17,730,780; with the Total Cost of the loan being c.$63,750,800 Million.

    If the interest rate is more realistically 5%, then the total interest cost paid would be c.$43 Million and with the Total Cost of the loan being c.$89 Million.

    If CHCC believe they can borrow $46,020,000 for 30 years at a fixed rate of 2.3%, they must also believe in fairies.

    We know inflation can aid the borrower but certainly not the lender. No lending institute today is going to stupidly lend such money to a borrower, especially to a local government council with arguably a reputation of financial recklessness and mismanagement.

    No doubt this GM and his loyal treasurer will somehow desperately find a way to pull a rabbit out of the hat.

    Despite all of the above, $46,020,000 isn’t enough to build this 100 million + dollar monstrosity, so where’s the rest coming from ? Let’s just wait and see. What we do know is the four councilors in favor of the glasshouse construction are in for a helluva roasting come election time.

    1. To add further comment and courtesy of ABC’s Business and Finance reporter, interest rates are likely to begin rising before 2024. The strength of our rising Aussie dollar will be the driver.

      The economy’s improving enough now to prompt financial markets to shift up or move forward their expectations of when interest rates will start rising.

      The ANZ’s Head of Australian Economics, David Plank, watches interest rate markets for a living.
      He says despite the Reserve Bank’s statement that it would not raise interest rates until 2024 at the earliest, financial markets are betting they will go higher earlier than that.”

      So what’s this going to mean to our shrewd financial experts sitting in their lush leather council office chairs doing financial modelling on the office abacus?

      “Full steam ahead” says the rather rotund GM slinking behind those who undoubtedly will have take the blame when he’s long gone.

      Sheer madness seems to have taken a grip on Coffs Harbour councillors and those at the top of the tree.

  5. Councils assumption that 2.3% will be the average across 30 years is absurd. A historical analysis of interest rates across the same previous time period would have told them that.

    But that would not have supported the narrative they wanted to sell.

    I find it hard to believe that the four Councillors Private Eye alludes to can be so naive. So the only conclusion one can come to is that something else is of more importance to them. What that may be I guess only time will tell.

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