The recommendation that has been put to Councillors to vote on in two days time, is the biggest decision that this Council has had to make, during the 5 years of their elected term.
By Rodger Pryce, Together We’ll Fix It Mayoral Candidate
The funding for the CCS has now been rejected by the finance arm of NSW Treasury, T Corp, on the grounds I understand that the Coffs Council has not satisfied the due diligence requirements of the lender.
Lenders in the commercial market do not have as strict lending criteria as T Corp. This is identical to the difference in borrowing from a Finance Company, versus a Bank. The risk is higher to the lender so they charge the borrower a higher rate of interest.
So our Council is too high a risk for T Corp, we are now in the higher interest rate sector of the market.
This is us, this is where we are now at. We are higher risk borrowers.
The funding cost of any project is a cost which forms part of the feasibility. So what is the interest cost to this project?
Well, even though we are the borrowers, we are not allowed to be told. This is confidential. apparently.
Can you imagine going into a bank, being offered a loan and being told that you are not allowed to know the interest rate, nor the cost to you? This is where we as ratepayers are at, this is a farce.
We believe that the banks will charge a fair bit more than T Corp, however we have done our calculations still on a conservative basis of less than 4% interest rate.
The business paper for this Thursday’s Council meeting carries a recommendation to Councillors that our General Manager be authorised to sign a $50 million loan for 30 years at a fixed interest rate,with Westpac.
Based on our calculations, the interest cost will be in the order of $38 million. This interest cost is an added cost to the project.
Then add to this cost the fact that the previously budgeted $20 million from the sale of four properties was a gross, not a net figure and did not factor in the cost of lease back rents.
The more likely cash contribution from the sale of these assets is $10m, not $20m.
So does our CCS project now look like this?:
Building cost – $81.5M
Interest cost – $38M
Loss on asset sales – $10M
Total cost – $129.3M
We would be very happy to be proved wrong. If these figures are wrong, they are wrong because of the lack of transparency that we have to struggle with.
The above is a media release, Monday 12 July 2021, on behalf of the Together We’ll Fix it Team for the Coffs Harbour City Council election on 4 September.
Coffs Coast Outlook will publish all media releases by candidates for the council elections to be held on 4 September on the Coffs Coast so long as they have legally acceptable content. Media releases can be sent to [email protected]