Your rates, your city: how does council use debt?
When it comes to council finances, one of the most common topics Onkaparinga residents ask about is debt—what is debt, why does council borrow money, and how sustainable is this?
“Put simply, debt means borrowing money for a specific purpose, which is why debt is sometimes referred to as borrowings,” says City of Onkaparinga Mayor Erin Thompson in a new video released this week.
The video is part of the Your rates, your city campaign, which aims to help demystify council finances following feedback received by the community during engagement on council’s Long Term Financial Plan.
“By borrowing money, we can deliver the facilities and infrastructure the community needs without the need for large rate increases,” Mayor Thompson continues.
“Using debt to fund infrastructure allows us to spread this burden over current and future communities—those that will ultimately benefit from the use of the infrastructure.
“This is a much more equitable way to spread the cost of infrastructure provision, and it’s what we refer to as intergenerational equity, a principle we adopt to rate fairly.
“In South Australia, councils generally have very low levels of debt compared with the value of their assets.”
If you were to compare the combined debt of the City of Onkaparinga to a home loan, Mayor Thompson says, it would roughly work out to $67,000 worth of debt on a $500,000 property.
“While our debt to asset ratio is low, we know that debt and borrowing must be carefully managed to ensure long-term financial sustainability,” she says.
Council adopted its new Long Term Financial Plan earlier this year and with it came a commitment to achieve a balanced budget within the next four years.
One of the ways it will do this is by changing the funding mix for significant upgrade projects and new major projects.
Those projects will be funded with a ration of 60 per cent debt and 40 per cent rates, instead of the previous mix of 80:20 debt:rates.
“This will slow down borrowing and help to reduce our debt over time,” she says.
For more information and handy explainers on council finances, head to the Your rates, your city web page, where you’ll find resources about how your rates are calculated, and a glimpse at the more than 200 programs and services council delivers to the community each year.
Community engagement on council’s Draft Annual Business Plan and Budget 2021–22 will open soon at council’s Your Say page, where you can provide your feedback until late June.
Stay tuned to Onkaparinga Now to see when engagement opens.