Council debt accrues $13m in interest

HOBART City Council will repay $13m in interest on debt it has accumulated over the past 15 years, but the council plans to be back in black by 2037.

City of Hobart CEO Kelly Grigsby said the council had reviewed its financial position due to the Covid-19 pandemic.

Debt levels at the end of June 2020 were at $54.8m, rising to $66.1m by the end of June this year. But Ms Grigsby said the bulk of the debt was not due to Covid.

“Between 2022 and 2037, the City of Hobart will repay approximately $71m in principal loan payments and $13m in net interest payments,” Ms Grigsby said.

“This debt was accrued as part of a strategic decision of council to fund a significant number of capital works programs and has been accrued over the past 15 years.”

She said the borrowings were necessary for the growth and development of Hobart.

“Projects included major stormwater infrastructure upgrades and waste management infrastructure,” Ms Grigsby said.

“Prior to the pandemic, the city had been on a $300m capital investment path.

“In order to deliver such a large program, it has been necessary to borrow funds, which is common practice in local government across Australia.”

Ms Grigsby said that, like many councils across Australia, the Hobart council had reviewed its long-term plans as a result of the pandemic.

“It’s critical that we are undertaking a review of the long-term financial plan and associated organisational costs now to ensure it accurately reflects the post-Covid outlook,’’ she said.

“And that we continue to optimise public value in managing the city’s financial position to protect against future risks, support our Hobart economy, while also managing growth.”

It is hoped the new plan will enable the council to bounce back.

“The City of Hobart’s longterm financial management plan includes these loan repayments in its forecasts, and the city will produce an underlying operating surplus and have a positive cash balance each year for the duration of the 20-year plan,” Ms Grigsby said.

“This position enables the city to maintain its current asset base, while allowing for growth to meet new and emerging community needs and aspirations.”