Our borrowings

Our borrowings history

During the 2012–13 financial year, we borrowed $29 million to fund major building works. The borrowings were at a fixed interest rate for 10 years and we are due to pay this back in full in 2022–23. We are currently looking at our loan portfolio to see if there is an opportunity to refinance the rest of this loan for another 10 years.

In 2014–2015, we reviewed our existing loan portfolio and took the opportunity to refinance long-term debt to a 4-year loan. This provided decreased interest rates and interest savings to the community. It also provided increased financial capacity to support future infrastructure programs.

In 2021–22, we proposed to borrow $70 million to fund significant infrastructure projects, including works at Kew Recreation Centre and Canterbury Community Precinct.

Our existing borrowings

During the 2021–22 year, we made $1.67 million in principal repayments on existing borrowings. This means that on 30 June 2022, our total borrowings will be $91.54 million. The projected cost of servicing these borrowings is $2.12 million during 2021–22.

Our future borrowing strategy

Our borrowing strategy is to pay off existing debt over time so that we can look at new borrowings for significant infrastructure projects for the community. This strategy allows us to invest in new infrastructure while paying off our debts.

We will look at different borrowing strategies for each portion of planned borrowings as they become due.

Our future proposed borrowings 

The following table sets out our future proposed borrowings, based on our forecast position on 30 June 2022. The table also shows the results of financial ratios from the Victorian State Government. The years below cover our Long Term Financial Plan. For these years, we are projected to be at low risk as defined by the Victorian Auditor-General's Office financial sustainability risk indicator of indebtedness.

Financial year ending New borrowings Principal paid Interest expense Balance 30 June
2022 $70,000,000 $1,674,000 $2,121,000 $91,540,000
2023 $19,700,000 $26,362,000 $2,781,000 $84,877,000
2024 $8,563,000 $2,120,000 $76,315,000
2025 $8,803,000 $1,876,000 $67,512,000
2026 $9,052,000 $1,625,000 $58,459,000
2027 $8,773,000 $1,390,000 $49,686,000
2028 $9,003,000 $1,158,000 $40,684,000
2029 $9,240,000 $920,000 $31,443,000
2030 $9,482,000 $675,000 $21,961,000
2031 $9,731,000 $423,000 $12,231,000
2032 $9,987,000 $166,000 $2,244,000

Adjusted Working Capital Ratio

We monitor our Adjusted Working Capital Ratio (current assets/current liabilities). This means we look at how much cash, or assets we have that we can convert into cash, within 12 months to pay back any amounts we owe to others during this time. We work to a capital ratio of 1.2 to 1. This tells us how many time we could pay the money we owe. This approach supports our goal of having enough cash to be able to pay the money we owe 1.2 times (or pay what we owe and still have money left over). If the ration falls below the target, our Long Term Financial Plan must show our future capacity to get back to the target level. This Budget has forecasted us to achieve this outcome by 2032.

Borrowings required by regulations

Indicator Forecast Actual 2021–22 Budget 2022–23
Total amount borrowed as at 30 June of the prior year $23,214,000 $91,539,000
Total amount to be borrowed $70,000,000 $19,700,000
Total amount projected to be redeemed –$1,674,000 –$26,362,000
Amount of borrowings 30 June $91,540,000 $84,877,000