Reviewed 26 June 2015

See the Liability Management Policy (part of the Treasury Risk Management Policy) [PDF, 1.3 MB] page 5 of the document, for full details.

Introduction

The Liability Management Policy focuses on borrowing (external and internal) as this is the most significant component of Council’s liabilities and exposes the Council to the most significant risks. Other liabilities are generally non-interest bearing. Cash flows associated with other liabilities are incorporated in cash flow forecasts for liquidity management purposes and for determining future borrowing requirements.

Council maintains external borrowings in order to:

  • Raise specific debt associated with projects and capital expenditures;
  • Fund assets where their useful lives extend over several generations of ratepayers;
  • Fund investment in CCOs;
  • Provide funding to CCOs;
  • Fund short term borrowing for working capital requirements.

Borrowing provides a basis to achieve intergenerational equity by aligning long-term assets with long-term funding sources, and ensures that the costs are met by those ratepayers benefiting from the investment. Generally when the Council borrows money the debt is not linked to a specific activity it is considered to be part of the overall cost of operating the Council. This general rule is not followed for debt which is linked to a service covered by a targeted rate. In those cases the debt repayment is recovered from within the targeted rate.