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Call for city rates hike as council hits debt ceiling

Local

Adelaide City Council will exceed its borrowing limit by early 2021, estimates show, prompting one councillor to call for the first rates increase in over five years.

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According to a quarter two revised update, by the end of this financial year the council’s borrowings are set to hit $81.6 million – up from $46.8 million recorded on December 31.

The debt increase has prompted Town Hall staffers to warn the council will exceed its own debt ceiling – currently set at $89.75 million – by the first half of 2021.

It comes after the council agreed to proceed with a $400 million redevelopment of the Central Market Arcade after being warned by independent advisors that it was “likely” that proceeding with the project would breach the council’s borrowing limits “for an extended period”.

Other major projects, including the upcoming redevelopment of the old Le Cornu site at 88 O’Connell Street and the recently-completed Gawler Place redevelopment – which ultimately cost the council about $10 million more than first budgeted – have also contributed to bourgeoning debt.

According to a council report, forecasted borrowings are currently subject to a strategic property review.

CEO Mark Goldstone told Tuesday night’s council meeting that the “primary reason” for the council’s upcoming debt ceiling breach was due to “the timing of our commitments”.

“In my view the prudential limit that’s imposed is a conservative figure and was set by a previous council prior to consideration of some of the city-shaping projects that we’re now engaged in,” he said.

“Our prudential limits and our debt forecast will be fully debated as part of the coming budget process – it’s going to be a key aspect of what we talk about and there’s no doubt that there’s a range of levers that Council has regarding revenue and expenditure that we need to fully consider as part of the budget.

“The administration has been working on a debt reduction strategy and we’re looking to bring that to you in the near future.”

But area councillor Robert Simms said the council needed to address the imminent debt breach by ending its “Harvey Norman style of economics… where we put everything on the credit card”.

He said he hoped the council would consider raising rates in the 2020-21 budget in response to growing service costs.

The council has, for the past five financial years, committed to freeze the rate in the dollar.

Following a rise in property values, the council last year decided to increase the average rates payable for residential and non-residential properties by 1.86 per cent, which the council said was “at the lower end of increases across SA metropolitan councils” and in accordance with Valuer-General valuations.

“I think this really underscore the need for us to start to have a genuine conversation with ratepayers about rates in the City of Adelaide and to stop this ongoing obsession with freezing rates,” Simms said.

“If we want to do big picture work then we need to actually have a revenue base to do that.”

But fellow area councillor Anne Moran, who last year unsuccessfully attempted to have the council freeze its rate in the dollar for the remainder of the council term, said she would this year try to persuade the council to reduce its rate in the dollar.

“This council has always prided itself on not raping and pillaging the purses of our ratepayers and indeed I would like us to become the Monte Carlo council of Australia where we’re totally rate-free,” she said.

North ward councillor Phil Martin said he hoped the council would not sell assets to pay off its debt.

“It’s just like a household budget, we just have to manage it.

“I’d love to go to Italy next month but I have to do some stuff around the house so we’re not going to Italy, just the same as we don’t need to go out and buy a shopping centre.

“I think our ratepayers have an expectation that we will manage our finances in such a way that we won’t go into financial strife.”

Lord Mayor Sandy Verschoor said the council’s debt reduction strategy would look at “how we can actually bring back that short-term pain”.

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