Wollongong City Council has issued a discussion paper aiming to gain support for Federal taxation incentives for investors in community infrastructure. The Local Government Infrastructure Bonds Discussion Paper aims to foster debate on advancing intergovernmental acceptance of Local Government capital funding through the use of infrastructure bonds for future social infrastructure and other major capital works.
With a suite of new planning instruments, Wollongong is embarking on a range of large scale projects to maintain, replace and build essential infrastructure over coming decades. In exploring funding opportunities, Council saw a timely opportunity for Local Government to pursue infrastructure funding through debt in the form of bonds issued directly to its community and supported by tax incentives.
Wollongong’s General Manager, Rod Oxley, said the 2006 Allan Inquiry report into the Financial Sustainability of Local Government in New South Wales flagged a $6.3 billion shortfall in infrastructure funding, which will grow to $14.6 billion by 2021.
“The report proves an annual gap of $900 million in current maintenance funding,” Rod Oxley said. “This scenario is generally replicated across most Australian States. It is time to ignite the debate on sensible debt funding for infrastructure provision.”
Wollongong’s finance team prepared the discussion paper after months of consultation and review with major banks, advisory firms and other Councils.
Wollongong’s Chief Financial Officer, Stephen Payne, said Council has secured a AA+ credit rating for two years.
“We have pursued this to provide comfort to investors and potential partners in the city and to establish our capacity to carry additional debt if required,” he said. “Council recently adopted a City Centre Revitalisation Plan that comes with a $400 million plus capital bill, which will not alone be funded by taxes, levies or rates. This is in addition to the soon to commence West Dapto Greenfield development, with an infrastructure price tag approaching $2 billion over the next 40 years. These will need to be delivered through a combination of traditional taxes and levies, but also through Public Private Partnerships and through the prudent application of debt funding.”
Rod Oxley said Council will now advance discussion on this issue with a range of peak bodies.
“Our vision will be achieved if governments at all levels accept that debt, prudently applied and well managed is in fact the cheapest form of capital available,” he said. “If we are supported by Federal and State tiers, providing some form of tax relief for investors, Australia will be able to close the burgeoning infrastructure gap much faster than through traditional methods.”
