IN late February, the Newcastle Herald revealed that Lake Macquarie Council had propped up three annual budgets by "borrowing" more than $44 million set aside for community infrastructure, against the advice of various officials and bureaucrats.
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The money had been part of a fund totalling $111 million last year, built by investing compulsory contributions levied on property developers whenever a project or subdivision is approved.
The levies are set by the state, but administered by councils, seen as "best placed to understand the needs of their communities".
Planning and Public Spaces Minister Rob Stokes described the borrowings as "an unacceptable breach of the public's trust", and Lake council is apparently the only one in the state to resort to the practice.
LAKE LOANS FILE
Against their critics, the elected councillors stood by their decision, which Mayor Kay Fraser even described as "smart".
On Monday, however, councillors had a change of heart, voting in line with a staff recommendation to fully repay the $38.4 million still owed to the developer contributions fund, with the rest of a new external loan of $63.8 million to be used for other purposes.
Much of the information about the internal borrowings became public only through the freedom of information process.
Despite the debate that ensued, and an investigation by the Office of Local Government, none of this was mentioned in Monday night's agenda.
Instead, the council papers recommended a new external loan because interest rates had fallen.
The existing internal loans were at 4.54 per cent, 3.59 per cent and 2.59 per cent.
This year's market rates were likely to be about 2 per cent or "slightly" less, saving $2.4 million over the life of the loan.
But this is surely a specious argument.
The council, as both borrower and lender, could choose whatever interest rate it wanted, and the existing internal loans were presumably tied to official rates between 2016 and 2018, when the borrowing took place.
While the council insists it has done nothing unlawful, its handling of this affair has been less than transparent from the start.
Councillors voted for a report to be made public to ratepayers, but the single page of information, posted on the council website in February, again makes no mention of the controversy, despite opening with the promise that "Council is open and transparent with all of its financial operations".
On the evidence of this affair, it is very hard to see how that's the case.
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