Council on Monday night will consider as part of the rate budget how much loan funding we should use to fund council programs.
When we as individual property owners need to improve or redevelop our property we will be faced with how to finance any such project. Like I suggested in my last blog post he larger the project the more likely we are to finance it by way of loan funding. This is because the larger the project the more likely it is we cannot fund it without loan funding.
The same applies to council. Indeed I would suggest the longer a newly created or improved asset we purchase will live the more we should consider using loan funding for it.
If we build an addition to our home the chances are we are going to use loans to fund it, assuming we can service the loan. If we can’t service the loan we cant pay cash and we should not be undertaking the project. Coucnil does have an option though. Almost like winning the lottery and being able therefore to pay cash Council can pay for it now by simply saying to current rate payers we are going to lift your rates.
I put it that each component of that addition a home owner will do to their home will invariably be loan funded rather than by using cash. That means the curtains you might pay for by cash in a room in your existing house, or the re-tiling you might do in your existing bathroom, or the pergola you might put on the rear of your house will funded by loan funding if part of a larger/major redevelopment.
Councillors can be emotionally frightened of debt and that is to be expected and understandable. They are people just like you. They could easily take the increase the rates approach. Let’s face it (as noted above) we have a captive audience.
I for one am satisfied that the “curtains, tiles and pergolas” that have been included in larger projects like the Goodwood Road redevelopment and the Cycle Path can and should be included in the loan funding for those projects.
Why would we bother to pull them (things like street signs, line marking etc) out and pay cash for them. To pull them out and account for them separately will actually add to our administrative costs.
It is not a case in other words Lower Rate verses Lower loan funding but budgeting for the both today’s rate payer and tomorrows rate payer to contribute based on good financial management practices. Unless convinced otherwise on the night by alternate logic I will be staying therefore with loan funding as planned and with keeping your rate increase down to 2.2%.