Infrastructure bonds an option for future funding

In a bid to foster support for federal tax incentives for investment in community infrastructure, Wollongong City Council has recently issued a discussion paper on strategies to attract investors.

The Local Government Infrastructure Bonds Discussion Paper aims to foster debate on advancing inter-governmental acceptance of local government capital funding through the use of Infrastructure Bonds [known as Municipal Bonds in North America] for future social infrastructure and other major capital works.

Council is embarking on a range of large scale projects to maintain, replace and build infrastructure over coming decades, in conjunction with a suite of new planning instruments.

As part of exploration of funding opportunities, Council are looking to obtain infrastructure funding through debt in the form of bonds issued directly to its community and supported by tax incentives.

 “The Allan Inquiry report into the Financial Sustainability of Local Government in NSW flagged a $6.3 billion shortfall in infrastructure funding in NSW growing to $14.6 billion by 2021,” said Council’s Chief Executive Officer, Rod Oxley.

“The report proves an annual gap of $900 million in current maintenance funding. This scenario is generally replicated across most Australian states and I see it as time to ignite the debate on sensible debt funding for infrastructure provision.”

The discussion paper was prepared by Council’s finance team after months of consultation and review across the broader finance industry and included major banks, boutique advisory firms and other local government authorities.

 “Council recently adopted a City Centre Revitalisation Plan that comes with a $400M+ 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.”

“We 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,” Mr Oxley said.

“If supported by federal and state tiers and providing some form of tax relief for investors, as is the case elsewhere in the world, Australia will be able to close the burgeoning infrastructure gap much faster than through traditional methods.”

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