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Major Policy
Major Policy
Major Policy
Major Policy
Major Policy
Loan Repayment
Reserve for
Interest Only Debt
Major Policy
September 2015

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Major Policy
Major Policy
Major Policy
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Loan Repayment Reserve for Interest Only Debt Major Policy
1.0 MAJOR POLICY AIM AND OBJECTIVES
The aim of the policy is to ensure that a cash backed loan repayment reserve is established for the purposes of setting aside
sufficient financial allocations to repay the principal on ‘interest only’ loans at the date of maturity.
The objectives of the policy are to:
• Create a loan repayment schedule
• Establish a loan repayment reserve and associated cash investment in respect to interest only debt
• Allocate a set amount of funds from the budget each year to the reserve
• Have sufficient funds in the reserve at the initial maturity date to repay the outstanding principal in line with the loan
repayment schedule.
2.0 DEFINITIONS OF TERMS BEING USED
Bond – is a debt security under which the issuer owes the holders a debt and depending on the terms of the bond, is obliged
to pay them interest (the coupon) and/or to repay the principal at a later date, termed the maturity date.
Interest Only Debt – is a form of debt (e.g. Bond, Loan) where interest is payable on the principal at an agreed rate and
frequency for a set term at the end of which, the principal is due and payable in full.
Local Government Bond Issue – is the bond issued by the Local Government Funding Vehicle (LGFV).
Restricted Reserve – is funds set aside for expenditure on a specific purpose.
Reserve – is a fund established by setting aside revenue over a period of time to fund a future capital expense, or repayment
of a long-term debt.
3.0 MAJOR POLICY STATEMENT AND PRINCIPLES
Major Policy – Statement
Where Council enters into an interest only debt facility, it will establish a loan repayment reserve for the purposes of
ensuring that sufficient funds are available to pay the outstanding principal at maturity.
Major Policy – Purpose
This policy is a Major Policy, in accordance with the Governance (Major Policy Consultation) Local Law No. 3. Council
considers this policy to be of major significance, and has committed to a public and transparent consultation process
that provides an opportunity for people affected by a major policy, to address the Council.
Major Policy - Mandatory Consultation
As a Major Policy, Council will, as a minimum, undertake a community consultation process as set out in its
Governance (Major Policy Consultation) Local Law No. 3.

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Major Policy
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Loan Repayment Reserve for Interest Only Debt Major Policy
Rev
Reviewed Date
Reason for Amendment Next Review Date
22/09/2015
New Policy
22/09/2019
Date Designated by Council as Major Policy - 22 September 2015
Date Amended/Modified by Council –
4.0 SPECIFIC REQUIREMENTS
Reserve Establishment
The loan repayment reserve must be established as a restricted reserve in the equity section of the Council’s balance sheet.
The reserve will be cash backed either as part of the Council’s overall investment portfolio or as a separate investment.
Budget Allocation
At the time the interest only debt is established the repayment schedule for principle payments will be also be established.
Each year an amount will be transferred to the loan repayment reserve that is no less than the amount specified in the
repayment schedule.
The amount will be calculated taking into account the following assumptions:
• Amount of the principal to be repaid at maturity
• Term to maturity
• Over the loan repayment period equitable financial allocations must be provided through annual budgets
• Interest repayments.
The maximum period for an interest only debt will be 15 years from the initial drawing down of funds, including any rollover/
refinancing of the outstanding debt.
Reporting
Each year:
• Council will report in the annual budget the amount agreed to be transferred to the loan repayment reserve when the
loan was established and the amount proposed to be transferred to the reserve in the forthcoming year.
• Council will report in the annual report the amount transferred to the loan repayment reserve in the reporting year and
the amount agreed to be transferred to the loan repayment reserve when the loan was established
Review
The loan repayment reserve will be reviewed on an annual basis as part of the budget preparation process to ensure
that sufficient funds will be available at the date of maturity to repay the principal. Where the forecast funds at the date
of maturity exceed or are less than the principal, the budget allocation will be adjusted accordingly. The Audit and Risk
Management Committee will have oversight of the loan repayment reserve annual review.
Amendment of Major Policy
This Major Policy can only be made, amended, modified or revoked, in accordance with the requirements of the Governance
Major Policy Consultation Local Law No. 3.

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This policy is designated as a Major Policy,
and is subject to the provisions of the
Governance (Major Policy Consultation)
Local Law No.3.
Brimbank City Council
Sunshine Office
Alexandra Avenue, Sunshine, Victoria 3020
T 9249 4000
F 9249 4351
W brimbank.vic.gov.au