LAKE Macquarie City Council has quietly caved on its controversial internal loan scheme, bowing to pressure from industry and the NSW government to repay the money.
The spectacular backflip saw council vote unanimously on Monday to externally borrow $63.815 million, that would partially be used to repay $38.392 million to a special fund of public money meant to be spent on critical community infrastructure.
The council said in February that borrowing the money internally from its developer contribution fund would save ratepayers $4 million in interest over 20 years, but a report to council on Monday said borrowing the money externally was now cheaper.
The Newcastle Herald reported in February that council was sitting on a $111 million developer contribution fund in June last year that had a gaping black hole because it had borrowed $44 million to "prop up" general expenditure.
After Planning and Public Spaces Minister Rob Stokes described the scheme in February as "an unacceptable breach of the public's trust and a misuse of public funds earmarked for important public infrastructure", the Office of Local Government (OLG) launched an investigation.
Despite the controversy, the debate at Monday night's council meeting was remarkable for its lack of debate about the backflip and the deafening silence on the OLG investigation.
Cr Brian Adamthwaite, who plans to challenge for mayor at the next election, said the council staff should be "congratulated once again" for their "fiscal management".
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A council spokeswoman refused to comment on Tuesday about the outcome of the OLG investigation.
But an OLG spokesman said it was aware council had moved to "rectify the matter" and would "continue to monitor the council".
Mayor Kay Fraser, who previously described the loan scheme as "clever" and said "we should not be questioned on this", was absent from the meeting for personal reasons and unavailable for comment.
The council spokeswoman said it was estimated council could now borrow externally at or below 2 per cent interest.
"Borrowing rates have changed in the past two months, due to the COVID-19 pandemic," she said.
Housing Industry Association Hunter executive director Craig Jennion welcomed council's move to repay the developer contribution funds.
Mr Jennion said developer contributions, collected to fund community infrastructure required as a result of new developments, should not be used as council "slush funds".
Editorial: Lake council papers short of information on internal loans controversy
"It takes far too long for infrastructure to be provided and in many cases families have moved on before it's even in place," he said.
Lake Macquarie developer Keith Johnson said it was clear council had been forced by the NSW government to repay the money and should be upfront about it.
"If they really want to do something clever, they should get an infrastructure fund going so developers can tap into cheap loans to provide infrastructure projects for the community," he said.
