Victorian Government launches new loans framework for councils

Victorian Government launches new loans framework for councils

From 1 January 2022, Victorian councils seeking financial assistance will be able to take advantage of the new Local Council Lending Framework (new Framework). Under the new Framework, councils will have access to a low interest loan financed by the Treasury Corporation of Victoria (TCV) and secured against the council’s revenue from general rates. Unlike other existing loan programs, councils will be able to borrow money under the new framework for the purposes of general working capital requirements as well as project specific infrastructure investment purposes. Councils intending to do infrastructure works or requiring funds for general services are encouraged to consider this cost effective alternative.

Local Government Victoria (LGV) has published a useful guide for Councils to understand the key steps involved in the new Framework. Below is a summary of the guide.

Borrowing intentions survey and council annual budgets

LGV will work with the Department of Treasury and Finance (DTF) and the TCV to administer the new framework. The first step in the implementation of the new framework is that LGV will conduct an annual survey to determine a council’s indicative borrowing intentions for the following financial year. LGV will then communicate these borrowing intentions to the DTF and the TCV for budget and planning purposes.

As required by the Local Government Act 2020 (Vic), councils will adopt a budget by 30 June. LGV will use the adopted budgets to calculate the planned new borrowings for the financial year and present them to the Minister for Local Government for consideration and endorsement.

Credit risk assessment and approval of borrowing limit

After endorsement is given, LGV provides the endorsed individual council and total annual new borrowings to the DTF for a credit risk assessment. The credit risk assessment determines each individual council’s financial viability, capacity to repay the loan and ability to meet other loan conditions.

Councils will need to provide supporting documentation to assist with the DTF’s credit risk assessment including a comprehensive income statement, balance sheet and cash flow statement which have been audited for the previous 3 years and projected and approved by the council for the next 4 years.

Following the credit assessment process, and provided the council meets the credit criteria, the DTF will recommend to the Treasurer that the council can take out a TCV loan up to an approved limit. Subject to the Treasurer’s approval, councils will receive written confirmation from the DTF of its TCV borrowing limit.

Application for the TCV loan

Once all the above steps have been completed, the council may make a formal application to TCV for a loan up to the approved limit. It is essential that councils provide accurate information on the application and during the period of the loan to avoid default or the loan being cancelled.

To access the TCV’s lending, councils will need to create a TCV client account. From there, TCV will assist the council with deciding on a loan product from its range that is most suitable for the council’s needs. While the loan interest rate will be relatively low, it is important to note that the TCV’s interest rates will be subject to market fluctuations. As such, the actual interest rate that a council will receive will depend on the rate at the date that the loan transaction is executed.

To assist councils, the table below is an indicative timeline for the new framework.


2021-22 financial year
(establishment year)
2022-23 onwards
Framework formally launched August 2021
Councils notify LGV via annual survey of indicative borrowing intentions for the following financial year Not applicable 31 March
LGV communicates these borrowing intentions to both DTF and TCV for budget and planning purposes Not applicable 30 April
Councils adopt (four-year) budgets 30 June 2021 30 June
LGV collates individual planned council borrowings disclosed in adopted budgets to determine total new borrowings for consideration and endorsement by the Minister for Local Government September 2021 July
Minister for Local Government notifies the Treasurer of planned council borrowings for the financial year September 2021 August
DTF credit assessment and loan recommendation process October 2021 – November 2021 September/October
Treasurer approves TCV borrowing limits and DTF writes to each council confirming individual TCV borrowing limits December 2021 October
Council applies to TCV for loan From January 2022 From November
TCV loan agreement execution process As required As required

Source: Department of Jobs, Precincts and Regions ‘Treasury Corporation of Victoria loans to Victorian councils’ 2021


The timing for completion of the adopted budget in June and the various other steps required in the new framework means that the first TCV loan is unlikely to be available before 1 January 2022. Councils should utilise the months until then to plan for any projects or works which could benefit from a TCV loan.

LGV has made it clear that the new framework will be an addition to existing funding programs therefore councils that take out a TCV loan are not precluded from seeking financial support from other fund providers or under other loan schemes. However, if a council borrows from TCV, it may be restricted by financial covenants pursuant to the TCV loan agreement. It is prudent for councils to review the specific terms and conditions of a TCV loan agreement and satisfy itself that the loan is appropriate to meet council’s needs.

While the TCV loan is not restricted to specific types of works, councils cannot use the TCV loan to refinance an existing loan or for investment in financial assets. If you require assistance in this area, please contact Hunt & Hunt’s local government lawyers.

~ by Michelle Nguyen, Lawyer

Our Government and Public Sector Lawyers