UTAS borrowings

 

This is an additional submission to the Legislative Council’s Inquiry into the Provisions of the University of Tasmania Act 1992 supplementing submission # 93, evidence given on 12^th December 2022 and a further submission made 19^th December 2022.

The supplementary submission was prompted by the lack of transparency and scrutiny surrounding UTAS’ borrowing arrangements as it pushes on with its move into the centre of Hobart.

The discussion is widened to include the raising of funds other than by traditional borrowings and whether Sec 7(2) of UTAS’ governing Act which requires the Treasurer’s approval to borrow, needs to be broadened to include other borrowing-like arrangements.

This is followed by comments on other arrangements that impact of UTAS’ financial position.

UTAS: The need to redefine who are members

 

This was an additional submission made on 19^th December 2022 to the Legislative Council’s Inquiry into the Provisions of the University of Tasmania Act 1992, supplementing submission #93 and evidence given on 12^th December 2022, all of which are available on the committee’s website.

The supplementary submission was prompted by the lack of a coherent discussion as to who are UTAS’ members, to whom should UTAS report and what role should members have in selecting board members (the University Council).

The need for the exact legal status of UTAS to be clarified was highlighted by Premier Rockcliff’s October 2022 assertion that UTAS was a private company and Vice Chancellor Black’s recent contention at the May 4^th 2023 hearing that UTAS is an instrumentality of the State.

Hopefully the Committee will be able to address this crucial issue. Most people are unaware if they're members of UTAS. Being a member does bestow any particular rights or obligations to receive information and very little by way a right to determine who should be elected to Council.

VicForests: The ongoing disaster

 

The 2021/22 VicForests’ loss of $54 million was a disaster. In one fell swoop VicForests’ equity of $45 million funded by the gift of trees from the Crown, was totally wiped out.

To end up with a loss of $54 million after timber sales of $80 million is a staggering achievement. 955,000 cubic metres of timber were sold at an average price of $85 per m3. The cash loss was a mind boggling $58 per m3.

The stumpage value of harvested timber (sales less harvesting and haulage costs) slumped to less than 4 per cent of revenue or $3.1 million. The stumpage value was $3 per m3. On a per hectare basis this is less than the costs to regenerate. Regeneration costs were $3.2 million. A government lifeline was needed to pay employee costs ($20.3 million), roading costs ($6.4 million) and overheads of $21.6 million. 

Harvesting 80-year-old trees for a stumpage value of $3 per m3 is the height of absurdity especially when it is accompanied by all the unrecorded non-timber losses.

Plantations grow at least four to five faster than native forests. This makes clear-felling native forests to essentially create the same woodchip product as plantations little more than State sponsored vandalism.

VicForests’ equity at June 2022 was negative $3 million. But for a letter of comfort from the Treasurer, VicForests would have been forced to cease trading.

The VicForests' model: A brief explainer

 

VicForests’ major assets are the trees that have been transferred from the Crown and are available to be harvested until 2030, the current end date for logging native forests in Victoria. There are a few plantations on its books, but these are of little significance.

The underlying forest land does not appear in VicForests’ books, only the trees.

When the trees were transferred to VicForests they were recorded as having a value equal to estimated future net harvest proceeds. The contribution/gift by the Crown represented the Crown’s equity in VicForests.

In theory, in a perfect world, when trees are harvested and sold, the net proceeds will be the same as the value on VicForests’ books. The book value of the asset will be realised. The book value of the trees will become an offsetting expense. Hence net profits from harvesting and sale will be zero.  VicForests will therefore be left with cash equal to the net proceeds, some of which will be used to regenerate felled forests, with the balance to be paid to the government as a return on its investment in VicForests. Regenerated forests once established are then transferred back to the Crown. That was the plan.