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TO WRITE OFF DOUBTFUL DEBTS RELATING TO TELSTRA CORPORATION AND

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TO WRITE OFF DOUBTFUL DEBTS RELATING TO TELSTRA CORPORATION AND Powered By Docstoc
					Ordinary Meeting of Council - 29 June 2004                                                                   7/1

Item 7                                                                                                S02413
                                                                                                 16 June 2004


      TO WRITE OFF DOUBTFUL DEBTS RELATING TO
       TELSTRA CORPORATION AND OPTUS VISION




                                      EXECUTIVE SUMMARY


PURPOSE OF REPORT:                                           To obtain Council's authority to write off
                                                             doubtful debts for Telstra Corporation Limited
                                                             and Optus Vision Pty Limited relating to Section
                                                             611 Charges raised under the Local Government
                                                             Act 1993.


BACKGROUND:                                                  Council has raised an annual charge under 611
                                                             of the Local Government Act on Telstra
                                                             Corporation Limited and Optus Vision Pty
                                                             Limited for installing and maintaining cables for
                                                             pay television high speed internet access since
                                                             1997. Telstra and Optus have challenged
                                                             Councils right to raise such a charge in various
                                                             courts culminating in the Full Bench of the High
                                                             Court of Australia.

                                                             In accordance with Australian Accounting
                                                             Standards, Council has been raising an annual
                                                             provision for doubtful debt for this charge since
                                                             1997. This has been sanctioned by Councils
                                                             external auditors.


COMMENTS:                                                    There is no impact on Council’s financial
                                                             operations as a provision for doubtful debts for
                                                             the full amounts exists.


RECOMMENDATION:                                              That Council formally write off the debts for
                                                             Telstra Corporation and Optus Vision.




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Ordinary Meeting of Council - 29 June 2004                                                                   7/2

Item 7                                                                                                  S02413
                                                                                                   16 June 2004


PURPOSE OF REPORT

To obtain Council's authority to write off doubtful debts for Telstra Corporation Limited and Optus
Vision Pty Limited relating to Section 611 Charges raised under the Local Government Act 1993.


BACKGROUND

A Council may make an annual charge on a person or company being in possession, occupation or
enjoyment of a rail, pipe, wire, pole, cable, tunnel or structure laid, erected, suspended, constructed
or placed on, under or over a public place.

Council has raised an annual charge under 611 of the Local Government Act on Telstra Corporation
Limited and Optus Vision Pty Limited for installing and maintaining cables for pay television high
speed internet access since 1997. Telstra and Optus have challenged Councils right to raise such a
charge in various courts culminating in the Full Bench of the High Court of Australia.

In accordance with the Australian Accounting Standards, Council has been raising an annual
provision for doubtful debt for this charge since 1997. This has been sanctioned by Councils
external auditors.

Council’s have been the subject of legal appeals and litigation both in NSW and Victoria over a
number of years. On the 28th of April 2004 the High Court held that NSW and Victorian Laws
allowing Councils to collect rates and charges from Telstra and Optus for installing and maintaining
Councils for pay television and high speed internet access, were contrary to Federal Legislation
preventing discrimination against telecommunication carriers and were therefore invalid.

The amount of doubtful debts that need to be formally written off are summarised in the following
table:

                        Telstra                               Optus                           Total Invoiced
  Year      Amount       GST         Total       Amount           GST       Total      Amount       GST        Total
   2003      819950      81995       901,945      655960          65596     721,556    1,475,910   147,591    1,623,501
   2002      780,850     78,085      858,935      624,680         62,468    687,148    1,405,530   140,553    1,546,083
   2001      734,850     73,485      808,335      587,880         58,788    646,668    1,322,730   132,273    1,455,003
   2001      112,585                 112,585        90,068                   90,068     202,653                202,653
   2000      632,500                 632,500      506,000                   506,000    1,138,500              1,138,500
   1999      632,500                 632,500      506,000                   506,000    1,138,500              1,138,500
   1998      632,500                 632,500      506,000                   506,000    1,138,500              1,138,500
            4,345,735   233,565    4,579,300     3,476,588    186,852      3,663,440   7,822,323   420,417    8,242,740




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Ordinary Meeting of Council - 29 June 2004                                                          7/3

Item 7                                                                                         S02413
                                                                                          16 June 2004


COMMENTS

There is no impact on Council’s financial operations as a provision for doubtful debts for the full
amounts exists. A formal resolution is now required to write off these debts prior to 30 June 2004.

As previously stated Council’s financial position is not effected by the writing off of these debts as
provision has been made over the years to ensure that Council is not adversely effected. It was
always considered that the collection of these charges was doubtful and the decision made by the
High Court was the likely outcome.

The administration of the appeals in the High Court was conducted by the Local Government and
Shires Association (LGSA). It is expected that the LGSA will request a contribution towards legal
costs which is the normal practice. If the LGSA requests a contribution for legal costs, a separate
report will be brought forward to Council to consider the payment of any costs awarded against
council’s or the LGSA.


CONSULTATION

Councils Solicitors Abbot Tout and Deacons were consulted on the legal issues in relation to this
matter.

Council’s external auditors Spencer Steer have advised that it is prudent to write off the entire
amounts raised via formal report to Council.


FINANCIAL CONSIDERATIONS

Not Applicable


CONSULTATION WITH OTHER COUNCIL DEPARTMENTS

Not Applicable


SUMMARY

Not Applicable




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Ordinary Meeting of Council - 29 June 2004                                                        7/4

Item 7                                                                                         S02413
                                                                                          16 June 2004

RECOMMENDATION

         A.    That Council formally write off debts for Telstra Corporation Limited of $4,579,300.

         B.    That Council formally write off debts for Optus Vision Limited of $3,663,440.

         C.    That the Council minute form part of the financial notes to Council.




John McKee                                                   David Lethbridge
Director Finance and Business                                Manager Revenue Accounting




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