I have recently received further documents from the Tasmanian Department of Treasury and Finance (Treasury), and a copy of Moody’s credit rating opinion on UTAS of 4 September 2023 from UTAS, under Right to Information (RTI). I am making the documents available here:

  • Treasury documents.  As these are redacted, I am also making the decision letter available as this gives some indication of what has been redacted. Links to documents that I have received previously from Treasury are provided in Appendix A.   

I will make some brief comments on these documents now, with a view to making further comments at a later date, if subsequent analysis warrants this. 

The Treasury documents

With this latest batch of documents, I have now received documents from Treasury covering the period from 1 January 2015 to 18 August 2023.  My main area of focus in obtaining these documents has been to establish the substance, frequency and quality of Treasury analysis and briefing on:

(1) The financial implications of UTAS’ proposed Hobart CBD relocation;

(2) UTAS’ general financial situation; and

(3) UTAS’ borrowing approvals from the Treasurer, particularly as they relate to the $350 million Green Bond.

On the basis of the documents received, it seems that Treasury has never prepared analysis or briefing on the financial implications of UTAS’ proposed Hobart CBD relocation, or on UTAS’ general financial situation.

More particularly, focusing on Michael Ferguson’s tenure as Treasurer since April 2022 – a time when there has been major community disquiet regarding UTAS’ proposed relocation and its financial dimensions – it seems that Mr Ferguson has never sought briefing from Treasury on the financial implications of UTAS’ proposed CBD relocation, or on UTAS’ general financial situation. Nor does it appear that Treasury has proactively sought to provide Mr Ferguson with such.

This is appalling on Mr Ferguson’s part, but it is equally appalling on the part of Treasury.  In the best traditions of the public service, Treasury should have been briefing Mr Ferguson on UTAS, whether he sought/wanted briefing or not. Whatever Mr Ferguson and Treasury may say, the financial troubles that UTAS will encounter, if it proceeds with relocation, will come home to roost with the State Government. (See my blog post Treasurer says Commonwealth would bail out UTAS – Ferguson flounders in LegCo).

When asked to comment on who would fund a ‘bail out’ of UTAS, at a hearing of the Legislative Council Select Committee Inquiry into the Provisions of the University of Tasmania Act 1992 (LegCo Inquiry) on 6 July 2023, Mr Ferguson said:

“I feel uncomfortable, in one sense, answering the question, because I don’t like to create hypothetical scenarios that suggest what would happen if the university were in trouble, when I know that it isn’t in trouble. I do not want to trash-talk it.” (Transcript, page 7; my bolding)

Again, in his dismissive answer to a question on UTAS’ finances in the House of Assembly from Kristie Johnston MHA on 16 August 2023, Mr Ferguson stated among other things:

“I invite you, Ms Johnston, to reconsider the way you might have come to this question. There is no concern that I hold in respect of the university’s finances. I made this clear at the recent Legislative Council inquiry hearing where I was quite happy to attend and provide evidence to make that point. I also made the further point that when the former treasurer, Mr Gutwein, approved borrowings, he did so on the basis of advice from his department, the Department of Treasury and Finance, the same people who advise me today….

I hold no concerns about the financial integrity of the University of Tasmania. I invite you and others to speak well of our university.” (Question and answer provided in full at Appendix B; video at Question Time Broadcast, 34 minutes in; my bolding)

How could Mr Ferguson responsibly state that he had no concerns about UTAS’ finances, when he hadn’t sought and hadn’t been provided with briefing from Treasury?

Was Mr Ferguson happy to make what were important pronouncements about UTAS’ financial health, given his position as Treasurer, in total ignorance?

Was he relying on verbal briefing from Treasury? Was he relying on assurances from, for example, Vice-Chancellor Black?

I seriously question whether Mr Ferguson is fit to serve as Treasurer.  UTAS is a vital component of Tasmania’s finances and social and economic health.  A disaster – financial or otherwise – for UTAS would be a disaster for all Tasmanians.  There needs to be rigorous scrutiny of UTAS’ finances by Tasmanian government agencies and assessments need to be made on paper, with authors accepting responsibility.  The Treasurer needs to make this happen, and to ensure it happens in an intellectually rigorous manner with full transparency. This is particularly the case as UTAS has not placed a comprehensive and up-to-date business case for CBD relocation in the public domain.

Too much happens behind the scenes in Tasmania.

The Green Bond

Section 7(2) of the University of Tasmania Act 1992 states:

“…the University is not to exercise its power to borrow money unless it has first obtained the written approval of the Treasurer.”

I have written extensively on UTAS’ $350 million Green Bond, including at: RTI papers fully expose UTAS Green Bond mess – VC, Treasurer should accept responsibility. I have shown that not only did UTAS not have the Treasurer’s approval to borrow $350 million from the market through the Green Bond, but that in doing so it breached the terms and conditions of the two borrowing approvals from the Treasurer on which it purported to rely. I have also noted that the State Government has allowed this situation to continue, at considerable risk to the State, when it could easily be remedied.

In the Treasury documents I recently received (pages 2 and 26), Treasury Deputy Secretary Fiona Calvert indicated in briefing to Mr Ferguson that the only (legally) contentious matter relating to UTAS’ Green Bond borrowing was whether UTAS was allowed to borrow from the market or not (this was also the thrust of comments by Mr Ferguson and Ms Calvert on 6 July 2023 to the LegCo Inquiry).

I do not know whether Ms Calvert was being disingenuous in her briefing and/or seeking to cover up previous Treasury mistakes. The fact that UTAS is able to borrow from the market, with the Treasurer’s approval, has never been in dispute.

Rather, I repeat, the issue was, and is, that the terms and conditions of the two Treasurer’s approvals on which UTAS has purported to rely have been clearly breached by UTAS’ Green Bond borrowing of $350 million. On the basis of the documents received from Treasury, it now appears that neither Ms Calvert, nor anyone else in Treasury, has ever bothered to address this issue in briefing to Mr Ferguson or to his predecessor, Peter Gutwein.

I provide copies of the two Treasurer approvals, and the debt maturity profile mentioned in the second of the these, in Appendix C.  I defy Ms Calvert or Mr Ferguson to explain how UTAS’ Green Bond meets the terms and conditions of these approvals.

Tasmanian politicians and journalists should demand such an explanation.

Ms Calvert also raised the issue of whether the Green Bond was green in her briefings to Mr Ferguson (page 4). I do not see this as a legal issue, although I do believe the Green Bond is far from green.

Moody’s UTAS rating of 4 September 2023

Moody’s 4 September 2023 rating of UTAS is very largely a cut and paste of its previous version of 14 September 2022, with a number of paragraphs repeated verbatim, other sections from 2022 simply moved around, and numerous minor updates.

Some of the repetitions border on the absurd.

For example, Moody’s statement of 2022 (page 5) that:

“The AUD550 million Southern Campus Transformation (SCT) program will be staged over ten years and funded via from [sic] a blend of investments and reserves, surplus operating cashflows and AUD350 million in a dual tranche green bond issued in March 2022.”

is largely repeated by Moody’s in 2023 (page 6) as:

“The AUD550 million Southern Campus Transformation (SCT) program will be staged over roughly ten years to 2030/2031 and funded from a blend of investments and reserves, surplus operating cashflows and AUD350 million in a dual tranche green bond issued in March 2022.”

Quite apart from the fact that “roughly ten years” from 2023 is 2033 (not 2030/2031) and that I have not found any other source than Moody’s for the $550 million figure, the $550 million figure should surely have changed anyway between 2022 and 2023, in light in of the cost increase for the Forestry Building from $86 million to $131 million that occurred between the two ratings.

In its 2023 rating (page 6), Moody’s states:

“Despite already having acquired the properties to undertake the proposed relocation of Sandy Bay into the Hobart CBD, UTAS is exposed to execution risks in managing the progressive development of the southern campus over the period to 2030.

In fact, in late December last year, the Hobart City Council voted to request the university to pause all activities pertaining to its proposed campus relocation until a new consultation was done as the community had concerns regarding the campus relocation and Sandy Bay redevelopment strategy. Meanwhile, UTAS has began with the Forestry building being redeveloped in Hobart CBD, which is aimed to be open by 2025.“

Yet Moody’s later repeats in full (page 8) its statement from 2022 that “We assess UTAS’ exposure to social risks as moderately negative (S-3 issuer profile score)….”, with no reference to the emergent community concerns in what is a paragraph long section on social risk.

My main issue with Moody’s September 2023 rating, however, is – as it was with previous Moody’s documents – that it has totally failed to address the questions of whether:

(1) UTAS has complied with the terms and conditions of the Treasurer’s borrowing approvals on which it relied for its $350 million Green Bond borrowing; and

(2) UTAS’ CBD relocation plan (including its building cost estimates for both the CBD and Sandy Bay elements) is sound.

On the first issue, Moody’s shows no awareness of the issue (and could hardly proceed quite so easily in its rating if it did).

On the second issue, as I have already mentioned, Moody’s mindlessly continues to use the $550 million figure.  Even more seriously, Moody’s has made no attempt to assess whether UTAS’ multi-billion dollar plan for Sandy Bay is likely to be viable to the extent it can pay both for itself and UTAS’ CBD plans.

As Moody’s primary role in issuing a credit rating to UTAS is to assess UTAS’ future capacity to service its debt to creditors, this beggars belief.

That said, there are perhaps some wordings, and some points of difference from last year’s rating, on page 6 of the September 2023 rating that may indicate concern on Moody’s part. Moody’s states for instance that:

“Over time, the monetisation of surplus non-core assets within the broader SCT plan remains a part mitigant for a higher debt burden.” (my bolding; other ‘mitigants’ are not specified)

Further, while Moody’s states, along similar lines to 2022 that:

“As UTAS progresses to the completion of…the SCT plan, the university remains exposed to extensive governance, procurement and execution risks given potential overruns that may arise from project delays, higher delivery costs or changes to scope, especially in an environment of high inflation and supply chain issues.”

unlike last year, three paragraphs down, Moody’s repeats this thought in a stronger form (typographical errors aside):

“UTAS has maintained a solid record of delivering projects on time and on budget but given current inflationary pressures and supply side constrains [sic], we view cost overruns are [sic] highly likely.” (my bolding)

I also note that, whereas in 2022 Moody’s provided forecasts of UTAS’ key financial indicators to 2024, this year (page 1) it has not extended those forecasts to 2025, perhaps indicating a greater degree of uncertainty in the task of making forecasts about UTAS.

Of course, I may be overreading things. Certainly, if Moody’s was beginning to have doubts about UTAS’ future plans and its debt servicing capacity, it should have clearly said so and downgraded UTAS’ rating.

The Bottom Line

While, as I have said, I may have more comment on the Treasury documents and Moody’s rating at a later date, I can say without hesitation now that anyone relying on the Treasurer, Treasury or Moody’s as sources for reassurance on the state of UTAS’ finances is foolish to do so.

This makes it all the stranger that, rather than producing UTAS evidence that all was well financially, Chancellor Alison Watkins leaned so heavily on the Treasurer and Moody’s as sources in her recent correspondence to me.

I finish by restating my view that Mr Ferguson is letting the people of Tasmania down with his feckless approach to UTAS’ proposed relocation. He needs to lift his game or resign.

Appendix A

Treasury RTI – initial decision letter of 10 March 2023

Documents provided with initial decision letter

Treasury RTI – review decision letter of 11 August 2023

Documents provided with review decision letter

Appendix B

University of Tasmania – Cost of Relocation

Ms JOHNSTON question to TREASURER, Mr FERGUSON

[10.34 a.m.]

You would be aware of extensive and ongoing community concern with the University of Tasmania’s decision to relocate from Sandy Bay to the Hobart CBD. Chief among these concerns is that it could send the university broke. Some submissions to the Legislative Council UTAS inquiry claim that the university no longer has sufficient funds to complete the relocation. The previous treasurer, I believe, approved UTAS borrowings of $350 million. Of concern is that UTAS is spending $131 million of its depleted funds on the ex-forestry building at a time when the relocation is in limbo. If UTAS cannot pay this loan, what implications arise for the Government, noting that the Tasmanian people are the shareholders of the university?

ANSWER

Mr Speaker, I thank the member for Clark for her question. The Tasmanian people are not shareholders of the University of Tasmania. That is not correct. The university is an institution established by a statute. The use of those business references like shareholders is not accurate. The state, whether through the parliament, GGS, or on the total state sector, does not underwrite the activities of the university. The university is a standalone entity established by a statute of this parliament.

The role of the Treasurer is an interesting one in respect of the University of Tasmania Act in that university borrowings have to be approved by the Treasurer. That is not an underwriting, it is not a commercial relationship, it is not a financial relationship. We do on certain initiatives support university expansion and transformation. We have been very proud to do so.

I invite you, Ms Johnston, to reconsider the way you might have come to this question. There is no concern that I hold in respect of the university’s finances. I made this clear at the recent Legislative Council inquiry hearing where I was quite happy to attend and provide evidence to make that point. I also made the further point that when the former treasurer, Mr Gutwein, approved borrowings, he did so on the basis of advice from his department, the Department of Treasury and Finance; the same people who advise me today.

I hold no concerns about the financial integrity of the University of Tasmania. I invite you and others to speak well of our university. It is a great university. We need to support it. It is going through reform and change as all universities in our country are. We need to speak well of our university and encourage them to continue their difficult work of reforming and changing the way that they provide high quality education and training opportunities to the Tasmanian people. It is a key enabler of our economy and the future economic prosperity of families right across the state, not just mine, but yours and, indeed, many people who in the past have not thought of themselves as university students. We need to talk up our universities, be proud of them. Scrutinise them from time to time if you feel that is important, but I would invite encouragement of their activities and scrutiny where it is absolutely required.

(Hansard, pages 11-12)

Appendix C: Borrowing approval letters upon which UTAS purports to have relied for the $350 million Green Bond borrowing

(Also see blog post: RTI papers fully expose UTAS Green Bond mess – VC, Treasurer should accept responsibility)

First approval letter

Second approval letter

Maturity profile referred to in second approval letter

By : Robert Hogan