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Addendum Agenda - Ordinary Meeting – Tuesday 22 May 2018 Page 1 |
CL18.123 Draft Integrated Strategic Plan Chapters 3 to 6 (Financials; Budget 2018/19; Fees, Charges and Rentals; Resourcing Strategy) - Public Exhibition
HPERM Ref: D18/162619
Group: Finance Corporate & Community Services Group
Section: Finance
Attachments: 1. Chapter 3 - Financials (under separate cover) ⇨
2. Chapter 4 - Fees and Charges (under separate cover) ⇨
3. Chapter 4 - Attachment A Schedule of Fees & Charges (under separate cover) ⇨
4. Chapter 5 - Budget and Capital Works (under separate cover) ⇨
5. Chapter 6 - Resourcing Strategy (under separate cover) ⇨
Purpose / Summary
The draft financials, budget and resourcing strategy for 2018/19 is presented to Council for consideration. The draft budget has been prepared after a number of Councillor briefing sessions and contains information provided to Council at the briefing sessions.
As part of Council’s Revenue Policy, a list of Fees and Charges is required to be prepared and placed on public exhibition along with the other components of the Draft Delivery Program and Operational Plan.
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That Council: 1. Includes the presented Chapter 3 Operation Plan – Financials as part of Council’s Draft Delivery Program and Operational Plan for public exhibition, for a period of 28 days 2. Includes the presented Chapter 4 Operational Plan – Fees and Charges Information, as part of Council’s Draft Delivery Program and Operational Plan for public exhibition, for a period of 28 days 3. Includes the presented Chapter 5 Operation Plan - Budget as part of Council’s Draft Delivery Program and Operational Plan for public exhibition, for a period of 28 days 4. Includes the updated Chapter 6 Resourcing Strategy as part of Council’s Draft Delivery Program and Operational Plan for public exhibition, for a period of 28 days
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Options
1. Council resolve to place the Draft Integrated Strategic Plan Chapters 3 to 6 (Financials; Budget 2018/19; Fees, Charges and Rentals; Resourcing Strategy), as presented, on public exhibition for 28 days
Implications: Nil.
2. Council recommend amendments to be made to one or more of the draft Chapters and resolve to place the amended drafts on exhibition for 28 days
Implications: Amendments to be included in time to advertise. There is a very limited timeframe in which Council must meet the requirements of the Office of Local Government. Any delay in publishing the document will result in Council not meeting the requirements set for it by the State Government.
3. Council not place the draft Chapters, as presented, on exhibition
Implications: Re-work required; may not make the required advertising period. There is a very limited timeframe in which Council must meet the requirements of the Office of Local Government. Any delay in publishing the document will result in Council not meeting the requirements set for it by the State Government.
Background
Budget Assumptions
The preparation of the Draft Budget and Long Term Financial Plan is based on the following assumptions:
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2.5% |
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Road and bridge construction index |
1.65% |
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Population growth |
0.6% pa |
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Number of assessable properties |
+0.6% pa |
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Rate increases |
Retention of the 13.2% special variation for 2017/18 as a permanent increase, followed by increases of 5% in 2018/19, 2019/20 and 2020/21, and 2.5% (assumed rate peg 2.5%) thereafter |
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Financial Assistance Grant |
CPI |
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Other recurrent government grants |
+2.0% pa |
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Interest on investments |
2.8% |
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Employee costs |
2.5% award increase |
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On-costs |
38.9% |
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Salary savings |
Target of $233,900 in the 2018/19 budget; escalated over the forward years in line with projected award increases |
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Road maintenance |
2.4% |
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Materials and contracts |
1.5% |
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Electricity costs |
Increase of 10% in 2018/19 and in 2019/20 (due to a new contract) with a 5% increase in the following years |
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Borrowings repayment schedule General Water and sewer |
10 years 15-20 years |
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Interest expense for new loans |
4.0% |
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Other expenses |
1.5% |
General Fund
The baseline budget, excluding the impact of the Special Rate Variation that has been determined by IPART, contains salary savings and a below CPI increase to materials and contracts expense. Given the salary escalator required under the Local Government State Award 2017, the budget assumes downward pressure on full-time equivalents.
Council’s current electricity contract ends at the end of 2018 and increases have been factored into the budget according to the best estimates available for the second half of 2018/19 and the first half of 2019/20.
A total of 89 operational budget bids and 54 capital budget bids were received from staff to support expanded or new projects to better support how Council serves the community. Operational bids relating mostly to staffing were added to the additional resource requirements resulting from the workforce planning exercise that was the subject of a Councillor Briefing in 2017. Because of lack of funds, the bids were prioritised after extensive consultation and peer review by Section Managers and Group Directors. The remaining 11 staff bids, that were otherwise unfunded, were contingent on the success of the Special Variation application (the $1M component for additional operations) and were prioritised after extensive consultation and peer review by Section Managers and Group Directors. Only two other critical operational bids relating to software hosting and maintenance were funded ($0.7M).
Of the capital bids, only three have been identified for inclusion in 2018/19, subject to the availability of funding:
1. Replacement of the environmental management system at the Nowra Arts Centre which is at the end of its useful life ($585K – part grant funded)
2. Construction of the seawall revetment at South Mollymook ($3.4M over 2 years)
3. Additional funding required to implement Council’s new corporate business system ($2M)
There is an expectation of some movement in the way other capital projects may be funded once the Contributions Plan is finalised so that these three may be accommodated in the Capital Works Program. Further detail regarding this will be reported to council following public exhibition.
The resultant Operating Result for 2018/19, excluding capital grants, is a deficit of $2,888K. When capital grants are included, the net operating result is a surplus of $11,600K. The cash flow result for unrestricted general fund is nil.
Part of the SRV additional funds are for maintenance spending in the following areas:
Council Resolutions - General Fund
At a Councillor Briefing on 17 May 2018, the following Council Resolutions were identified as priorities for funding in 2018/19:
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Minute |
Title |
Amount |
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Min18.301 |
Hyams Beach traffic management |
$150,000 |
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MIN18.314 |
Additional funding support for RFS at Broughton Vale / Berry |
$400,000 |
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MIN17.1067 |
Aboriginal Bushcare Regenerators x 2 |
$50,000 |
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MIN18.227 / MIN18.228 |
Extend funding for CBD Revitalisation Committee to end with current term of Council |
$500,000 |
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MIN18.319 |
Voluntary rebate of $10 for eligible pensioners |
$120,000 |
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MIN18.22 |
Environmental Health Australia NSW State Conference 2018 |
$6,700 |
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Animal Shelter Operations |
$300,000 |
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$1,526,700 |
It is proposed that the resolutions are funded in the following way:
· Communication Towers reserve – the renewal program for the towers has been determined and excess funds have been identified in the 2018/19 financial year of $500K.
· Strategic Projects reserve has been used to fund $500K of the Milton Croquet, allowing the general funds to be used on the CBD Committee.
· The Land Decontamination Reserve has been used to fund an internal loan for the Berry RFS site works ($400K) with repayments in the future from unrestricted general funds.
· Growth in rates has been increased to cover the additional pensioner rebate. Subject to Council’s decision in respect of the way forward with the RFS site, the funding source could be used to fund the alternate strategy outlined in the Addendum Paper presented by Director, Assets & Works.
· Councillors determined that the Environmental Health Conference be funded from the tourism budget.
It was also identified at the Councillor Briefing that the following Council Resolutions be noted as priority items for consideration/inclusion in future budgets, unless funding becomes available sooner from grants, Developer Contributions Plan Review or as part of Council’s Quarterly Budget Reviews:
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Minute |
Title |
Amount |
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MIN17.797 |
Hoarding & Domestic Squalor |
$50,000 |
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Min18.204 |
Warden Head Lighthouse Ulladulla co-contribution |
$75,000 |
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Min18.92 |
Old Erowal Bay - Playground, BBQ Area & Amenities |
$100,000 |
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MIN17.739 |
LP406 - Falls Ck / Woollamia Deferred areas planning proposal |
$400,000 |
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Min18.290 |
Huskisson Traffic Control - roundabout intersection Owen/Sydney/Tomerong Streets |
$800,000 |
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Min18.202 |
Grants / Research Officer |
$100,000 |
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Min18.295 |
Drain Maintenance - The Park Drive Sanctuary Point |
$30,000 |
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MIN18.296 |
Artie Smith Oval - development of detailed designs |
$200,000 |
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Min18.111 |
SCARP - Athletics Facility |
$300,000 |
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Min18.303 |
Public Toilets Tomerong |
unknown |
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$2,055,000 |
Following are details of other key components of the Draft Budget for 2018/19.
Rates
The rate peg set by IPART for the 2018/19 financial year is 2.3% based on the increase in the Local Government Cost Index for the year to September 2017.
In February 2018, Council submitted a Special Rate Variation application to IPART. On 15 May 2018, IPART approved Council’s application in full; that is:
• Maintaining the 13.2% from the 2017/18 SRV as a permanent increase and an additional 5% in 2018/19 (includes the announced rate peg of 2.3%)
• 5.0% in 2019/20 (includes estimated rate peg of 2.5%)
• 5.0% in 2020/21 (includes estimated rate peg of 2.5.
The additional revenue will be used to improve Council’s financial sustainability, reduce its infrastructure backlog, reduce its operating deficit and fund asset renewal and maintenance. As indicated last year, part of the SRV will be applied to the owners of properties in the Verons Small Lot Estate to repay the loan for infrastructure construction.
A summary of where the additional revenue is to be allocated is show below:
There is also a continuation of the Special Rate Variation of 4.6% from 2014/2015. The following projects are included in the draft budget, funded from these Special Rates:
With the SRV, Council’s rating structure for 2018/19 is expected to be:
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Category |
Sub |
No of Assessments |
Land |
Ad Valorem |
Base Rate Amount |
Base Rate %age |
Yield |
Yield |
Total |
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Residential |
Ordinary |
53,324 |
$14,309,065,540 |
0.22801 |
$611 |
49.97% |
$32,580,988 |
$32,626,100 |
$65,207,088 |
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Non-Urban |
1,000 |
$27,060,410 |
0.23151 |
$47 |
42.86% |
$47,000 |
$62,648 |
$109,648 |
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Farmland |
Ordinary |
743 |
$692,547,700 |
0.19805 |
$611 |
24.87% |
$453,973 |
$1,371,591 |
$1,825,564 |
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Dairy Farmers |
127 |
$162,393,000 |
0.10073 |
$611 |
32.17% |
$77,697 |
$163,578 |
$241,175 |
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Business |
Ordinary |
168 |
$2,252,450 |
0.33235 |
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$0 |
$7,483 |
$7,483 |
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Commercial/ Industrial |
1,720 |
$772,843,000 |
0.31998 |
$611 |
29.82% |
$1,050,920 |
$2,472,944 |
$3,523,864 |
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Nowra |
363 |
$168,843,000 |
0.69876 |
$611 |
15.82% |
$221,793 |
$1,179,807 |
$1,401,600 |
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57,445 |
$16,135,004,538 |
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$32,432,271 |
$37,884,152 |
$72,316,423 |
The expected increase in the average residential rate for 2018/19 from the SRV is $59 with average increase for farmland and business rates of $118 and $102 respectively.
Fees and Charges
A summary of changes to proposed Fees and Charges for 2018/19 was presented to Councillors at the Councillor Briefing held on 22 February 2018 and included:
• A list of proposed new fees and charges, including those that may replace previous fees or charges.
• A list of fees and charges where there has been a decrease or increase above 5%
The fees and charges presented as Attachments 2 & 3 have been updated to reflect the current adopted fees of Council.
Water and Sewer Charges
A report on the proposed water and sewer charges was presented at the Ordinary Meeting on 31 January 2017. Below is a summary of the charges:
Loan Program
The draft General Fund Budget for 2018/19 includes loan funding of $3.43 million for major capital works projects. Council’s proposed General Fund Loan Program for the next four years is as follows:
Council’s projected loan repayments (principal and interest at 4%) for future years – including the above proposed borrowings (excluding Verons) are:
With the increase in loan funding for the REMS1B project over this and next year, Council’s Debt Service Ratio will be significantly impacted. This will be closely monitored and loans reforecast, where necessary.
Total loan balances for General Fund are as below:
General Fund - Strategic Projects Reserve Strategy
It is proposed to transfer the whole of the dividend from Shoalhaven Water to the Strategic Project Reserve. Transfers to and from the Strategic Projects Reserve and the estimated balances are indicated below:
The recurring transfers from the Reserve include the repayment of loans for the construction of Braidwood Road and a transfer to the Coastal Management and Infrastructure Reserve.
It should be further noted that, given the extensive capital works program for Shoalhaven Water’s Sewer Fund, there will be no sewer dividend for three (3) years from 2017/18.
Analysis of Capital Works Budgets
General Fund
Capital expenditure of $63 million has been allocated in the Draft Budget for 2018/19. The total includes the following significant projects/programs:
$9.6 million for the Shoalhaven Indoor Sports Stadium
$6.3 million for Waste Management
$5.6 million for Local Road Repair Programs
$3.9 million for Local Road Reseal and Re-sheet
In addition, a number of large projects are funded by expected Government Grants, as shown below:
Local Road Repair (Roads to Recovery) $1,315,819
Fire Stations (unallocated) $600,000
Footpaths $470,000
Regional Road Repair Program $330,000
Pedestrian Infrastructure Around Schools $270,000
The table below summarises the overall Capital Works Program:
Specific details on what capital works are included in the budget can be found in the attachment: Chapter 5: Operational Plan – Budget & Capital Works
With the SRV, the following additional amounts will be spent on asset renewals from the additional revenue received:
Shoalhaven Water – Water and Sewer Fund
The table below summarises the capital programs in the two funds.
Shoalhaven Water – Water Fund
Shoalhaven Water – Sewer Fund
Shoalhaven Water Operating Budget
The Operating Results for the Water Fund are budgeted to be:
The Operating Results for the Sewer Fund are budgeted to be:
The full budget document from the Delivery Program and Operational Plan is attached. Any changes Council may wish to make to the budget that are not resolved tonight can be considered for inclusion in conjunction with submissions received during the public exhibition period.
Community Engagement
The community will have an opportunity to make submissions to Council as part of the consultation period during the months of May and June 2018. As part of this consultation phase, three Community Information Nights are scheduled to be held, firstly at the Nowra School of Arts on Tuesday 29 May 2018, Ulladulla Civic Centre on Thursday 31 May 2018 and the Vincentia Public Hall on Thursday 7 June 2018, all commencing at 7.00pm. All CCBs & Business Chambers have been notified of these meetings and the community will be notified through advertising over the next few weeks.
Financial Implications
Council’s (one year) Operational Plan is a critical document that allocates funding towards works and services delivered by Council to its community to achieve the goals and objectives set in the Community Strategic Plan and Delivery Program.
Council’s fees and charges make up a significant proportion of Council’s total revenue. Ensuring that all fees and charges are set at the appropriate level is an important exercise to recover costs and ensure patronage of Council facilities.