Agenda of Ordinary Council

GOVERNANCE AND CORPORATE

ITEM NUMBER 4.1

SUBJECT Draft Delivery Program 2010/11 - 2013/14 Draft Operational Plan 2010/11

REFERENCE F2009/02419 - D01503657

REPORT OF Manager Finance

PURPOSE:

To seek Council’s approval to place the Draft Delivery Program 2010/11 to 2013/14 and Draft Operational Plan 2010/11 on public exhibition and to submit Council’s application for a special variation to general rate income to the Minister for Local Government.

RECOMMENDATION

(a) That Council adopts the –

1 Draft Delivery Program 2010/11 to 2013/14 including the proposal to apply to the Minister for Local Government/for a special variation to rates income for the period 2010/11 to 2013/14 as detailed in the Draft Delivery Program.

2 Draft Operational Plan 2010/11

3 Draft Fees and Charges 2010/11

4 Long Term Financial Plan

5 Asset Management Policy

(b) That Council approves the placing of the Draft Delivery Program 2010/11 to 2013/14, Operational Plan 2010/11 and draft Fees and Charges 2010/11 on public exhibition for a period of 28 days.

(c) That Council applies under section 508(A) of the Local Government Act to the Minister for Local Government for a special variation to general rates income as follows:

1 2010/11 – 7.5% comprising the rate pegging increase of 2.6%, 2.9% to enable the continuation of the special rate variation expiring at 30 June 2010 and an additional special variation of 2%

2 2011/12 to 2013/14 – 4.3% comprising an assumed rate pegging increase of 3.3% and an additional special variation of 1%.

(d) Further, that the CEO and staff continue to explore other opportunities that would create a balance operating budget as quickly as possible".

BACKGROUND

1. As reported to Council on 14 December 2009, the Local Government Amendment (Planning and Reporting) Act 2009 came into effect on 9 October 2009. In summary the Act requires Councils to prepare a number of linked plans as shown in the diagram below:

2. The new integrated planning and reporting requirements include a Community Strategic Plan that is for a minimum of 10 years and sets out the community’s expectations for the future including objectives and strategies to achieve them. At its meeting on 14 December 2009 Council resolved to endorse Parramatta Twenty25 as the Community Strategic Plan and nominate to be part of group 1 Councils to have its Community Strategic Plan and Delivery Program adopted by 30 June 2010. Council’s nomination was successful.

3. A long term Resourcing Strategy is also part of the new requirements and comprises 3 components:

(a) a minimum 10 year Financial Plan

(b) a minimum 10 year Asset Management Plan incorporating an overall policy and strategy

4. The 4-year Delivery Program sets out how Council plans to achieve the objectives of the Community Strategic Plan. Along with the more detailed 1-year Operational Plan, it has replaced the old Management Plan requirements. The budget, proposed rates, annual charges, fees and charges, pricing policy and proposed borrowings are now included in the Operational Plan.

5. Council is required to place the Delivery Program and Operational Plan on public exhibition for a minimum of 28 days.

6. Over the past months, the development process of the draft Delivery Program and Operational Plan has included a series of meetings of the Finance Budget Committee and workshops for Councillors to consider Council’s current and forecast financial position, to develop operational and budgetary strategies and to review and determine priorities for future services and projects expenditure.

7. A key element of the Delivery Program is the proposal to apply to the Minister for Local Government for a special variation to rates income for the period 2010/11 to 2013/14. As discussed at the Councillor workshops this proposal includes the continuation (without an end date) of the special variation approved in 2000/01 that expires at the end of this financial year and which currently contributes around $2.4 million to revenue and funds primarily CBD infrastructure and economic development projects . The proposal also includes an increase to general rates income above the rate pegging limit of 2% in 2010/11 and 1% above an assumed rate pegging limit of 3.3% in each of the three years 2011/12 to 2013/14 as part of Council’s long term financial strategy to achieve a financially sustainable position by 2014/15. Full details of these strategies are shown in Council’s Long Term Financial Plan.

8. The Draft Delivery Program and Operational Plan are now presented to Council for determination. Once adopted they will be placed on public exhibition for a period of 28 days. The exhibition period will be advertised and comments on the draft Program and Plan invited from the community. Copies of the plans will be available at Council’s libraries and the Customer Contact Centre. Copies will also be placed on Council’s website.

9. Following the exhibition period it is proposed to bring the Program and Plan back to Council in June to consider any submissions from the community. By this time Council should know the results of its application for the special rates variation. Council can then make any appropriate changes to the Delivery Program and Operational Plan and formally adopt them. This will include adopting the 2010/11 Budget and Schedule of Fees and Charges and making the rates for 2010/11.

10. Council must adopt its Delivery Program and Operational Plan by 30 June 2010. An application to the Minister for Local Government under section 508(A) of the Local Government Act for a special variation to rates income must be lodged by 30 April 2010.

ISSUES/OPTIONS/CONSEQUENCES

Presentation format

11. The Draft Delivery Program and Operational Plan have been prepared in a format based on Council’s four Pillars:

(a) Environment & Infrastructure

(b) Community & Neighbourhoods

(d) Corporate & Governance

12. Each Pillar section includes details of the Pillar’s purpose, objectives, service activities, projects, proposed income and expenditure on services and projects and the Pillar’s performance measures and targets.

13. The second section of the Draft Program/Plan sets out details of the draft 2010/11 Budget, forward financial estimates for 2011/12 to 2014/15, proposed rates and annual charges for 2010/11 and the proposed income and expenditure from these proposed rates and charges. Other required statutory information is also contained in this second section. The schedule of proposed Fees and Charges and Pricing Policy for 2010/11 are contained under separate cover.

2010/11 Budget and Forward Estimates 2011/12 to 2014/15

2010/11 Budget

Financial Results Summary

Operating Result

14. The budget delivers an operating result before capital income of $8.2M deficit. The budgeted result after capital income is a deficit of $750K. This result is an improvement on the targeted result in the Long Term Financial Plan estimates and is part of the overall strategy to deliver a surplus result before capital income by the 2014/15 financial year. The operating statement for the 2010/11 budget is included on Page XX of the Delivery Program/Operational Plan document.

Capital Budget Allocation

15. The budget incorporates a Capital expenditure Budget of $37.6M. Included in the operating budget are operating projects totalling $3.5M. All projects are fully funded from Council’s reserves and general revenue funds.

16. For the 2010/11 budget year only, as part of the overall financial strategy to maintain a healthy balance of reserves, the allocation proposed for some ongoing capital program is lower compared to recent years. This has been done so as to have minimum impact on ongoing service delivery and capacity utilisation.

Rates and Annual Charges

17. As noted above, the Draft Delivery Program includes the proposal to apply to the Minister for Local Government for a special variation to rates income for the period 2010/11 to 2013/14. If approved this would enable the continuation of the special variation approved in 2000/01 that expires at the end of this financial year and which currently contributes around $2.4 million to revenue and funds primarily CBD infrastructure and economic development projects. In addition, the proposal includes an increase to general rates income above the rate pegging limit by 2% in 2010/11 and 1% in each of the three years 2011/12 to 2013/14.

18. The rate pegging maximum increase for 2010/11, set by the State Government, is 2.6% the lowest increase since 2000/01. Council’s proposed special variation in 2010/11 is for an increase to enable the continuation of the expiring variation and an additional 2% increase as part of the financial sustainability strategy.

19. A very extensive consultation program was undertaken with the community in regard to the proposal and the results from the consultation provided overwhelming support for a modest increase in ordinary rates and a continuation of the economic development and CBD infrastructure special rates. The results were as follows:

Ordinary Rates survey (Residents only):

As a resident would you prefer to see a modest increase in Council ordinary rates (on average $10 per year over four years) or a reduction in community services and infrastructure?
	Random Telephone N=505	Residents Panel N=617	Website (Broader Community) N=37
Modest increase in Council rates	78%	78%	84%
Reduction in community services and infrastructure	22%	22%	16%

Economic Special & Business Special rate (Parramatta Businesses only)

As a business owner located in the Economic Development Special rates/ CBD Infrastructure special rates area would you prefer to see a continuation to the rate or a reduction in economic services and infrastructure from Council?
	Economic Special rate N=23	CBD Infrastructure N=17	Workshop N=11
Modest increase in Council rates	78%	78%	All supported
Reduction in economic development and infrastructure	22%	22%

20. The Draft 2010/11 Operational Plan has retained the same rating structure as used in 2009/10 and the proposed ordinary and special rates are detailed in the Plan. These details show the proposed rates with and without approval for the special rates variation. The variation proposal does include a transfer of around $200,000 of the overall rate levy from residential ratepayers outside the CBD to the major commercial/industrial ratepayers. This will reduce the impact on residential ratepayers paying in excess of the minimum rate. The increases in individual rates will vary due to the impact of changes in the rating database arising from property uses changing and some properties becoming either rateable or non-rateable.

21. The Domestic Waste Management Charge has been increased by 4%. The Stormwater Management Service Charge is set by legislation and has not been increased.

Employee costs

22. The rate of increase in employee costs has been a challenge that Council has had to deal with and which has long term financial sustainability implications. In late 2009 Council negotiated and adopted a new salaries and wages system which will reduce employee costs compared with what would have been incurred if the old system had been retained. Estimated savings in 2010/11 are $984K.

Interest on investments

23. The 2010/11 Budget assumes a return of 5.5% on funds as recommended by Council’s investment advisors.

Reserves

24. Included in the draft Delivery Program is a schedule showing the proposed transfers to and from reserves included within the 2010/11 Budget and forward estimates for 2011/12 to 2014/15.

Projects

25. The draft Delivery Program proposes expenditure of $41.1 million on Projects in 2010/11. A detailed list of the Projects is contained in each Pillar section of the Draft Delivery Program.

26. The Draft Delivery Program shows Capital Projects expenditure to be funded by general revenue funding of $3.1 million (including funds allocated to the asset replacement reserve for specific project expenditure) from the Services Budget. The balance is from special rates, loans, reserves, grants and section 94 contributions.

27. At the Council workshop on 15 March it was decided to cut back the level of Project expenditure. In achieving the reduced levels one of the objectives was to have a minimum impact on Council’s internal employee resource utilisation and our ability to deliver services. The level of activity has had to be constrained across a wide range of projects, however, to achieve the revised budget allocations. In comparison with the 2009/10 budget, for example, expenditure on library resources has been further reduced, playground replacement has been reduced from $410,000 to $350,000, less work will be undertaken on minor capital works on a range of building assets and bushcare work such as weed reduction programs have been reduced. Other significant changes include:

(a) Roads replacement program

The revised budget includes a 50% reduction in proposed expenditure on the roads and kerb and gutter programs. Council developed the current road strategy in 2000 and has maintained a similar level of expenditure each year. This allocation has not been indexed and the draft Strategic Asset Management Plan suggests that increased expenditure is actually required to maintain the overall road condition. The revised budget will enable some essential and reactive maintenance to be undertaken with other programmed work being postponed. While the proposed reduction in expenditure may not have a significant impact in the short term, future investment in this area is important if the asset performance is to be maintained along with residents’ satisfaction.

(b) Following feedback received from Councillors, the changes noted below have been made to projects included in the Delivery Program:

(i) The following prioritised capital projects which were originally above the red line, have not been included in the 2010/11 budget:

i. Item No. 17 – Traffic Lights for Cycle Crossings $50,000

ii. Item No. 18 – City Centre Cycle Routes $400,000

iii. Item No. 20 – Bike Racks $150,000

iv. Item No. 24 – Greening the CBD $100,000

v. Item No. 35 – Cycle Route Maintenance $50,000

(ii) The following prioritised capital projects which were originally not included, have now been included in the 2010/11 budget:

i. Item No. 33 – Dundas Community Centre and Library – base building structural and refurbishment works $250,000 (The 2011/12 estimate for this project has been revised downwards from $500,000 to $250,000).

(iii) The non-prioritised (CORE) operating project – Winter Operation of Parramatta Pool $296,600 has now also been included in the 2010/11 budget.

The forward estimates for 2011/12 – 2014/15 have also been adjusted to reflect constraints on the level of funding available in future years. These allocations can be reviewed as part of the development of the 2011/12 – 2015/16 Delivery Program next year.

(d) It is to be noted that project expenditure has been aligned with funding constraints and Council’s overall Financial Strategies aimed at improving Council’s financial health over the next five year period to a sustainable level going forward in future years.

28. The recommended cuts to non prioritised projects expenditure bids totalling $4.51M is $0.31M higher than the originally requested $4.2M. However, given the deficit nature of Council’s operating results and the declining trend in Council’s Reserve balances, it has been necessary to hold a firm line on containing Projects’ expenditure. As a result of this exercise, $3.42M of general revenue funds are proposed to be transferred to the Asset Replacement Reserve for future expenditure on Council’s assets.

2010/11 to 2014/15 Operating / Services Budget Summary

29. The Draft Delivery Program includes the 2010/11 budget and 2011/12 – 2014/15 estimates for the Operating Statement depicting the operating result before capital revenue. For the 2010/11 financial year, we are on track to deliver an operating result before capital contributions of $8.2M deficit, which is an improvement on the previously targeted result deficit of $8.6M. We however need to implement further strategies that will enable us to have a break-even operating result before capital revenue by the 2014/15 financial year as outlined in our Long Term Financial Plan.

30. The 2011/12–2014/15 forward estimates have been developed using the following assumptions:

(a) Rates and annual charges

Rate pegging increase of 3.3% plus additional 1% special variation in 2011/12 to 2013/14 and $400K growth annually. Annual charges 4%.

(b) Fees and Charges

4% on overall income.

Outcomes from the new salary system have been incorporated in budget estimates. Implementing the performance based system is estimated to generate savings of $3.5M over six years.

(d) Childcare

On 22 March 2010, Council resolved to adjust the child care fees for 2010/11 and other changes relating to the operation of Westfield Occasional Care Centre. The draft 2010/11 – 2014/15 Delivery Program and 2010/11 Budget has been amended to reflect these recent Council decisions.

(e) Multilevel Carparks

On 22 February 2010, Council resolved that staff investigate the development of a new schedule of fees for parking in its four multilevel car parks including a model that provides the first 2 hours free on Sundays. Following this investigation it is proposed to include within the Draft 2010/11 – 2013/14 Delivery Program and 2010/11 Budget the following changes:

(i) Introduce free 2 hours parking in Horwood, Erby and Wentworth Street carparks on Sundays

(ii) Reduce the after hours rate to $5 for less than 1 hour stays and increase to $10 for longer stays

(iii) Reduce the first hour rate at Erby and Horwood Place carparks from $3 to $2.50 and commence the long stay rate after four hours

(iv) Increase the long stay rate at Hunter Street to $14 and promote increased use of Wentworth Street carparks by all day parkers.

The original draft budget for 2010/11 did not include any fee increases for the carparks, however, it set a goal of 3% growth in revenue through increased utilisation. Taken together, the above changes will have a favourable impact on revenue longer term and help to achieve this ambitious revenue target.

Although the investigation also considered parking meter fees, no changes have been included in the draft budget for 2010/11.

(f) Gap Closing Strategies

Estimates of additional income or savings from gap closing strategies have been included as follows:

Strategy	2011/12	2012/13	2013/14	2014/15
IT savings	707	721	736	750
COMBI Project	1,010	1,530	1,561	1,592
Services Review	1,200	2,424	2,472	2,522
Property Review	1,200	1,236	1,273	1,311
Special variation rates increase	2,513	3,458	4,471	4,605

(g) Operating Projects

The following estimates have been included for each of the years ($000) as outlined in the project lists:

2010/11	2011/12	2012/13	2013/14	2014/15
3,511	3,291	2,802	2,299	2,273

(h) Loan funds

For the 5 year period of the Delivery Program, loan borrowings have been included within the constraints of Council’s borrowing policy which restricts the maximum new borrowings in a given year to the amount equivalent to principal repayments on the core historical loans. For the 2010/11 Budget the proposed borrowings are $2,960,000 to fund capital projects.

(i) Internal borrowing

The table below outlines the proposed internal borrowings to fund the IT systems replacement project. It also includes a repayment proposal for these borrowings to be funded from expected future years’ savings.

*Reserve*	*Borrowing*	*Repayments*
*Reserve*	*Borrowing*	*2011/12*	*2012/13*	*2013/14*	*2014/15*	*2015/16*	*2016/17*	*2017/18*
Granville	$2,326		$394	$1,401	$531
Property	$1,500				$900	$462		$138
Bonds/deposits	$250							$250
Street Furniture	$350							$350
Insurance	$500							$500
Employee Leave Entitlements	$2,509	$1,468	$1,041
Total	$7,435	$1,468	$1,435	$1,401	$1,431	$462		$1,238

(j) Civic Place

Civic Place operating costs have been included in the estimates per the Civic Place Development Agreement with Grocon. Appropriate assumptions have been made in relation to the timing of key events such as financial close, relocation to the new building and other key milestones. Interest related to the borrowing for Council facilities has been capitalised in the 2014/15 financial year estimates, in accordance with accounting principles.

(k) Reserves

The Draft Delivery Program details projected reserves balances for the period 2010/11 – 2014/15. These balances reflect the funding identified in the proposed Projects and services.

CONSULTATION & TIMING

31. As noted above, the draft Delivery Program and Operational Plan have been developed over a series of workshops and briefings attended by Councillors and staff. Extensive consultation was undertaken with the community regarding the proposed special rates variation. The Delivery Program go towards achieving the objectives in the Community Strategic Plan which underwent significant community consultation.

32. During the exhibition period the community will be given the opportunity to discuss the contents of the Draft Program and Plan with Councillors and staff and to make submissions for Council’s consideration.

33. The exhibition period must be for a minimum of 28 days and Council is required under the Local Government Act to adopt by 30 June, its Delivery Program and Operational Plan for the following year commencing 1 July.

34. As noted earlier, the application for the special rates variation must be lodged by 30 April.

Alistair Cochrane

Manager Finance

Attachments:

1	Draft Delivery Program 2010/11 to 2014/15 and Draft Operational Plan 2010/11 (Under separate cover)
2View	Draft Schedule of Fees and Charges 2010/11
3View	Long Term Financial Plan	46 Pages
4View	Asset Management Policy	6 Pages

REFERENCE MATERIAL

Sue Coleman – Group Manager City Services			Assistant Minutes Clerk – Joy Bramham
Gregory Smith – Group Manager Corporate			Minutes Clerk – Grant Davies
Sue Weatherley–Group Manager Outcomes & Development

Clr Paul Barber – Caroline Chisholm Ward			Clr Lorraine Wearne, Lachlan Macquarie Ward
Clr Mark Lack – Elizabeth Macarthur Ward			Clr John Chedid – Elizabeth Macarthur Ward
Clr Glenn Elmore – Woodville Ward			Clr Scott Lloyd – Caroline Chisholm Ward
Clr Pierre Esber– Lachlan Macquarie Ward			Clr Andrew Wilson – Lachlan Macquarie Ward
Clr Prabir Maitra – Arthur Phillip Ward			Clr Andrew Bide – Caroline Chisholm Ward
Clr Julia Finn – Arthur Phillip Ward	Clr Michael McDermott - Elizabeth Macarthur Ward	Clr Antoine (Tony) Issa, OAM – Woodville Ward	Clr Chiang Lim, Deputy Lord Mayor – Arthur Phillip Ward