Long
Term Financial Plan |
Planning
for
Financial Future
Long Term
Financial Plan
Long Term Financial Plan |
Like most Council’s in NSW,
At the core of
In order to achieve its objectives and financial sustainability, there
must be in place a Long Term Financial
Plan (LTFP) which will outline the steps the Council will take to
realistically address the major financial challenges and opportunities which
will impact on the way we do business over the next ten years.
The LTFP influences and ultimately reflects the Community Management Plan Parramatta
Twenty25. It is also integrated with the Strategic Asset Plan and the Workforce
Management Plan. The LTFP will underpin the content of Council’s 4 year Delivery Program and annual Operational
Plan.
The LTFP is an integral part
of Parramatta City Council’s ongoing strategic planning cycle. On an annual
basis, the plan will be updated with actual financial data and the planning and
financial assumptions will be reviewed for continued accuracy. Changes to the
plan will be driven by changes in strategic direction as reflected in the
implementation plan for
Item 7.1
- Attachment 3 |
Long
Term Financial Plan |
The Long Term
Financial Plan will seek to answer the questions:
§ Can we afford what the community wants?
§ How can we go about achieving these outcomes?
§ Can we survive the pressures of the future?
§ What are the opportunities for future income and
economic growth?
The
Long Term Financial Plan (LTFP) is a decision-making and problem-solving tool.
It is not intended that the LTFP is set in concrete – it is a guide for future
action. The modelling that occurs as part of the plan will help Council to decide
how and if, it can meet the community’s aspirations. It will also provide an opportunity for
Council to identify financial issues at an earlier stage and gauge the effect
of these issues in the longer term.
The LTFP exists to
facilitate the delivery of the outcomes expressed in the Community Plan ParramattaTwenty25 in a financially sustainable and responsible manner.
In addition to acting as a resource plan, the LTFP
further endeavours to:
1) establish a prudent and sound
financial framework, combining and integrating financial strategies to achieve
a planned outcome
2) establish a financial framework encompassing
appropriate performance measures against which Council’s strategies, policies
and financial performance can be measured
3) ensure that Council complies with
sound financial management principles, as required by legislation and plans for
the long-term financial sustainability of Council.
The LTFP will be
revised annually to ensure ongoing alignment with Council’s Community Plan.
The main objectives of the plan for
the period 2010/11 to 2019/20 include:
1) Identifying the financial capacity
for the delivery of key initiatives arising out of the Parramatta Twenty25
Community Strategic Plan
2) Identifying adequate levels of
funding to ensure provision of required services at the appropriate service
levels
3) Identifying the financial capacity, through
revenue generation, cash/investments and reserves, for the acquisition, renewal
and replacement of assets in line with the recommendations arising out of the Strategic
Asset Management Plan
4) Maintaining stable and predictable
rate increases
5) Identifying appropriate levels of
debt
6) Achieving a situation of financial
health for Council that is sustainable in the long term
The City of
The population of
It is estimated that the population
will continue to grow and forecasts for the future were:
2015 175,000
2120 182,000
The above forecasts pre-dated the
latest estimates by the ABS and will be reviewed.
This forecast growth will be
reflected in the number of dwellings which were forecast to be:
2010 62,000
2015 68,234
2120 73,000
These forecasts will also be
reviewed in light of the latest population data.
The City of
The
NSW Government supports
These
growth projections create demand for extra services and infrastructure and
place additional demands on our existing services. Despite Parramatta City
Council increasing resources to provide leadership and services to our
burgeoning City, there are significant challenges ahead.
§ Expected pressures that will affect the
community socially, environmentally and economically and the drivers behind
this change
§ Expected economic growth rates – significant workforce
growth predicted
§ Significant population growth
§ The community’s aspirations and priorities for
improving its economic, environmental and social outcomes
§ The community’s priorities in terms of expected
levels of service and community projects.
§ Cost pressures related to
employee costs and other resources
Long Term Financial Plan |
In developing the Long Term
Financial Plan, key Council plans and policies have been considered to ensure
that any strategies developed are within existing policy guidelines.
The
Parramatta Twenty25 was adopted in December 2006 and is Council’s Community Strategic Plan and
vision for the City.
The
plan was developed following extensive community consultation and research and
sets out a sustainable plan for the future of
1) Land and water that is protected,
respected and sustained
2) A society that is healthy and
compassionate
3) Businesses that are dynamic,
prosperous and socially responsible
4) Neighbourhoods that are liveable and
distinctive
5) A community that is diverse and
cohesive
6) People and places that are linked by
sustainable transport and communication networks
7) A city that is innovative and
inspirational
The plan underpins Council’s priorities for:
§ service delivery
§ project development
§ asset management
The
implementation plan for Twenty25 sets out the key actions and projects to be
delivered to ensure the realisation of the Twenty25 vision and destinations.
Six key strategic actions have been developed:
§ Perceptions of the LGA
§ Key city sites
§ Growth management
§ A city of choice for business
§ Great neighbourhoods to live
in
§ Sustainable transport
The
on going development of the Implementation Plan will pose challenges for the
Council as it seeks to redirect services and resources towards the aims and
priorities set out in Parramatta Twenty25.
The Delivery Program outlines the
strategic direction the Council plans to take over the next four years to
achieve the objectives of the Community Strategic Plan and details how this
will be achieved. This is the point where the community’s strategic goals are
systematically translated into actions. These are the principal activities to
be undertaken by the Council to implement the strategies established by the
Community Strategic Plan.
Supporting the Delivery Program is an
annual Operational Plan. It spells out the details of the Program – the
individual projects and activities that will be undertaken each year to achieve
the commitments made in the Delivery Program.
The
Strategic Asset Management Plan (SAMP) provides a strategy for the management
of Parramatta City Council’s $3.5 billion asset portfolio. Of these assets, $0.8
billion are depreciating assets that need to be maintained, renewed and
eventually replaced.
The
SAMP allows Council to make informed decisions on the most cost effective use
of its assets over the longer term to achieve the objectives of the Community
Strategic Plan, support service delivery within available resources and a
prudent risk profile. Strategic asset planning:
§ Analyses the key issues that may influence
the Council’s requirements for assets in the medium to long term;
§ Analyses the appropriateness of existing
assets in relation to the Council’s strategic plan and the needs of the
community;
§ Identifies the need for new assets and
develop strategies to meet the needs;
Further,
the SAMP informs decisions about:
§ achieving and maintaining the appropriate
level of operational performance for assets;
§ maintaining physical assets in an appropriate
condition;
§ disposing of assets that are surplus to
Council’s requirements.
The
Local Government Act requires Council to include in its Operational Plan, a
Statement of the Council’s Pricing Policy with respect to the goods and services
provided by it. The purpose of the Pricing Policy is to explain the rationale
behind each fee and charge set out in Council’s annual Schedule of Fees and
Charges.
The
Council’s Pricing Policy is made up of a number of Pricing Principles and the Pricing
Base which Council considers when setting the level of its fees and charges.
Some fees are set by State Government legislation and Council cannot exceed the
limits on these fees.
Fees
and Charges outlined under the Pricing Policy are reviewed annually as part of
the Operational Plan process.
This policy guides Council in its loan
borrowing decisions, emphasising the need for maintaining Council’s financial
viability in terms of debt servicing and overall debt level.
In 1996 Council adopted a policy to
restrict new annual borrowings so as not to exceed the amount of principal to
be repaid in the same financial year. This had the effect of ensuring that the
level of debt did not increase. In 2000/01 the debt level under this policy was
$29.3 million.
In 2001/02 Council adopted a one-off
strategy to borrow an additional $15 million (in three instalments of $5
million over three years) to fund major capital projects referred to as “The
Big Seven” major capital items. These
loans are being progressively repaid over a period of 15 years.
Council also received two special loan
allocations totalling $55 million for strategic property acquisitions in
respect of the Civic Place Redevelopment Project – $35 million in the latter
part of the 2002/03 financial year and $20 million in 2003/04. These loans were
taken up on an interest – only basis, with the servicing costs being met by
income derived from leasing the properties purchased and interest income from
the unexpended loan portfolio. These loans were renewed in June 2008 on an
interest – only basis for a period of five years. However, the terms of the new
loans include the flexibility to make repayments or redraw on the $55 million
facility according to Council’s needs in relation to
Council has determined that it maintain a
debt service ratio (debt service costs/revenue from continuing operations
excluding capital grants & contributions) of less than 8%
This
policy establishes the framework within which investment principles are to
apply to the investment of Council funds.
It details:
§ Council funds’ covered by the Investment
Policy Statement;
§ Council’s objectives for its investment
portfolio/s;
§ how investments are to be undertaken;
§ the applicable risks to be managed;
§ the strategy adopted by Council to achieve the
investment objectives;
§ any constraints and other prudential
requirements to apply to the investments of funds having regard to the
applicable legislation and regulations governing Council investment;
§ the manner in which compliance with the Policy
& Strategy will be monitored and reported;
§ the expected level of future returns; and
§ appropriate benchmarks for each category of
investments.
The
objective of this policy is to document Council approved guidelines for the
acquisition and/or disposal of land and/or buildings by Council. These are conducted to fulfill the following
requirements:
§ To ensure Council's and the public's
interest are protected in all commercial transactions;
§ To assure probity in all Council
dealings;
§ To ensure all transactions are carried
out in accordance with legislative and community requirements;
§ To ensure all transactions are
conducted as transparently as possible;
§ To assist Council in making decisions
relating to its property portfolio;
§ To assist Council to optimise
commercial returns and satisfy Council’s strategic objectives.
Key Planning Assumptions
§ Population
forecasts – there has been an average annual growth of 2.6% over the four years
2005 to 2009. Estimated annual growth in the term of the LTFP will be in the
1-2% range but this may have to be reviewed given the most recent data
available.
§ Anticipated
levels of local economic growth - Parramatta’s Gross Regional Product is
growing at a faster rate than NSW. Parramatta’s GRP in 2007/08 increased by
9.1% compared to 7.2% for NSW.
§ Capital
works expenditure has had to be constrained in the first five years of the LTFP
but has been increased thereafter.
§ Inflation
forecasts are in the range of 3% to 3.3%
§ Interest
rates have been estimated at 7% in the long term.
§ Rating structures have been assumed to remain
essentially the same as currently exist
§ Civic Place – impacts of the development have been included in line with the development agreement entered into with Grocon
Key Financial Assumptions
Operating Statement Assumptions
The following are the general
assumptions that have been applied. Where specific information is known about
revenue and expenditure trends, this has been factored into forecasts.
Revenue assumptions
Category |
Commentary |
Factor 2010/11 |
Factor 2011/2 to 2019/20 |
Rates |
Indexed by estimated NSW State Government rate pegging. Included
special rates variation approval in years 2010/11 to 2013/14 |
2.6% rate pegging plus 4.9% special variation approved. (2.9% to
continue existing plus additional 2%) |
3.3% rate pegging plus special variation of 1% in 2011/12 to 2013/14 |
Rates and Annual Charges growth |
Supplementary levies |
$400K per annum |
$400K per annum |
User Charges and Fees |
Indexed to CPI |
(Generally 3%, but some higher to reflect cost recovery, statutory
fees no change) |
4% |
Interest and Investment Revenue |
Not indexed to CPI, based on average real expected return across
portfolio as determined by Grove Financial. |
5.5% |
5.5% |
Grants and Contributions – Operating |
Indexed to CPI |
3% plus specific know additional grants |
3% plus specific know additional grants |
Grants and Contributions – Capital |
Indexed to CPI Capital grants from State and Federal Agencies. These grants are used
in the construction and improvement of roads, cycleways and the natural
environment. |
Varies due to levels of expenditure and available funding from state
and federal government. In general 3% plus specific know additional grants |
3% plus specific know additional grants |
Other Revenue |
Indexed to CPI Incorporates parking fines and property lease rentals on Connection
Arcade and Macquarie House. |
3% plus any known reductions |
3% plus known reductions |
Expenditure assumptions
Category |
Commentary |
Factor 2010/11 |
Factor 2011/2 to 2019/20 |
Employee Benefits and On Costs |
Indexed to competency / performance based salary system and annual
award movements. |
In line with salary system provisions and award entitlements |
2011/12 to 2014/15 as per 2010/11. From 2015/16 to 2019/20 4% |
Materials and Contracts |
The plan currently assumes a flat increase across all materials and
contract expenditure and has not specifically included the following
information that may be available for outer year projections: § DWM § Parking Meters § Carparks |
3% |
3% |
Borrowing Costs |
Based on current loan portfolio and Council’s Borrowing Policy.
Principal repayments are re-borrowed each year on regular loans (excludes Big
7 and |
Varies – refer to commentary |
Varies – refer to
commentary |
Depreciation and Amortisation |
Assumes maintenance of existing arrangements for the purchase and sale
of assets. Directly impacted by the Strategic Asset Management Plan and the
impact of any revaluation in asset classes. |
3.3% |
Varies due to timing of
asset purchases up to 2014/15. 3% for
2015/16 to 2019/20 |
Other Expenses |
Incorporates such items of expenditure as Insurance, Telecommunication
and Utility charges. The plan assumes a flat increase and has not specifically included the
following information that may be available for outer year projections: § Street Lighting and Energy
Consumption across Council buildings. § Parking Meters § Tipping Fees |
3% |
3% |
The primary objective of Council’s financial planning
is to enable the delivery of Council’s vision as set out in the Community
Strategic Plan while ensuring Council’s continued financial sustainability. An
analysis of Council’s current financial situation and longer term financial
forecasts showed that there was an unsustainable gap between operating
expenditure and revenue that must be addressed. Council could not continue on a
“business as usual” basis. Not addressing this operational deficit would
ultimately jeopardise the adequate funding of capital expenditure to maintain
and replace existing community assets and the additional capital expenditure identified
in Council’s Strategic Asset Management Plan. In addition to the annual operating result
Council needs to focus on some other key financial parameters. These include the prudent build up and use of
Reserve Funds (Internally and Externally Restricted), Liquidity and
Unrestricted Cash (reflected by a healthy Working capital position), Borrowings
and Debt servicing, Asset replacement and maintenance, new Capital project
initiatives.
By focusing on these key areas and setting improvement
targets for each of them over the period of the Delivery Program (5 years)
Council aims to improve the financial health of the organisation to a desirable
level that can be sustained in the long term.
Reserves
In
recent years Council has undertaken some significant new capital works
(including the major upgrade of its pools and increased allocation for roads,
footpaths, neighbourhood centres and capital works in the CBD. This has resulted in a significant forecast
decline in our Reserve balances in the 2009/10 budget year. This increased level of capital expenditure
allocation cannot be sustained for prolonged periods of time. For the period of the Delivery Program,
Council has therefore attempted to curtail annual capital expenditure, so that
a consistent and sustainable allocation can be achieved over a prolonged period
of time. This has been done using a
prioritisation methodology aligned with Council’s strategic planning outcomes,
with minimum impact on ongoing service delivery and organisational capacity
utilisation.
The
long term financial model estimates show that this strategy would reverse the
recent declining trend in reserve balances and enable Council to delivery a
satisfactory and consistent level of capital expenditure allocation.
Liquidity and
Unrestricted Cash
Liquidity is a key factor in the viability of any
organisation regardless of whether it is in the commercial or government
sectors. The ability to meet short term funding requirements is equally
relevant to a Council as it is to any business. Council monitors its short term
funding requirements daily and produces cash flow estimates on both a short and
long term basis. This monitoring and forecasting informs its investment strategies
and decisions so as to ensure that adequate liquidity is maintained. Council will also, as part of its reserves
strategy, continue to provide for adequate levels of reserves to fund such less
predictable outlays such as major employee leave entitlement payments.
Borrowings and
Debt servicing
As noted earlier, Council has
adopted a policy to restrict new annual borrowings so as not to exceed the
amount of principal to be repaid in the same financial year. Council has also
adopted a strategy of containing its annual debt servicing to less than 8% of
its revenue from continuing operations.
This strategy will enable
Council to stabilise its debt levels within manageable limits while still
recognising that borrowing prudently is a valid funding source for long term
capital purposes.
Asset
replacement and maintenance
Parramatta City Council is responsible for assets
worth approximately $0.8 billion including roads, library collections, heritage
material, drains, bridges, footpaths, parks, plant, vehicles and public
buildings.
The financial impact on Parramatta City Council’s
budget from assets is substantial and increasing as new assets are created and
existing assets age. Council aims to maintain its infrastructure and assets to
a standard acceptable to the community to ensure delivery of services to agreed
standards. This involves developing and integrating long-term infrastructure
and asset management plans with the LTFP to provide for the continued
investment in maintenance, renewal and replacement of asset stock. An emphasis
must be placed on allocating funds to maintain and enhance the existing asset
base so that current service levels are not compromised.
New capital
project initiatives
Other new capital expenditure will have to be provided
to meet the infrastructure needs flowing from the anticipated growth in
resident and worker populations. Funding for these projects will be sourced
primarily from development contributions, capital grants, loan funds and the
prudent allocation of reserve funds.
Operating
Result: Council
has adopted a strategy to achieve a break even position in its operating statement (excluding capital
grants and contributions and profit/loss on asset disposals) by 2014/15 and
then moving into surplus in the years beyond. Achieving this will mean that Council will be generating
sufficient recurrent revenue to maintain existing services and to fully fund
the depreciation cost of its assets as part of a sustainable capital program.
Part of this strategy is to maintain an adequate level of reserves to fund our
on going capital program and new initiatives including the
To address the deficit, Council has decided to focus
on the following areas to generate additional revenues and to deliver services
in a more cost effective manner:
ü Implementing a new industrial relations framework to
contain employee costs
ü A comprehensive review of the services that are
provided by the organisation, both internal and external
ü IT systems replacement
ü Property strategy to optimise returns on Council’s
portfolio
ü Fleet management
ü Rating strategies
Employee costs
In recent years employee costs had been growing by a
rate that exceeded the increase in revenues from rates, fees and charges. The
continuation of this trend would have been unsustainable. The growth in
employee costs was attributable to an increase in staff numbers as a result of
implementing new services and enhancing some existing services, the provisions
of the salary and wages system that was in place together with the normal award
increases and significant increases in on-costs such as superannuation in
relation to the defined benefits schemes. In addition to the pressure being
placed on Council’s operating statement, having in excess of 700 employees
operating under various employment agreements governing hours of employment and
conditions of employment added to the complexity in both managing and
maintaining consistency in our processes.
Action was taken in 2008 to impose a “freeze” on
staff recruitment and following a review of staffing requirements, the removal
of 10 positions from the establishment averaging $1 million per annum savings.
In conjunction with these measures a new industrial relations framework was
negotiated and in late 2009 agreement was reached on a new salary and wages
system. The new arrangements will result in significant savings in employee
costs in the period 2009/10 to 2014/15 of approximately $3.5 million as shown
below.
2009/10 |
2010/11 |
2011/12 |
2012/13 |
2013/14 |
2014/15 |
$984,000 |
$689,000 |
$603,000 |
$288,000 |
$62,000 |
Services Review
In 2009 Council commenced a review of all service
areas- both internal and external. The first review was in City Operations and
became the COMBI Project –City Operations
Making Business Improvements. COMBI has identified recurrent
savings/revenue initiatives for 2010/11 of $800K with additional savings of
$378K to be confirmed. Revised work practices, work force restructuring and
improved cost/revenue analysis have delivered confirmed savings in staffing for
facilities maintenance, cleansing services and parks maintenance totalling
$500K. An additional $300K will be generated from an increased profit margin on
restoration services. Additional savings to be confirmed include capital
expenditure reduction in vehicle purchases of $142K and recurrent staffing
costs of $236K.
The COMBI Project has set a target of $1.5 million
recurrent savings/revenue by 2012/13 and is on track to achieve this with in
excess of $1 million already identified.
A review of all other service areas is underway and
will be completed by June 2010. Every Council business unit will undertake a
structured review involving:
§ Defining customers and services
§ Determining how customers measure the
value of these services and establishing key performance indicators
§ Documenting the processes by which
services are delivered
§ Confirming the alignment of services
delivered with Council’s charter, strategic community plan and the corporate
plan
§ Measuring and benchmarking current
performance
§ Recommending any changes to the service
delivery model that can improve productivity and quality, reduce costs or
provide additional revenue opportunities
The reviews will be led by each business unit manager
and will involve all team members. The review process has been supported by a
series of training and education sessions with assistance from an in-house
support team. Each manager will present
the outcomes of their review to a panel of senior management and peers who will
provide feedback and mentoring with at least one follow up session to assess
the results. All recommendations will be reviewed by the Senior Executive Team
before going to Council for consideration.
Council has set itself a target of $2.4 million in
recurrent savings/additional revenues from the services review. It is
recognised that while some initiatives can be quickly realised, there will be
many that will require a longer timeframe to be delivered. Council’s financial
strategy provides for $1.2 million to be realised in 2011/12 and the balance in
2012/13.
IT systems replacement
Since 2004 Council had been part of the Councils
Online group. In 2009 Council was faced with a significant cost to upgrade the
system and took the opportunity to review the terms of the agreement and
resolved to exit the arrangement in 2010. Council subsequently went to tender
and new IT systems will be implemented commencing June 2010. The new
arrangements will result in savings in operational expenditure and greater
control over systems support and development. The new IT systems combined with
the Services Review will develop efficiencies across our corporate and
service delivery functions via improved alignment of information technology
systems and processes. This improved control will result in greater
responsiveness to Council’s business requirements and increases in productivity
and the quality of management information. The following estimated operating
cost savings from these new arrangements have been included in forecasts:
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Property Strategy
Council owns a number of revenue generating
properties within the LGA with the most significant of these being the
multi-storey car parks in the Parramatta CBD. Council has recently altered the
management arrangements of the car parks to generate additional returns and
will undertake a review of pricing structures with the objective of generating
additional future revenues. In the longer term Council will be evaluating the
use of these sites to ensure that they are optimally meeting Council’s
strategic objectives for CBD development, traffic and transport infrastructure
and financial sustainability.
Council also owns a number of other properties within
the LGA which are surplus to Council’s needs or that could potentially be
better used. Council’s property strategy is reviewing a range of options
including disposal and re-investment and re-development. Opportunities being
considered include developing new car park locations on the edge of the CBD
e.g. Park ‘n Ride facilities with leverage off Council’s shuttle bus service
“The Loop”.
The timeframes to deliver parts of this strategy will
vary depending on the characteristics of the property and any associated
facilities that will be relocated or re-developed.
Council has established a target for the overall
property strategy of $1.2 million in recurrent savings/revenues to be achieved
in 2011/12.
Fleet Management
A review has been undertaken of Council’s fleet
requirements, vehicle usage patterns and leaseback arrangements. As noted above
in comments on the COMBI project, savings have been identified in capital
expenditure costs on plant and vehicles by eliminating the need for certain
fleet items or by utilising less expensive but equally suitable vehicles. This
also results in a flow on to savings in operating costs. The review also
indicated that benefits could be obtained by extending the changeover of
vehicles from 2 to 3 years and this practice is now in place.
The necessity for vehicles to be allocated to staff
has also been reviewed following a comprehensive data collection exercise in
2009. As a result, in any staff replacement process the need for new staff to
have a vehicle must be justified by a documented business case. Council’s gap
closing initiatives have targeted an attrition of 2 vehicles per annum which
would yield recurrent savings in operating costs and FBT liabilities of $27,000
cumulative per annum.
A strategy has also been put in place to recover a
greater component of vehicle operating costs from leaseback arrangements with
staff. Historically the leaseback arrangements have recovered about 33% of
operating costs. Council has adopted a strategy that will move towards a staged
recovery of 50%. This is estimated to generate an additional $200,000 by 2011/12.
Rating strategy
Revenue from rates constitutes about 54% of Council’s
total recurrent operating income. The State Government imposes a maximum limit
by which Councils can increase their rates revenue – rate pegging. Councils may
apply to the Minister for Local Government for an increase in excess of rate
pegging and Council is seeking a special variation for the period 2010/11 to
2013/14 as part of a financial strategy to achieve two main objectives. The
first is the renewal of a special variation that expires in 2009/10 to enable
the continuation of infrastructure and economic development works and services
that are critical in supporting the role of
If the
2000/01 special variation is not continued, Council will be required to remove
approximately $2.4 million from its base revenue in 2010/11. Details of where
this will occur are shown below.
The
additional special variation component sought is 2% above rate pegging of 2.6% in
2010/11 and 1% plus an assumed rate pegging limit of 3.3% in the three
following years. These increases would cumulatively add the following estimated
amounts to Council’s rates revenue in the years shown.
2010/11 |
2011/12 |
2012/13 |
2013/14 |
$1.6M |
$2.5M |
$3.5M |
$4.6M |
In 2000/01 the Minister approved a special variation
of to general income under Section 508(2) of the Local Government Act for a
period of 10 years. The additional revenue has been raised via special rates
for the following purposes –
CBD Infrastructure Enhancement Program $1.7M
Suburban Infrastructure Improvement Program $0.1M
Economic Development Program $0.6M
Under the terms of the Minister’s consent this
special variation ceases at the end of 2009/10 and Council will have to reduce
its 2010/11 rates income by the above $2.4M unless a new special rates
variation is approved by the Minister to retain the funding. Continuing this
income requires Council to seek a special rate variation of 2.9% in 2010/11.
The achievements from works and services provided by
these Programs have been significant, the need for these Programs is on-going
and Council’s consultation confirms that the relevant stakeholders support the
continuation of the Programs.
Subject to the Minister approving the special
variation, Council proposes to continue to utilise special rates levied on
business properties within the CBD and other business localities to raise the
funds for the CBD Infrastructure and Economic Development programs. Those
business ratepayers’ will benefit from the maintenance and continuing
improvement of the CBD infrastructure which has encouraged investment and
growth in the CBD. Business will also benefit from the on going economic
development programs which will promote
Other strategies
A number of other strategies have been identified and
are being further developed that will contribute to the progressive improvement
in Council’s financial position. At this time the potential savings through
expense reduction, productivity improvements or revenue generation have not
been quantified and are therefore not yet factored into the forward financial
estimates. These include:
§ On going implementation of Council’s Asset
Management Plan to improve asset management, leading to a reduction in the
maintenance and refurbishment costs of buildings and an increase in the useful
lives of assets. This will include ensuring all new assets undertake lifecycle
assessments and the development of programmed maintenance cycles for existing
assets, regular review and clarity around our investment and return on plant
and equipment and developing more flexible assets to support a number of
services which will lower average operation and maintenance costs for services.
§ Increase revenue by reviewing user fees
and charges or finding new charge points. This will include an annual strategic
review of comparative fees and charges imposed by neighbouring Councils to ensure
anomalies are reviewed and the relevance to Parramatta City assessed.
§ Increase commercial sponsorship or
advertising arrangements via key Council events (Riverbeats, Australia Day) or
locations on Council land or buildings and/or initiatives focusing on tourism
(Website: “Welcome to Parramatta”).
§ Maximise grant revenue to undertake work
that is of priority to all levels of government while remaining aware of
potential for grants that create financial pressure on Council and/or direct
effort away from strategic priorities, particularly where matching funds are
required.
§ Expanding the use of technology
(eInvoicing, eTendering, eContractor, library technology to reduce resource
requirements.
FINANCIAL FORECASTS
Attached are the following financial forecasts:
Attachment
1
This
graph shows the projections of the “business as usual” scenario and the
projections when Council’s primary “gap closing strategies” are included. FRANCIS
SUGGESTED DELETING THIS AND SUBSTITUTING A GRAPH OF THE OPEARTING RESULT OF THE
THREE SCENARIOS MODELLED.
Attachment
2 to 4
These reports show operating statements, balance
sheets and cash flow statements for the following scenarios:
i. Council’s
applications for continuing the expiring special rate variation and the
additional special variation are approved (PLANNED APPROACH)
ii. Council’s
application for continuing the expiring special rate variation is approved.
Approval for the additional special variation is not approved (OPTIMISTIC CONSERVATIVE
APPROACH)
iii. Neither the application for the continuation of
the expiring variation nor the additional variation is approved (CONSERVATIVE PESSIMISTIC
APPROACH)
Council
has adopted the following indicators as measures of its financial health with
the targeted objectives shown
KPI |
Comment |
Target |
Net operating result before grants and
contributions provided for capital purposes |
Capital income is used to fund capital
expenditure and it is therefore prudent to exclude this from the operating
result. It is desirable to breakeven on this result before capital income. |
Breakeven by 2014/15. Surplus going forward |
Unrestricted current ratio |
Represents the ability to meet expenditure
commitments and it is an indication of Council’s liquidity. |
>1:1 |
Debt service ratio |
Represents the proportion of income used to
service debt(principal and interest) |
<8% |
Rates coverage ratio |
The proportion of untied income provided by
rates. |
>63% |
Rates outstanding ratio |
Uncollected rates as a proportion of rates
levied. |
<=5% |
Asset renewal ratio |
Council’s expenditure on the renewal of its
fixed assets as a proportion of depreciation. |
>=100% |
Item 7.1 - Attachment 3 |
Long Term Financial Plan |
Item 7.1 - Attachment 3 |
Long Term Financial Plan |
Item 7.1 - Attachment 3 |
Long Term Financial Plan |
Item 7.1 - Attachment 3 |
Long Term Financial Plan |
Item 7.1 - Attachment 3 |
Long Term Financial Plan |
Item 7.1 - Attachment 3 |
Long Term Financial Plan |