Our Shire Our Future Resourcing Strategy 2013/14 – 2022/23
Sutherland Shire Council 4-20 Eton Street, Sutherland NSW Australia Locked Bag 17, Sutherland 1499 Tel: 9710 0333 Fax: 9710 0265 Email: [email protected] Web: www.sutherlandshire.nsw.gov.au © Sutherland Shire Council 2012
TABLE OF CONTENTS
1. Background ......................................................................................................... 1
1.1 Introduction .................................................................................................................... 1 1.2 Sutherland Shire ............................................................................................................ 2 1.3 Vision and values ........................................................................................................... 4 1.4 Council’s commitment .................................................................................................... 4 1.5 Council’s Responsibilities and Services ........................................................................ 5 1.6 Council’s Integrated Planning and Reporting framework .............................................. 6
2. Asset Management Strategy .............................................................................. 8
2.1 Introduction .................................................................................................................... 8 2.2 Purpose .......................................................................................................................... 8 2.3 Asset Management Planning in Local Government ...................................................... 9 2.4 Council’s Asset Portfolio ..............................................................................................10 2.5 Assessment of Current Asset Management Capability ...............................................29 2.6 Asset Management Capability Improvement Plan .......................................................35 2.7 Conclusion ...................................................................................................................40
3. Workforce Strategy .......................................................................................... 46
3.1 Background ..................................................................................................................46 3.2 Challenges ...................................................................................................................46 3.3 Workforce Overview .....................................................................................................48 3.4 Responses ...................................................................................................................50
4. Long Term Financial Plan ................................................................................ 61
4.1 Introduction ..................................................................................................................61 4.2 Forecasts and Assumptions in the LTFP .....................................................................66 4.3 Financial Risk Assessment, Strategies and Sensitivity Analysis .................................95 4.4 Financial Performance Monitoring ...............................................................................99 4.5 Financial 10 Year Projections, Strategies and Outcomes .........................................102
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1. Background
1.1 Introduction
This Resourcing Strategy has been prepared in accordance with the requirements of the
Local Government Amendment (Planning and Reporting) Act 2009. The Strategy describes
how council will deliver on its responsibilities for achieving the community’s future
aspirations and priorities as articulated in the Community Strategic Plan Our Shire Our
Future 2030.
Realising the Shire’s desired future requires that sufficient time, dollars, physical assets and
people are available to execute the necessary programs and actions. Responding to this,
and aligned with integrated planning and reporting reforms, a ten year Resourcing Strategy
has been developed that consists of three key components:
1) Asset Management Strategy provides a framework for the sustainable management of
current and future council assets so that appropriate services are effectively delivered
to the community now and in the future. It considers information about council’s
assets, asset management processes and practices, and presents a plan to improve
council’s asset provision and management capability.
2) Workforce Management Strategy describes current and historical patterns and trends
in council’s workforce, and the actions necessary to achieve the organisation’s
workforce planning and human resource management objectives.
3) Long Term Financial Plan outlines the modelling used to forecast the council’s financial
future for the coming ten years and presents the strategic aims, financial objectives,
financial indicators and strategies the council has adopted to achieve continued
financial sustainability.
Together these three strategies support both the long term community goals and council’s
4 year Delivery Program and Annual Operational Plan.
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1.2 Sutherland Shire
1.2.1 Area Profile Sutherland Shire covers 370km2 with about half the area taken up by the Royal National
Park and bushland. The geographic features include beaches, wetlands, bays, rivers and
Hawkesbury sandstone tablelands dissected by deep river valleys and gorges covered in
vegetation.
The population is approximately 212,000, making Sutherland Shire Council the second
largest local government area, in terms of population, in NSW.
The Sutherland Shire’s population is declining in every age group between the ages of 5 -
49 years, however, each age group over 50 years is experiencing population increases.
Only 16.6% of the Shire’s population was born overseas, compared with Sydney (31.8%).
Whilst the urban area is predominantly residential, Sutherland Shire is home to a small but
highly significant commercial and industrial presence. This includes Australia’s sole nuclear
reactor, Australia’s largest oil refinery, Sydney’s desalination plant, a regional waste facility
and a major regional shopping centre.
Socio-economically Sutherland Shire ranks highly with low unemployment at about 3%.
Council plays an important role in economic development and promotion of the tourist
attractions and facilities in the Shire.
The Sutherland Shire community is articulate, involved and places high expectations on
council and the services, programs and infrastructure it delivers. The community expects
council to take a stand against proposals which do not meet high environmental and social
standards that the community has set for this area.
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1.2.2 Desired Future The following depicts the community’s aspirations for the ideal future of the Sutherland Shire. A place where all people can live, work and enjoy their life locally. Translating the Shire vision and desired outcomes into reality will be facilitated by responsible leadership at a government and organisational level. Responsible leadership is characterised by accountable and transparent decision making for all our existing residents and those of future generations. Active citizenship by our residents is also critical to facilitating our desired future. We need our residents to be informed of, interested in and involved in local decision making.
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1.3 Vision and values
1.3.1 The Shire Vision Sutherland Shire, in Sydney’s south, shaped by bays, rivers, beaches and national parks:
A connected and safe community that respects people and nature, enjoying active lives in a strong local economy.
1.3.2 Council’s Vision To provide community leadership translating the Shire vision to improve lifestyles and community wellbeing, and the natural environment.
1.3.3 Council’s Values Understanding Council’s values helps Councillors and staff to know what is expected of them as Council representatives working on behalf of the community. As individuals and as an organisation, Council will:
act with honesty, integrity, responsibility and transparency
prioritise customer service and community satisfaction
demonstrate leadership and ingenuity
make decisions based on reliable research and information
value staff and encourage teamwork and foster pride in our workplace
have respect for culture, community and the environment.
1.4 Council’s commitment
1.4.1 To the community Community satisfaction The highest priority is given to satisfying the needs and expectations of our community. Management by fact Our analysis of problems, decisions, performance measurements and other actions is based on fact and sound judgment. Continuous improvement Individually, in teams and as an organisation, Council is committed to ongoing improvement. Ethics We will promote sound, legal and honourable practice in the conduct of Council business. 1.4.2 To Council staff Council staff will respect each other as individuals, encourage teamwork, and provide a safe and caring workplace, with equal opportunities for promotion and development to foster a sense of pride in the workplace. The steps taken to implement Council’s commitments to the community and Council staff, and to measure its performance, are detailed in the ‘Governance’ section of this Delivery Plan.
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1.5 Council’s Responsibilities and Services
Council responds to both the community’s long term vision and short term needs. It achieves this through planning for and delivering an extensive range of services, facilities and infrastructure which support community life and the ongoing sustainability of the Sutherland Shire. Below is a snapshot of the type and range of Council services and facilities that the community uses every day.
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1.6 Council’s Integrated Planning and Reporting framework
The diagram below outlines the relationship between council’s major planning and reporting tools. In our activities we aim to respond to the Community Strategic Plan for the Sutherland Shire and address local needs and issues as they arise.
The State of the Shire (SOS) incorporating the State of the Environment (SOE) report informs our
formal review of the implementation of ‘Our Shire Our Future’. Regular Community Satisfaction
Surveys and Neighbourhood Interaction and Participation Surveys assist in monitoring council’s
performance.
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ASSET MANAGEMENT
STRATEGY
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2. Asset Management Strategy
2.1 Introduction
Sutherland Shire Council is responsible for a very large and broad asset portfolio which totals $1.5 billion of noncurrent assets. Our assets are acquired, held and maintained for the purpose of delivering services to the community. The services required by and for the Shire community are considerable, and the provision of these is often dependent on this portfolio. Council’s asset base includes traditional asset infrastructure such as roads, footpaths, buildings and drainage as well as assets which are unique to coastal councils such as seawalls, tidal baths, lifeguard towers, wharves and jetties. Council has an ethical and legal obligation to effectively plan for, account for and manage the public assets for which it is responsible. In order to do so, we have taken a long term strategic approach to asset management. The successful delivery of our assets will enable the current and long term aspirations of the Shire community to be met.
2.2 Purpose
Council has an adopted Asset Management Policy which articulates our commitment to sound asset management and integrated, responsive and financially sustainable asset provision. It provides a clear direction for asset management by defining the key principles that underpin it. This Strategy is the first step in translating that Policy into organisational practice. Its purpose is to establish the structure for further detailed planning and improvements in organisational knowledge management, systems, processes and structures which will support long term asset management well into the future. It incorporates:
an overview of all the assets under Council’s control
the community’s expectations of asset provision and maintenance
an assessment of our current asset management planning practices
a plan for improving council’s asset management maturity to a level both the community and council are satisfied with
Through the development and implementation of this Strategy Council aims to:
provide a specified level of service for assets and establish evaluation measures
adopt a lifecycle approach to developing cost effective strategies for managing assets in the long term that meet the specified level of service
determine future demand and manage the appropriate investment levels
apply risk management including identification, assessment and appropriate control of risks, for the asset itself, organisation and community
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strengthen the linkages to our long term financial plan which identifies expenditure across all lifecycle stages (eg. creation/acquisition, operational, maintenance, disposal).
This Strategy will be supported by four comprehensive Asset Management Plans (AMPs) for our key asset categories. Together they will inform and be informed by our Long Term Financial Plan and Workforce Strategy to deliver the infrastructure, programs, services and facilities detailed in our Delivery Program and aspired to in the Community Strategic Plan. 2.3 Asset Management Planning in Local Government 2.3.1 Strategic Issues at National Level After considering the financial sustainability of local government in 2007 the Local Government and Planning Ministers’ Council (LGPMC) endorsed nationally consistent frameworks to be applied by each State or Territory relating to:
assessing local government financial sustainability;
asset planning and management; and
financial planning and reporting. In May 2009 the LGPMC agreed to enhance the nationally consistent frameworks on local government asset and financial management frameworks to assist councils improve their asset and financial management and planning. The following elements of a national framework were identified and agreed to by each State and Territory to facilitate an improvement in asset management performance by local governments in their jurisdiction:
Development of an asset management policy
Strategy and planning
Governance and management arrangements
Defining levels of service
Data and systems
Skills and processes
Evaluation. 2.3.2 Asset Management in New South Wales In New South Wales (NSW) several processes have led to change in the way local councils regard and manage their assets on behalf of local communities. The 2005 Local Government and Shires Associations of NSW Independent Inquiry into the Financial Sustainability of NSW Local Government concluded that the biggest and most urgent problem was around local government infrastructure, not being maintained or renewed to satisfactory standards. Financial limitations and the limited application of asset management practices were considered the problem. Building asset management capacity across the industry was seen as the key to addressing the infrastructure problem. The inquiry’s report served to act as a
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significant catalyst to focus attention on asset management practices within NSW local government. The amendment to the Local Government Act with the introduction of the Integrated Planning and Reporting Regulation (2009) has also had implications for asset management. This has required all councils in New South Wales to connect their long and short term planning with their community’s needs and aspirations. Asset Management as part of a long term Resourcing Strategy is critical to this. 2.4 Council’s Asset Portfolio 2.4.1 Current Assets Council’s current asset portfolio is vast and enables the provision of a range of necessary and desired services which support our residents, businesses and visitors to Live, Work in and Enjoy the Sutherland Shire. The delivery of these services to the local community is the paramount consideration. Infrastructure provision, condition and service levels are dependent on local community needs and expectations. Council currently has five main Asset Categories comprised of a range of asset classes:
1. Buildings 2. Drainage 3. Open Space 4. Organisational Support and 5. Transport Infrastructure.
Buildings
Based on total number of buildings (515)
Underground/ multi storey
carparks 0%
Tennis Courts
6% Surf Clubs
1% Rural Fire Service/SES
4%
Regional arts/ Entertainment
1%
Public toilets & sporting amenities
16%
Other 11%
Libraries 1%
Leisure & Indoor Centres
4%
Community/ Sporting
25%
Community halls & centres
9%
Commercial & retail
3%
Child Care 8%
Admin, depots & support
11%
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Most of our buildings are heavily utilised and support a broad range of community activities. Council also provides direct services from our childcare centres, surf clubs, regional arts and cultural venues. Our leisure centres are used to provide Council operated leisure and fitness businesses. Transport Infrastructure
The chart above excludes bridges and carparks. Collectively this infrastructure delivers transport options which enable people to get around within the Shire. It supports all areas of community life.
Open Space
The chart above excludes waterways and supporting assets such as boat ramps, wharves and jetties. Our open space is as much about providing leisure and recreation opportunities as enhancing the quality of life for current and future generations. Details on our Drainage and Organisational support categories are contained in our ‘Overview of our Assets’ table on page 14.
Kerb and Gutter
63%
Pathways 3%
Road Pavement
34%
Bushland 55%
Playgrounds 1%
Parks 28%
Sporting Fields 16%
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Asset Replacement Costs Our assets infrastructure has a total replacement value of $1.5 billion dollars.
The chart above excludes replacement values for bushlands, parks, and sporting fields. The table on the following page provides a detailed snapshot of council’s current asset stock. Asset data “sum of class” has been sourced predominately from our existing AM systems, primarily CONFIRM and the Pavement Management System. Current condition is presented as an average across the asset class and has been provided from several inspection and assessment processes conducted by our Property and Engineering Divisions. Replacement values have been calculated from Council’s 2011/12 Insurance figures. Current service levels have been formed from broad strategic community consultation and budgetary constraints. The following simple condition rating has been applied across all asset classes.
Level Condition Description
1 Excellent No work required (normal maintenance)
2 Good Only minor maintenance work required
3 Average Maintenance work required
4 Poor Renewal required
5 Very poor Urgent renewal/upgrading required.
Buildings 32%
Drainage 21%
Open Space 2%
Organisational
Support 3%
Transport
Infrastructure 42%
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The table also indicates which long term Community Goal (Live, Work or Enjoy) each asset class supports and which Corporate Strategy it is part of. The Strategies are: S1: Provide effective and integrated infrastructure S2: Deliver integrated transport options S3: Conserve natural resources S4: Protect our environment S5: Strengthen our community S6: Respect and value all heritage and culture ACRL: Active Citizenship and Responsible Leadership, which facilitate our
community goals
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Overview of our assets
Category Class Sum of Class (no/hectares/km etc)
Average Current Condition
Replacement Value
Current Service Level Corporate Strategy
Community Goal
Buildings
Administration, Depots and service support buildings
57 3 $32.1 M
Provision of functional, safe and suitable buildings to support Council in providing office, depot and other support services.
S1, S3 Civic Life
Children services 41 2 $31.5 M
Provision of purpose built child care services for children aged birth to 14 years old which meet the needs of children and families as well as the legislative requirements that govern the child care sector.
S1, S5 Live, Work
Commercial and retail
16 3 $12.9 M 1
Provide attractive ,safe and tenantable buildings which maximise the rental return
S1 Work
Community / sporting organisation facilities
131 3 $72.2 M
To facilitate sporting and community organisations provision of services to the community in accordance with adopted policies
S1, S5 Enjoy
Community halls and centres
45 3 $43.1 M
Provision of safe, well maintained and accessible community facilities which accommodate delivery of targeted services as well as facilities available for hire by members of the community and small businesses for recreational and social purposes.
S1, S5 Live, Enjoy
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Category Class Sum of Class (no/hectares/km etc)
Average Current Condition
Replacement Value
Current Service Level Corporate Strategy
Community Goal
Leisure and indoor recreation Centres
19 3 $31.2 M
Provision of multi-functional fitness/leisure healthy activities through a uniformed approach to service delivery and investment in facility infrastructure which meets community expectations and market trends.
S1, S5 Enjoy
Buildings
Libraries 2 4 3 $3.5 M
Provision of balanced collections, services and facilities that meet and reflect the needs and interests of both current and potential customers in the community
S1, S5 Live,
Work, Enjoy
Other purposes 55 3 $25.1 M Provision of facilities meeting current and future community needs
S1 Live,
Work, Enjoy
Public toilets and sporting amenities
84 3 $11.4 M Provision of well presented, clean facilities in suitable locations
S1 Live Enjoy
Regional arts/entertainment Centres
2 3 $20.4 M
Provision of attractive and versatile facilities encouraging arts and culture with areas for civic and private functions
S6 Enjoy
Rural Fire Service/ SES facilities
22 3 $13.3 M
Provision of safe and suitable facilities which meets the needs of volunteers and the respective organisations
S1, S5 Live
Surf Life Saving Clubs 3 5 3 $23.0 M Support the clubs’ provision S1, S5 Enjoy
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Category Class Sum of Class (no/hectares/km etc)
Average Current Condition
Replacement Value
Current Service Level Corporate Strategy
Community Goal
of life saving services
Tennis Courts 33 3 $2.2 M
Provision or facilitation of tennis related infrastructure to a standard suitable for the local community.
S1, S5 Enjoy
Underground/multistorey car parks
1 2 $13.2 M 1
Provision of safe , secure and accessible parking
S1, S2 Live,
Work, Enjoy
Drainage
Stormwater 651 km 2 $212.0 M
Drainage system generally controls discharge from 20% AEP storms with 1% AEP storms at low points.
S1 Live,
Work, Enjoy
Waste water reuse system
1 system 1 $4.4 M Provision of non potable water supply to suitable customers.
S3 Enjoy
Open Space
Bushland 640.6 Ha 3 Indeterminate
Manage bushland areas through Bushcare groups, seed collection, noxious weed and pest management and propagation of plants at our nursery.
S4 Enjoy
Playgrounds 177
6.6 Ha 2 $11.7 M
Playgrounds inspected quarterly and maintained compliant with relevant Australian standards
S1 Enjoy
Open Space Parks 818
324.8 Ha 2 Indeterminate
Parks maintained in good condition by a combination of routine maintenance and reactive maintenance in response to Customer Requests
S5,S1 Enjoy
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Category Class Sum of Class (no/hectares/km etc)
Average Current Condition
Replacement Value
Current Service Level Corporate Strategy
Community Goal
Sporting Fields 119
193.9 Ha 2 Indeterminate
Sporting fields maintained in good condition by a combination of routine maintenance and reactive maintenance in response to Customer Requests
S1,S3 Enjoy
Waterways and Assets
Length of beach: 13.3km
Boat ramps:18
Wharves & Jetties: 15
Tidal Pools & Baths: 9
2
Beaches - Indeterminate
Boat Ramps, Tidal Pools & Baths, Wharves & Jetties - $12M
Timely response to beach erosion events.
Beaches clean and accessible at all times.
Waterway structures safe and accessible.
Reactive maintenance in response to customer requests.
S4, S1 Enjoy
Organisational Support
Light Vehicles 249 2 $7. 8 M To replace assets at the end of their useful life.
S1 Civic Life
Heavy Vehicle and Plant
268 2 $22. 2 M To replace assets at the end of their useful life.
S1 Live,
Work, Enjoy
Mobile (Books) 510,825 items 2 $5.4 M
Provision of balanced collections, services and facilities that meet and reflect the needs and interests of both current and potential customers in the community.
S5 Enjoy
Transport Infrastructure
Bridges 34 2 $11.5 M
Provide for the safe movement of pedestrian, cycle and motorised traffic over watercourses, roads and
S1,S2 Live,
Work, Enjoy
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Category Class Sum of Class (no/hectares/km etc)
Average Current Condition
Replacement Value
Current Service Level Corporate Strategy
Community Goal
rail cuttings.
Car parks 24.4 ha
3
$19.3 M
Provision of safe, easily accessed parking in close proximity to heavily frequented facilities.
S2 Live,
Work, Enjoy
Transport Infrastructure
Kerb and Gutter 1455.2 km 2 $112.0 M
Control of surface runoff and definition of road carriageways to ensure public safety.
S1, S5 Live
Pathways (Pedestrian/cycleways)
67 km 2 $12.4 M
Facilitate pedestrian and cycle access to schools, shopping centres, train stations and bus stops and to provide a facility for recreational cycling and walking.
S1, S2, S5
Live, Work, Enjoy
Road Pavement Length: 803.8 km
Area: 2 $277.4 M
Provision of sealed road network, well maintained, fully accessible network and fit for purpose
S1, S2 Live,
Work, Enjoy
1 Does not include Cronulla Central. Significant building asest are within stratum and strata lots where the core building replacement / maintenance is already planned as part of an external building management committee. The sites include Kirkby House, Sutherland Library, 29-31 Waratah Street Kirrawee, and Stapleton Avenue community offices.
2. Excludes Cronulla library within Cronulla Central 3. Includes Woronora River Life Saving Club
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2.4.2 Assets critical to Council’s Operations Some assets are considered critical to the ongoing operation of Council’s core services. If they are removed our services to the community would be severely impacted or impossible to deliver. We have defined these assets to be:
Council’s Administration Building in Eton Street Sutherland, which is the ‘nerve centre’ of our activities
Council depots at Bath and Ethell Roads, Kirrawee which support our operations
Sutherland Shire library, where our Information and Technology back up occurs and
Our domestic waste fleet, which could not be replaced within an appropriate time to meet resident’s domestic waste removal requirements and expectations.
Council has assessed the risks associated with the partial or total loss of these assets and has adopted a disaster management plan as part of our Business Continuity Plan. 2.4.3 Lifecycle assessment As part of the development of this Strategy we have undertaken comprehensive life cycle assessments for roads and drainage. We are currently in the process of undertaking similar assessments for our buildings. Lifecycle costing is defined as a process to determine the sum of all expenses associated with an asset class including acquisition, installation, operation, maintenance, refurbishment, discarding and disposal costs. During the implementation of our Asset Capability Improvement Plan (detailed in Section 6) we will complete whole of life cycle costings for our Open Space and Organisational Support Asset Categories. 2.4.3.1 Remaining Life Drainage Council has detailed attribute information regarding its stormwater asset inventory. This includes asset build dates, life expectancy based on engineering standards and local environmental conditions, valuations and replacement costs. Council also has some condition data based on closed circuit television (CCTV) and visual inspections of its network. This stormwater data is stored centrally in its Corporate Asset Management System, Confirm. Council has a detailed and spatially accurate location of all its stormwater assets stored in its Geographical Information System (GIS). Council also has information regarding asset capacity and service performance, mainly hydraulic information based on the many catchment studies carried out across the Shire. Council's Stormwater Drainage facilities and services are generally provided to meet industry design and safety standards where these are available. From a safety and “fit for purpose” perspective it is considered that Council’s Stormwater Drainage assets are meeting appropriate performance requirements.
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For the purpose of gaining an initial understanding of the renewal and financial requirements for Stormwater Drainage assets, remaining useful life has been estimated directly from the assets age against expected life as outlined in the following table. At this stage future renewal expenditure requirements have been forecast based on existing condition and remaining useful life information and an assessment of “backlog” works required to bring Stormwater Drainage assets up to appropriate standard. This future renewal expenditure and any gap analysis will be further explored in the Stormwater Asset Management Plan.
Transport Infrastructure
Council has detailed attribute information regarding its transport asset infrastructure. This includes asset build dates, life expectancy based on engineering standards and local environmental conditions, valuations and replacement costs. Council also has detailed condition data based on regular scheduled inspections of its network. This transport infrastructure data is stored centrally in Councils Pavement Management System (PMS). Additionally Council has a detailed and spatially accurate location of all its Transport Infrastructure assets stored in its Geographic Information System (GIS) and accessible to all staff. The PMS provides detailed condition and deterioration modelling, asset capacity and service performance, and combined regular inspections provide a rigorous platform to program future works and transport infrastructure budgets. The following graphs for the useful remaining life of Road Pavement, Kerb and Guttering and Footpaths has been extracted from the data within the PMS.
0
20
40
60
80
100
120
Stormwater Drainage Remaining Life
Useful Life Consumed Expected Remaining Life
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Council uses a variety of road pavement types in order to optimise benefits to the road users and minimise costs to council. The graph shows that the old style sprayed seals are more than halfway through their useful lives and will be progressively replaced with asphaltic concrete.
Much of council's kerbing and guttering is relatively new and still has a substantial useful life. Brick kerbing is now only used to replace existing brick kerb in historically significant areas.
0
20
40
60
80
100
120
Road Pavement Remaining Life
Avg % Useful life used Expected Remaining Life %
0
20
40
60
80
100
120
INTEGRAL OR STRIP K&G ROLL TOP KERB BRICK KERB
Kerb Remaining Life
Avg % Useful life used Expected Remaining Life %
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There has been a surge in footpath construction in recent years and much of the footpath network is in good condition. Bitumen footpaths are no longer constructed and are gradually being replaced with concrete paths.
2.4.3.2 Road Pavement Network Lifecycle costings The road pavement network is Council’s most valuable asset. Staff regularly inspect and monitor our pavement and associated streetscape assets .The data collected is held in Council’s PMS which then processes the data to inform our works programs and budget process. Based on our lifecycle assessment Council has allocated an additional $2m in 2012/13 and is aware that additional like funds are required in order to preserve the integrity of our road network. The data collected for pavements includes rating the extent and severity of defects such as roughness, cracking and potholing. The figure below shows the break up of pavement condition in 2010/11.
0
20
40
60
80
100
120
CONCRETE FOOTPATH BITUMEN FOOTPATH BRICK / PAVER FOOTPATH
Footpath Remaining Life
Avg % Useful life used Expected Remaining Life %
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Although this analysis reflects an overall condition of “good” it is known that pavements do not deteriorate in a linear manner. The majority of lightly trafficked local roads managed by Council are sealed with a thin layer of asphaltic concrete and mainly fail as a result of the breakdown of the surface treatment; the main predictor for bitumen oxidation is the age of the pavement. The current average age of road pavement surfacing in Sutherland Shire is 21 years, while the average age of the base layers is over 30 years. The following figure shows the current seal age of the pavement network.
Distribution of Pavement Condition
3
13
30
54
0
10
20
30
40
50
60
POOR FAIR GOOD VERY GOOD
Condition Rating
Len
gth
(%
of
netw
ork
)
Pavement Seal Age
20
36
44
0
5
10
15
20
25
30
35
40
45
50
1 -10 Years 11 - 20 Years > 20 Years
Age Group
% o
f R
oad
Net
wo
rk
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A computer analysis was undertaken using our PMS to determine the maintenance needs and budgeting requirements for the road pavements over the next ten years. Two different funding scenarios were modelled:
Scenario 1. Network performance if the annual pavement maintenance budgets are continued at their current level ($3.8 million annual expenditure)
Scenario 2. Future condition of the network if the budget for road pavements was increased to $5.8 million per annum (CPI adjusted).
The following figure plots the relationship between maintenance budget and its effect on future network condition. Under Scenario 1 (current funding) the average road network condition will continue to slide into an overall “poor” condition within the next decade. Scenario 2 will arrest the slide and keep the overall pavement condition in the “good” classification.
2.4.4 Community satisfaction with assets Council’s on-going community engagement program maintains an informed basis for the prioritisation and programming of asset provision and maintenance. The following three major engagement programs provided the principal community inputs for this asset strategy:
1. Council’s Community Satisfaction Survey (2011) 2. Household Survey for the Proposed Infrastructure Levy (2009) 3. Community Engagement for Community Strategy Plan Review (2011)
Funding Scenarios
0
1
2
3
4
5
6
7
8
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Co
nd
itio
n I
nd
ex
$3.8M Expenditure
$5.8M Expenditure
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The table below provides a time based comparison across the three most recent community satisfaction surveys of both importance and satisfaction ratings for Council’s key asset classes. Scores are reported using a 1 (low) to 10 (high) scale.
COUNCIL FACILITY / SERVICE 2011 2009 2007
Imp Sat Imp Sat Imp Sat Local Roads Condition 8.6 6.7 8.5 6.5 9.0 6.5 Local Bushland Maintenance 8.6 7.1 8.7 6.6 8.7 6.8 Local Traffic Management 8.5 6.0 8.3 5.9 8.7 6.4 Public Toilets Condition 8.5 5.6 9.0 5.5 8.4 5.5 Parks and Gardens Condition 8.5 7.5 8.7 7.3 8.7 7.2 Footpath Condition 8.2 6.2 8.3 5.9 8.6 5.9
Local Sporting Fields Condition 7.9 6.8 8.3 6.9 8.2 7.0 Footpath Provision 7.8 6.3 8.0 5.8 8.7 6.0 Cycleway Length & Coverage 4.7 5.0 5.3 4.6 6.8 5.5
These broader asset priorities and ratings were given greater depth and resolution through a 2009 community engagement program associated with Council’s proposal for the introduction of an infrastructure levy. Involving a total of 2,741 residents the program assessed support for 14 component program areas of an overall infrastructure development proposal. The analysis below shows that trends from highest to lowest levels of support are consistent, with the exception of cycleways, which showed some polarisation of support.
Program Area Priority
Rank Level of Support (percent) Total
% None Slight Moderate Strong Unrated
Rural Fire Service 1 19.3 7.8 13.9 29.6 29.4 100
Roads 2 20.3 8.4 15.5 27.2 28.6 100
Drainage 3 21.7 11.2 17.2 19.2 30.7 100
Public Toilets 4 24.8 12.2 15.2 19.1 28.7 100
Beachside Protection 5 25.8 12.5 16.1 15.3 30.3 100
Playgrounds 6 27.9 17.0 15.6 9.1 30.4 100
Reserves (passive) 7 27.8 17.1 14.8 9.4 30.8 100
Wharves & Jetties 8 28.8 15.6 15.4 10.1 30.2 100
Surf Clubs / Beach Buildings 9 28.9 14.9 15.4 10.5 30.3 100
Sports Fields 10 29.2 15.4 15.5 9.6 30.2 100
Community Buildings 11 30.1 16.9 14.2 7.9 30.9 100
Cycleways 12 35.0 14.1 9.1 12.1 29.8 100
Entertainment Centre 13 37.9 15.3 10.6 6.6 29.6 100
Croyden St Carpark 14 40.9 11.4 9.2 10.1 28.4 100
A third level of information about the community’s expectations and priorities infrastructure was obtained from the 2011 engagement program undertaken to
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inform Council’s integrated planning and reporting framework and in particular the Community Strategic Plan. Effective Critical Infrastructure was rated as both the second highest Overall priority and was the second most frequently rated First Priority item. Specific infrastructure aspects identified included:
Improved quality of both local and major roads which are able to meet traffic capacity
Safe and/or off road bicycle paths across the Shire and bike storage stations at work and at rail stations
Quality footpaths across the Shire, particularly for older people
Provision of bus shelters and seating, particularly for older people
Additional sporting fields are critical for our youth and their healthy and active lifestyle.
More parking at railway station areas
Wide cycle ways for parents with kids
Shared pedestrian footpath/cycle ways to get from local shopping centres
Upgrade or replacement of Sutherland Entertainment Centre and other arts facilities.
Provision of infrastructure (roads, parking, and transport services) was critical
The lack of appropriate infrastructure to support increased density and
population and its impact on the existing infrastructure such as roads.
Protecting trees/vegetation throughout development
Infrastructure to meet demographic changes.
Keep infrastructure well maintained.
Public toilets that are accessible for older people.
Encourage use of community parks
Provision of infrastructure and facilities
Foreshore pedestrian and bike riding opportunities
Walking facilities in suburbia and the bush
Playing fields and ovals and equal access
Bush tracks and green open areas
Play spaces for children in parks
Maintenance of parks, ovals and beaches and ease of access to all
More sport interactive parks like bike tracks and along the tracks exercise
equipment
Council will continue to explore the community’s importance and satisfaction levels with our assets. In order to better match community expectations with the type of asset and levels of services provided further and quite specific dialogue with the community needs to occur in the future. This consultation has been incorporated into our Capability Improvement Plan.
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2.4.5 Local asset management issues Sutherland Shire is no longer a growth area and generally the life cycle stage of its assets reflects this. Our future challenge will be to maintain services with little opportunity for real growth in revenue. The relative affluence of the Shire population mean that there is few major financial assistance programs available from other levels of Government to assist council. A significant number of council’s assets, particularly its buildings are 30 years or more in age and reaching a point of capital reinvestment to maximise longevity Sutherland Shire prides itself with a high participation rate in sports and these sporting facilities need to be supported at the same time the demand for facilities continue to increase. Local asset category issues include: Buildings -
large number of standalone sporting facilities on playing fields
exposure to marine corrosion
some significant assets are reaching capital reinvestment stage
need to resolve asset management responsibilities with community/ sporting occupants of buildings
Drainage –
with a small number of exceptions, Council's drainage structures are in good condition and will not require a major expenditure for many years
due to the presence of improvements above drainage pipelines in an urban environment, pipe replacement is seldom a viable option for renewal
modern technology such as lining will be employed as pipelines reach the end of their service life.
Open Space –
until recently, open space in Sutherland Shire has generally not been intensely developed
Council has recently developed major feature parks such as the Como Pleasure Grounds, Centenary Reserve, Miranda and Oak Park, Cronulla
feature parks are recent constructions and will require little structural maintenance for some time to come.
Transport Infrastructure -
many of the road pavements in the western area of the Shire are reaching the end of the service life and will need to be replaced within two years
most cycleways are recent constructions and will provide many years of service without a major demand for funds
Council maintains it footpaths in good condition however they are subject to uplift by tree roots and localised repair will continue to demand the expenditure of maintenance funds
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Council has a fifteen year commercial contract for the provision and maintenance of all bus shelters (some with advertising) in the Shire at no cost to Council, so no expenditure will be required for maintenance.
2.4.6 Financing our Assets The ongoing provision of asset infrastructure of a type, condition and service level which is acceptable to the existing and future Sutherland Shire communities is critical to ensuring appropriate services to our people.
Council’s 2011/12 to 2020/21 Capital Works budget indicates the level of funding allocated for the specific maintenance and upgrading of existing infrastructure and the creation of new assets to promote community, business and visitor activity.
2.4.7 Additional funding needs As Council completes its asset management plans, an accurate cost for maintaining the assets will become apparent. It is expected that a funding shortfall will be identified, in common with other councils and levels of government, and decisions will be made to prioritise expenditure from available resources, Council’s property investment fund has been a valuable supplement to general rate revenue for many years and for financial year 2011/12 provided approximately additional funding equivalent to 5% of general rate revenue In 2012 Council does not support raising additional revenue via rate increases, increased user fees or introduction of new user pays levies. In the absence of new revenue sources Council will need to pursue operational efficiencies and review services and service levels in consultation with the local community.
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Support Specific Maintenance Replacement & New
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2.5 Assessment of Current Asset Management Capability
To determine the current asset management performance at a broad, strategic level and identify areas for improving Council’s asset management capability, Council undertook an assessment by means of a gap analysis. The Institute of Public Works Engineering Australia’s (IPWEA) provides a tool for undertaking this analysis, as part of its NAMS.PLUS program. IPWEA’s ‘sustainability’ approach is essentially based on three key elements: 1. Stewardship – the role of elected members 2. Asset Planning – managing existing as well as new 3. Financial Planning – an essential part of business. For each of these, a series of capabilities are assessed in relation to the present capacity, the desired capacity and the importance of that capability. The latter criteria are significant as they allow councils the flexibility to pursue a standard that may be less than ‘best practice’ because it may not be relevant; the cost to achieve best practice is prohibitive or there is no benefit to be gained from best practice compared to current practice. The results of our gap analysis follow. 2.5.1 Stewardship
This Strategy was not complete at the time of the analysis.
It has progressed to a competency level.
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Key points relating to Council’s ‘stewardship’ capability:
Council is meeting its desired capability in having an AM Policy, referring asset management issues to its Audit Committee when necessary, and reporting on its financial sustainability
Council’s approach to having systems for managing asset related risks either as part of a corporate risk management system or within an Asset Management Plan is mixed, depending on the asset category
Council’s Asset Management Working Group ensures there is a reasonable cross functional approach to asset systems management, however, there is no dedicated asset management business unit
Accountabilities and responsibilities are not defined in all managers’ job descriptions.
2.5.2 Asset Planning
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Key points relating to Council’s ‘asset planning’ capability:
Asset identification and recording is done at the component level for both roads and drainage, with some further work required in buildings and parks
While asset data is current and there is a documented work process for asset register maintenance, there are gaps around document procedures for recognising and capitalising new and donated assets, as well as reviewing useful lives of assets
Responsibility for maintaining the asset register lies with several staff members, and updates are sometimes delayed due to pressures on time and resources
Asset condition data exists for roads, with data for the remaining asset categories incomplete. The aim is to have a rolling program of assessment – not an annual one
Risks are assessed and treatments identified that are linked to capital and maintenance programs for all asset categories, except for buildings, which will be completed in the next 12 months
Knowledge of the life cycle costs of services using each asset varies – ranging from high for roads to minimal for parks
Future demands and impacts on service delivery relating to roads and drainage is fairly well known; and is in development for buildings
No asset management plans exist for any asset category but plans for Buildings, Drainage, Open Space and Transport Infrastructure will be developed within 6 months.
2.5.3 Financial Planning
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Key points relating to Council’s ‘financial planning’ capability:
Council has had a 10 year Long Term Financial Plan for some years’ which has been revised to conform to IP&R requirements.
There needs to be clear and direct linkages in the LTFP to a number of asset management activities, such as life cycle cost considerations, provision for new assets including their operating and maintenance costs, asset renewals and treatment of capital expenditure
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Gap Analysis
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Excellence 5
Competence 4
Systematic Approach 3
Awareness 2
Needs Improvement 1
Current Capability Score Gap to achieve Desired Capability
Present Capability 5 3 2.6 2 5 3.5 2.5 2.6 2.8 2.2 2.2 1.4 1.5 2.5 4 2.5
Desired Capability 5 5 4 4.5 5 4 4.3 3.2 4 4 3.2 4 4 3 4 4
Gap 0 2 1.4 2.5 0 0.5 1.8 0.6 1.2 1.8 1 2.6 2.5 0.5 0 1.5 Importance Weighting 5 5 3.4 4 5 3.5 3.7 3.4 3.4 3.2 3.4 4 3.5 3.5 4 4.5
Weighted Gap 0 10 4.8 10 0 1.8 6.7 2 4.1 5.8 3.4 10.4 8.8 1.8 0 6.8 Priority For Improvement 12 2 7 2 12 11 5 10 8 6 9 1 3 11 12 4
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2.5.4 Priority Areas for Improving Asset Management Capabilities The following table presents a summary of the gap analysis across the three capability areas. From the gap analysis scores, a priority for improvement is determined by calculating the gap between the desired and present capacity, with a weighting applied based on the importance of the particular capacity being assessed.
Priority Practice Area
1 Asset Management Plans
2 AM Accountability & Responsibility
3 Life Cycle Costs & Investment Decisions
4 Long Term Financial Plan
5 Asset Data Maintenance
6 Service Levels & Delivery Costs
7 Risk Management Process
8 Risk Management
9 Future Demand Impacts
10 Asset Condition Data
11 Asset Identification & Recording
12 Revaluation Process
13 Reporting Asset Consumption
14 AM Strategy
15 Sustainability Reporting
16 AM Policy
Excluding this Strategy, the gap analysis indicates that council’s priorities should focus on:
completion of asset management plans
identification and definition of responsibilities and accountabilities across council positions
incorporating life cycle and investment expenditure into council’s Long Term Financial Plan, and broader decision-making.
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2.5.4.1 Asset Management Plans Council will be currently developing its formal asset management plans for the core categories of:
buildings
drainage
open space
transport infrastructure An Asset Management Plan is not proposed to be developed for organisational support at this stage. Council has a significant asset portfolio, and whilst the intention is to have asset management plans in place for all asset categories, this will be achieved through a gradual and phased approach due to resource and financial constraints. In order to keep Asset Management Plans current and relevant, it is proposed that they will be updated annually to reflect both financial/budgetary changes as well as any changes in service levels. A full review of the plans will be undertaken every 4 years.
2.5.4.2 Asset Management Accountability and Responsibility Across council, there are a range of asset management responsibilities as well as a range of asset classes. As outlined earlier in responsibility for asset management, at both a strategic and technical level, is spread across the organisation. There is a recognition that in order to improve the strategic capabilities of the organisation, a dedicated Strategic Asset Management Unit may be one option of achieving this. This, however, would not be considered until the new Division is operational. 2.5.4.3 Life Cycle Costs and Investment Decisions Life cycle assessments are inconsistent and unavailable across all categories and classes. There is a high level of sophistication associated with costing our road pavement network supported by data and routine monitoring practices. Some initial work has been undertaken in the assessment of buildings, however, there is considerable work to do to achieve the desired analysis and understanding.
2.6 Asset Management Capability Improvement Plan
It is clear from the gap analysis we have undertaken that council has room for improvement in its asset management. The Asset Improvement Capability Plan aims to bridge the gaps identified in this Strategy and move Council to more advanced asset management. The following table identifies the actions council will take to do so. Actions are prioritised according to their urgency with immediate attention given to legislative compliance and safety concerns. The priority rating used is: 1. Immediate and within 3 months 2. 3-6 months and informing the development of AMPs 3. 6-12 months 4. Ongoing
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A five heading approach has been applied for areas of improvement:
Corporate Review
Process Improvement
Information System Improvements
Organisational People Issues
Commercial Tactics We believe substantial benefits will be obtained from our corporate approach which will then feed into categories and classes of assets. The development of core Asset Management plans (AMPs) together with our commitment to measurable continuous improvement are the necessary tools for successful asset management which will take us into the future. Council’s AMPs will be a “first cut “ approach and provide information to the Executive and Council to enable a more rapid transition to the desired advanced asset management practice in the future. These plans will build on the current approach and over time, be based on more complete and more accurate asset data, and relate to specific service levels that directly reflect community expectations. Our AMPs will include:
lifecycle costing approach
use of current information and condition assessment
identification of critical assets
determination of current service levels
determining improvement strategies as measured against the current baseline position
prioritising new capital works on simple cost benefit analysis (business case)
long term financial planning for assets and
establishing measurable financial and service level performance indicators. Coordination of actions in this Plan¸ the Asset Management Working Group (AMWG) and reporting on progress at 3 monthly intervals to Councils’ Executive will be the responsibility of the Strategic Planning Unit.
Background
Workforce Strategy
Long Term Financial Plan Page 37
Asset Management
Asset Management Capability Improvement Plan
CORPORATE REVIEW
Action Priority Completion
Date Responsible Officer Resource Requirements
Statement of executive and Council commitment (similar to WHS) 1 Nov 2012 Executive Report to Directors
Specification of executive and Council reporting requirement 1 Nov 2012 Executive Report to Directors
Define the roles and responsibilities between Asset Management and project delivery 1 Nov 2012 AMWG/ Executive Forum, Report to
Directors
Recognise and confirm the roles of asset manager and occupier 1 Nov 2012 AMWG/ Executive Forum, Report to
Directors
Allocate all assets to Asset managers 1 Nov 2012 AMWG/ Executive Forum, Report to
Directors
Determine and implement community engagement model to review Customer Service levels 3 Aug 2013 SPU/ Executive Scope and cost TBD
Prepare first cut Asset Management Plans 2 Feb 2013 Asset Managers Scope and cost TBD
Integrate existing Asset Management policies plans and strategies not under IPR framework 2 Feb 2013 Asset Managers Forum, Report to
Directors
Determine frequency Asset Management of review 1 Nov 2012 Executive Report to Directors
Finalise format of Asset Management Plans 1 Nov 2012 AMWG/Executive Report to Directors
PROCESS IMPROVEMENT
Action Priority Completion
Date Responsible
Officer Resource Requirements
Determine which services are critical to the community in collaboration with the community. 3 Aug 2013 SPU/ Executive Scope and cost TBD
Review service levels for services. 3 Aug 2013 SPU/AMWG Report to Directors
Standardise business case assessment for capital expenditure. 2 Feb 2013 AMWG Report to Directors
Review Long Term Financial Plan with benefit of Asset Management Plans 3 Aug 2013 AMWG/ Manager Finance
Report to Directors
Align Finance and Asset Management Systems. 3 Aug 2013 AMWG/ Manager Finance
Report to Directors
Identify energy and water efficiency issues and develop appropriate strategies. 3 Aug 2013 AMWG/ Manager Energy
Report to Directors
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Workforce Strategy
Long Term Financial Plan Page 38
Asset Management
INFORMATION SYSTEM IMPROVEMENTS
Action Priority Completion
Date Responsible Officer Resource Requirements
Create Asset Management System user group 3 Aug 2013 AMWG Within existing resource allocations
Examine enhanced use of EView for Asset Management 3 Aug 2013 Manager LIU Within existing resource allocations
Prepare a tool for weighting the benefit of expenditure in improving the condition of the asset 3 Aug 2013 Manager LIU Within existing resource allocations
Develop a standard business case template 3 Aug 2013 AMWG Report to Directors
Consider upgrading mobile functionality in the light of new developments in the Confirm software 3 Aug 2013 AMWG Scope and cost TBD
Review mobile functionality and consider upgrading systems/technology in light of new developments in the Confirm software
3 Aug 2013 AMWG Scope and cost TBD
Develop a consistent Condition Rating system across all asset classes 3 Aug 2013 AMWG Scope and cost TBD
Ensure system data classification meets requirements for all legislative and business reporting requirements
3 Aug 2013 AMWG Within existing resource allocations
ORGANISATIONAL PEOPLE ISSUES
Action Priority Completion
Date Responsible Officer Resource Requirements
Migrate remaining existing asset data into corporate asset management system 3 Aug 2013 AMWG Within existing resource
allocations
Collect asset condition data for outstanding asset classes 3 Aug 2013 AMWG Scope and cost TBD
Improve asset information accessibility to staff via EView and SSR reporting 3 Aug 2013 Manager LIU Within existing resource allocations
Complete and maintain Asset Class Register 3, 4 Aug 2013, Ongoing
AMWG Within existing resource allocations
Define corporate roles and responsibilities for maintenance of asset data 2 Feb 2013 AMWG/ Asset Managers
Forum, Report to Directors
Background
Workforce Strategy
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Asset Management
ORGANISATIONAL PEOPLE ISSUES
Action Priority Completion
Date Responsible Officer Resource Requirements
Integrate functions between Asset Management and Projects Delivery Division 1 Nov 2012 AMWG/ Executive
Forum, Report to Directors
Develop strategies and training to connect program and project management including formalising consultation with users
3 Aug 2013 Corporate Development
Forum, Report to Directors
Develop and provide training for Councillors, Executive and asset managers 3 Aug 2013 Corporate Development
Forum, Report to Directors
Create asset managers and occupiers working group 2 Feb 2013 AMWG Forum, Report to
Directors
COMMERCIAL TACTICS
Action Priority Completion
Date Responsible Officer Resource Requirements
Determining core, discretionary and commercial services and the corresponding operating parameters
3 Aug 2013 AMWG/ Executive
Forum, Report to Directors
Resolving maintenance responsibilities of parties outside of council 3 Aug 2013 Mgr Property & Building Assets/ Executive
Report to Directors and Council
Optimise revenue opportunities from available assets 3 Aug 2013 Mgr Property & Building Assets/ Executive
Report to Directors and Council
Formalise and standardise contractor management procedures 3 Aug 2013 AMWG / Legal Services
Forum, Report to Directors
Determine asset based indirect financial assistance to outside organisations 3 Aug 2013 Mgr Property & Building Assets / Mgr Finance
Forum, Report to Directors
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2.7 Conclusion
This Strategy is based on Council’s existing Asset Management Policy and establishes the
structure for improvements to support our ongoing asset management planning and
practice. It has considered:
a detailed overview of all the assets under Council’s control
the community’s expectations of asset provision and maintenance
an assessment of our current asset management planning practices and
identification of organisational deficiencies.
The Asset Management Capability Improvement Plan contained in Section 6 articulates the
action Council will take to improve our asset management capacity. We will do so through
improvements in organisational knowledge, systems, processes and structures. This
Strategy will soon be supported by four comprehensive Asset Management Plans (AMPs) for
our key asset categories:
Buildings
Drainage
Open Space
Transport Infrastructure
Together they will inform and be informed by Council’s Long Term Financial Plan and
Workforce Strategy to deliver the infrastructure, programs, services and facilities detailed in
our Delivery Program and aspired to in the Community Strategic Plan.
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Appendix A Asset Management Policy 1. PURPOSE The purpose of this Asset Management Policy is to articulate Council's commitment to the principles of sound asset management. It establishes a clear direction and framework to ensure that asset management is undertaken in a structured, coordinated, cost effective and financially sustainable manner across the whole organisation. 2. SCOPE This policy applies to all physical assets (excluding personnel) owned or controlled by Council. 3. GOALS AND OBJECTIVES The goals and objectives of this policy are to establish a framework which will:
Ensure that Council’s services and infrastructure are provided in a sustainable manner, with the appropriate levels of service to residents, visitors and the environment.
Safeguard Council assets, including physical assets and employees, by implementing appropriate Asset Management strategies and appropriate financial treatment of those assets.
Create an environment where Council employees play an integral part in the overall management of Council assets by creating and sustaining Asset Management awareness throughout Council.
Meet or surpass legislative requirements for Asset Management.
Ensure resources and operational capabilities are identified and responsibility for asset management is allocated.
Demonstrate transparent and responsible Asset Management processes that align with demonstrated best practice.
4. POLICY
4.1 Background 4.1.1 Council is committed to implementing a systematic asset management
methodology in order to implement appropriate asset management best practices across all areas of Council. This includes ensuring that assets are planned, created, operated, maintained, renewed and disposed of in accordance with Council’s priorities of service delivery.
4.1.2 Council owns, uses and or controls approximately $1.5 billion of “non-current” assets (eg roads, buildings, reserves) to support its core business of delivery of service to the community.
4.1.3 Asset management directly supports the Council endorsed community strategic plan, "Our Shire Our Future” by detailing the asset resources that are required to be managed in a way that meets the community’s main priorities and aspirations, as set out in the community strategic plan.
4.1.4 Asset management practices impact directly on the core business of Council and appropriate asset management is required to achieve our strategic service delivery objectives.
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4.1.5 A strategic approach to asset management will ensure that the Council delivers the highest appropriate level of service through its assets. This will provide positive impact on:
Members of the public and staff;
Council’s financial position;
The ability of Council to deliver the expected level of service and infrastructure;
The political environment in which Council operates; and
The legal obligations of Council.
4.2 Principles 4.2.1 A strategic and systematic approach to asset management, that embraces
industry standards and best practice, will be employed throughout Council. 4.2.2 Council’s assets will be managed using a “life cycle” approach and all future
life cycle costs will be calculated and considered in all decisions relating to new services and assets as well as upgrading of existing services and assets.
4.2.3 Council’s assets will be utilised to their optimum potential, to maximise usage and economic performance, based on performance targets relating to the particular classes of assets set out in the Asset Management Strategy.
4.2.4 All relative legislative requirements together with environmental, social, economic and governance standards are to be taken into account in asset management.
4.2.5 Council’s assets will be regularly maintained to the Asset Management Plan, based on the Asset Management Strategy, to ensure that they continue to function as built for the duration of their life and minimise Council’s exposure to risk in regard to asset failures.
4.2.6 An inspection regime and consistent condition rating will be used to ensure agreed service levels, intervention methods and renewal priorities can be determined across all asset classes.
4.2.7 Funding for all asset purchases, maintenance, rehabilitation and replacement shall be guided by Council’s Asset Management Plans and included in the Integrated Planning & Reporting framework consisting of the annual Operational Plan, the 4 Year Delivery Program and 10 year Long Term Financial Plan.
4.2.8 Asset renewal plans will be prioritised and implement progressively based on the level of service required and the effectiveness of the current assets to provide that level of service.
4.2.9 Systematic and cyclic renewal reviews will be applied to all asset classes and are to ensure that the assets are managed, valued and depreciated in accordance with appropriate best practice and applicable Australian Standards.
4.2.10 Future service levels provided by infrastructure assets will be determined in consultation with the community.
4.2.11 All assets must be assigned to an asset manager who will be responsible for managing the assets in accordance with this Policy, Asset Management Strategy and Asset Management Plan/s.
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4.2.12 That in all asset management documents the hierarchy of asset management recognise the different roles of asset owner, asset manager and asset user/occupier.
5. RESPONSIBILITIES
5.1 Councillors Councillors, as the custodians of community assets, are responsible for adopting the policy and ensuring that sufficient resources are made available for asset management activities.
5.2 General Manager
The General Manager has overall responsibility for developing an Asset Management strategy, plans and procedures and reporting on the status and effectiveness of Asset Management within Council.
5.3 The Asset Management Steering Committee (AMSC)
The AMSC reports to the General Manager.
Implement and continuously review the corporate Asset Management Policy and Strategy subject to allocated resources.
Provide strategic direction and leadership for asset management over the next 25 years.
To ensure that accurate and reliable information is presented to Council for decision making.
Ensure the needs and obligations of the Council are being fulfilled on behalf of the community.
Foster and support the multidisciplinary, cross-functional Asset Management Working Group.
5.4 The Asset Management Working Group (AMWG)
The AMWG reports to the AMSC.
Develop an asset management Strategy for asset management and resource requirements that reflect a corporate approach to asset management utilising Councils corporate systems.
Encourage continuous improvement, innovation and cost effective methods to improve asset management practices.
Facilitate the development of asset management plans.
Present accurate information relating to infrastructure assets (lifecycle costs, risks, etc) to support Council’s decision making processes.
5.5 Asset Owners
Acts as the authorised representative of the council to acquire, dispose, lease, license or hire assets in accordance with applicable council resolutions and delegations.
5.6 Asset Managers
To develop, implement and review asset management plans at the business unit level in accordance with this Policy and the Asset Management Strategy.
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To report on the performance of assets under their responsibility.
To manage occupational health and safety and public liability risks associated with the assets assigned to the Manager.
To act as an interface with asset occupiers.
5.7 Asset Users/ Occupiers
To use or occupy council assets under agreement with the asset owner, or where applicable, the asset manager in accordance with adopted council policies relating to the use or occupation of the class of asset or type of transaction.
6. ASSET MANAGEMENT FRAMEWORK The framework for implementing Asset Management within Sutherland Shire Council in accordance with the principles outlined in this policy is illustrated below:
7. REVIEW This policy shall be reviewed every year and in conjunction with Council’s Community Strategic Plan.
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WORKFORCE STRATEGY
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Asset Management
3. Workforce Strategy
3.1 Background
Council is, and has been for many years, the largest employer in Sutherland Shire. Over three-quarters of the organisation’s employees are Shire residents. The last 3 decades have demanded that the organisation responded to significant community and operational changes including a 24% population increase (170,000 to 212,000 persons) and a 320% increase in operating budget ($59m to $250m). From a workforce perspective, these challenges have been met through a modest 7.25% change in employee numbers (1034FTE to 1109FTE). The need for competitive service delivery and an increasing diversity of community demands have required council’s workforce mix to change from a traditional structure of a “day labour” organisation with high numbers of administrative, regulatory, and “blue collar/outdoor” staff. Significant structural shifts, including both increases and decreases, have been:
From 85 staff in 1993 Waste Services currently has 9 staff for putrescible waste collection and total of 35 staff for domestic, green waste and recycling, underpinned by the introduction of the rapid rail collection service
A reduction in Information Technology staff numbers through council’s move in the 1980s away from developing and supporting its own software to outsourcing its software requirements.
A growth in Children’s Services from one long day childcare centre and 12 staff in 1989 to the current situation of 11 centres and 352 staff.
A shift in Recreation and Leisure away from traditional Olympic pools and towards a range of leisure and recreation has seen Council move from 21 staff employed at Caringbah, Sutherland & Engadine Olympic pools in 1993 to 331 staff in 2012 employed across a variety of centres.
Increased employment associated with more recently introduced services and support resulting from council’s involvement in environmental, bush care, economic development and tourism related activities.
This development and evolution of the necessary responses have resulted in council creating a comprehensive platform of policies (Appendix B) that support its workforce. Market testing has been with council for a number of years and some recent changes, facilitated by natural attrition, have seen the outsourcing of some traditional areas eg. Footpaths reduced from 14 to 4 employees, Parks Maintenance from 103 employees (in 2006) to 94 employees (in 2012). Whilst council has undergone significant reform it has minimised redundancies preferring instead to retain and retrain staff where it can.
3.2 Challenges
One of the big issues facing local government is maintaining financial sustainability. This is becoming increasingly difficult as the community and government expects more from local government and ratepayers want a good return on their rate dollar. Councils have also had to cope with continuing cost increases, eg. energy, cost shifting from other levels of
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government and hand in hand with decreasing financial support from state and federal governments. Many councils in NSW are not financially sustainable into the future. There is also concern that the role of councils in its important regulatory responsibility, planning and determining development applications is in need of an overhaul. Governments see the need for local government to operate efficiently and see councils as an important contributor to stimulating investment and creating jobs in this State. There are a number of initiatives which will impact on future staffing requirements and support for staff in Local Government, including:
Destination 2036 Action Plan includes and sets a number of initiatives and key actions under the headings:
- Efficient and Effective Service Delivery - Quality Governance - Financial Sustainability - Appropriate Structures - Strong Relationships
The Independent Local Government Review Panel is examining options for government, structural arrangements and voluntary boundary changes for local government.
Review of the Local Government Act
A review of the planning legislation is underway.
Council’s workforce must be able to respond to the changing operating environment and the economic pressures under which it operates. For many parts of the organisation community needs will be met and services will be provided in similar ways. The main influences on the way the workforce will be structured and how Council will meet its people resourcing requirements are:
the ageing work force, particularly in the senior ranks, and the resultant loss of knowledge and experience
the proposed State planning system will lead to a change in the skills mix with fewer staff in development assessment, but more staff in planning and certification services.
the need to be competitive in service provision and if day labour is unable to provide a competitive and effective service those services will be outsourced where appropriate.
As part of workplace change there will be times where positions are declared surplus to organisational needs and as such the incumbent in the position is to be redeployed elsewhere within the organisation. Council wants to ensure that staff have jobs and as such redeployment is always the first option. Council will use its best endeavours to ensure successful redeployment, with redundancy only being discussed as a very last option. In all cases the General Manager would have to approve the redundancy payment.
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3.3 Workforce Overview
The following overview is derived from a series of information sources including Council’s employee record system, the 2011 Staff Survey, interviews with Directors and identified managers, and a variety of reports detailing workplace initiatives undertaken by the organisation since 2005. In 2011 council’s workforce stood at 1836 total positions. Positions have been chosen as the reference base rather than employee numbers to better reflect the organisation’s labour demand. The distribution of positions shows distinct differences across the organisation’s five directorates, with the main features including:
Community & Recreation (C&R) accounts for almost half the total positions (869) in SSC, due largely to substantial body of casual employees who are mainly female.
Engineering accounts for one quarter of the total SSC positions (492) and contrasts with the C&R directorate due to its large proportion of permanent male employees.
Executive and Property each have fewer than 100 positions, and collectively account for less than 10% of the total workforce.
Corporate (197 positions) and Environmental Services (134 positions) account for the remaining 18% of the total workforce.
Environmental Services and Property have an almost equal gender spilt in their workforces, with over 80% of Environmental Services positions being full time, compared with 50% full time positions in Property.
Corporate and Executive each have a 60%female/40%male (approximate) division among their employees, with over 70% of Corporate Services positions being full time, compared with slightly less than 50% full time positions in Executive.
Comparison of council’s 2011 workforce profile with the organisational profile from 5 years earlier (2006) shows that for both total numbers and general composition, our workforce structure remained relatively constant over that period.
878
564
206 137 89 46
869
492
197 134 91 53
0
200
400
600
800
1000
C&R ENG COR ESD EXE PRO
Nu
mb
er
of
Po
sit
ion
s
1920 positions in 2006: 1836 positions in 2011
2006
2011
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In net terms our workforce reduced by four percent over the five years from 2006 to 2011, with most directorates showing only marginal shifts in their total number of positions. The main change occurred in Engineering directorate, with a twelve percent reduction in position numbers. The Corporate Services directorate showed a five percent reduction in numbers, although as it comes off a smaller total employment base when compared with Engineering and C&R, the absolute numbers of positions reduced were smaller (9 positions overall) The overall age and gender composition of our workforce also remained relatively stable over the 5 years between 2006 and 2011 exhibiting:
slightly higher proportion of females (55%) than males (45%)
a slight increase in the proportion of employees aged 65+ (1.3% in 2006 up to 3.4% in 2011)
a decrease in the proportion of under 25’s (15.% in 2006 down to 12% in 2011)
an overall ageing of the workforce with an increase in the proportion of employees aged 45 and over, among both males (up 3.7%) and females (up 10.2%).
While females constitute a higher proportion of positions within the SSC labour force, their employment status is quite different to that of males.
Males hold more than twice the number of full time positions compared with females, while females hold three times as many casual positions when compared with males. Females hold the dominant proportion of part-time positions within the organisation. Over 40 percent of our workforce has been employed at Council for less than five years. The proportion of females in this under five year group is considerably higher than that for males. For all other periods of employment the proportion of males and females in each group is relatively similar, although the proportion of males outweighs females in the long term employment categories.
8.5%
2.8%
33.3%
23.7%
13.9%
17.7%
40% 20% 0% 20% 40%
Casual
Part time
Full time
2011 - Total Number of Positions = 1836
FEMALES (55.3%) MALES (44.7%)
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Specifically, four key aspects for attention were identified within the broader context:
Retention
Attraction
Development
Transition and form the basis of this Workforce Strategy profiled and detailed below.
3.4 Responses
3.4.1 Retention For the last decade SSC staff turnover has been relatively low (less than 15%). After experiencing a dip in 2008/2009 (likely due to the GFC) turnover has steadily trended back toward the 10% mark.
Interviews with Directors and Managers generally indicated that the current workforce size is “about right” for the organisation’s facility and service delivery program highlighting a need to ensure that staff turnover remains at the low levels seen in recent years. The 2011 SSC Staff Survey revealed the following time to exit profile for various age groups:
Year in which this age group will reach…
Age in 2011 50% exit 75% exit
Under 20 2026 na
20 to 24 2016 2026
25 - 29 2016 2020
30 - 34 2018 2027
35 - 39 2019 2027
40 - 44 2023 2030
45 - 49 2024 2028
50 - 54 2021 2026
55 - 59 2017 2020
60 - 64 2015 2018
65+ 2013 2014
0%
2%
4%
6%
8%
10%
12%
14%
16%
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Annual Staff Turnover Trends
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In addition to identifying the (expected) higher levels of exits among the over 55’s during the next 5 to 8 years this profile also reveals higher levels of exits among the under 40’s during the same period. A particular vulnerability is found among the 25 to 29 year age group. This is reinforced by the identification throughout the organisation of a particular difficulty in retaining mid-career staff, especially those suitable to move into management positions. While employees’ satisfaction overall with council as a place to work received a score of 7.5 (out of 10), a series of issues have been identified for the maintenance and enhancement of the organisation as a desirable place to remain an employee, including:
Difficulties in being able to compete with remuneration levels offered outside the organisation, especially those in the commercial sector.
The need to identify and promote other “non-dollar” points of difference that Council has to offer as a workplace.
One of the key incentives – identified by both management and employees – is the opportunity to live and work locally rather than needing to commute outside the area for work. However, employees have identified that this does not fully compensate for less than competitive wages.
Council’s capacity to extend flexible and family friendly working arrangements to employees was also identified as a desirable feature of the organisation. However limitations do exist to this both in terms of equity in access to such arrangements across the organisation, and a view by managers that flexible arrangements were posing increasing difficulties on the organisation’s ability to maintain continuity in customer service requirements.
Access to workplace progression was seen identified as one of the top 5 areas of concern among employees in the 2011 staff satisfaction survey. Limitations to the organisation’s ability to offer clear and timely career track progression are acknowledged, making the cultivation of a working environment that provides ongoing challenges and development opportunities a key issue.
Recognition that those areas of Council with a high component of casual employees operate in an environment of high staff turnover, an need to balance the flexibility of an on-demand pool of labour with the inherent loss of skilled and reliable employees to other more stable employment opportunities.
3.4.2 Attraction Two critical factors were identified as having a major impact on the organisation’s workforce, namely: 1) The impending exit of a significant proportion of the workforce over the next 5 to 10
years, the over 50’s group retires, and
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2) The uncertainty produced for a number of Directorates – particularly Community & Recreation, Environmental Services, and Corporate Services – by a changing legislative environment. These changes were regarded as being relatively unpredictable in the medium to longer term, making planning for their associated requirements difficult, and resulting in reactive responses.
While the introduction and revision of systems and technologies was seen a partial solution to the resulting workforce shortfalls resulting from the combination of these two factors, there will still remain a need for the organisation to attract additional employee resources from outside. In some instances it will be possible to meet these demands by moving to contract arrangements; a significant proportion of the 12 percent reduction in Engineering’s workforce between 2006 and 2011 resulted from a shift from day labour to contract arrangements. It was regarded that this trend would continue when appropriate opportunities occurred. Meeting the balance of the employee shortfall will require Council to proactively promote itself within both the local government sector and the wider labour market. Specific areas for investigation include:
The identification of attracting appropriately skilled personnel at a reasonable cost as a major challenge for Council.
The 2011 staff survey indicated that 60 percent of staff would be either very or extremely likely to recommend Council as a place to work, however it also identified Council’s negative image as an area of concern among employees.
While it is anticipated that factors that attract employees to Council would be similar to those that serve to retain existing employees, this is an area that warrants further exploration.
3.4.3 Development While the current workforce size was generally felt to be appropriate, some areas of the organisation identified a need for adjustment of the existing skills profile. In Engineering this adjustment was seen to be occurring within the pool of graduates emerging from tertiary institutions, although the issue of attracting new graduates to Council remains a challenge in general. By way of contrast, Environmental Services employs a model of in-house development of its staff, with a structured program aimed at skills transfer from more experienced staff members to newer members of the division. Council presently maintains an extensive range of specific workplace skills training programs that are promoted and managed via the organisation’s intranet system. These training programs are largely vocational in nature.
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Historically Council’s broader development programs have focussed on the needs of three broad age groups:
Under 35’s (In-house forums, Livewire etc)
35 to 45’s (The Mid-career or “Middies”)
Over 50’s (Sage Co. program).
Current offerings for personal and professional development are less age-related in their scope, however, and include programs such as Springboard, POD, Toastmasters and the Local Government Managers’ Association challenge (LGMA). These programs are also promoted and managed via the organisation’s intranet system. Because of their delivery structure, these programs have a limitation in the number of potential participants in any one year. This limitation needs to be examined in terms of potential equity and access issues. A key issue identified throughout the organisation was the difficulty in identifying, training and retaining experienced mid-career personnel willing to move into management roles. In contrast the 2011 staff survey identified the lack of access to workplace progression as one of the top five concerns among staff. This apparent mismatch in opinions identifies an area for further investigation. The annual performance review process includes an evaluation of training and development needs of the individual. This is a source of information which could be further utilised to design and deliver skills and training programs to reflect the wider needs of the organisation’s workforce. 3.4.4 Transition With the exception of the Community & Recreation Directorate which has a notably younger workforce associated with its high proportion of casual employees, all remaining Council directorates have at least one quarter of their employees aged 55 and over.
Directorate % employees aged 55 and over
Corporate Services 30%
Environmental Services 26%
Executive 23%
Property 26%
Engineering 30%
(62% aged 45 and over)
Taking these profiles in conjunction with workforce leaving intentions from the 2011 Staff Survey
Year in which this age group will reach…
Age in 2011 50% exit 75% exit
50 - 54 2021 2026
55 - 59 2017 2020
60 - 64 2015 2018
65+ 2013 2014
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reveals significant issues for Council to manage during the next five years, including:
Absolute loss of a significant proportion of the workforce occurring in a short time period
Potential need to expand flexible working arrangements to extend the exit time horizon
Specific loss of highly experienced employees and their embodied corporate knowledge
Loss of specific skill sets, particularly in the Engineering Directorate, which pose the question of replacing these skills sets in-house versus outsourcing these task requirements
Significant attrition of the organisation’s senior management over the next decade.
Council’s ageing workforce and the resulting loss of experience and expertise over the coming years will have major ramifications for all levels of our workforce. There will be a change in the most senior management of Sutherland Shire Council over the next five years – the General Manager, five out of six directors, and a number of managers, are over 60 years of age – and informal succession planning is occurring. While we have worked with Sage Co to define and address options for this group, including staged retirement and knowledge capture initiatives, ongoing action is required in conjunction with the Attraction and Development aspects of this Workforce Strategy. Council is very aware of the profiles of its senior staff and has given informal consideration to the way in which the organisation’s structure may change with the retirements which will occur over the coming years. We have already undertaken the following succession planning initiatives:
Establishing a Projects Delivery Division
Providing staff training and development opportunities, including an emerging leaders program
Endeavouring to place its staff in a position to be competitive when senior staff and mangers positions become available
Assessing risks associated with early or unexpected departures of senior staff and managers
Information capture from all employees exiting the organisation, regardless of age or time with Council, is also important, providing valuable feedback to inform and guide Council’s employment environment. As well as employees transiting of out of the organisation, another area of consideration is managing the redeployment of older employees engaged in heavy physical tasks into areas more suited to their age and physical capacity. The following tables summarise strategies for each of the four key aspects, identifying:
Workforce Issues that need to be addressed
broad Responses to be initiated
outcome Indicators for the responses, and
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the Corporate Strategy from the Strategic Plan that is primarily* responded to, where
o S1 = Provide effective & integrated infrastructure o S2 = Deliver integrated transport options o S3 = Conserve natural resources o S4 = Protect our environment o S5 = Strengthen our community o S6 = Respect and value all heritage and culture o RLAC = Responsible Leadership and Active Citizenship.
* Note: This Workforce Strategy obviously supports all of council’s corporate strategies. Those shown in the summary tables indicated the main strategies that the initiatives support.
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Strategy Issues Responses Indicators Corporate Strategy
R e t e n t i o n
Currently lower staff turnover levels trending upward toward 15% historical average Exposure to significant staff exits by the Under 40’s, and especially the 25 to 29 year age group Potential exit of 50% of the over 55’s by 2017 Remuneration levels less attractive than those offered by commercial sector Lack of access to workplace progression identified as a key concern by employees Some Council operations (especially Community & Recreation) require a high component of casual employees
Target workforce initiatives toward specific job satisfaction issues identified in 2011 Staff Survey Continue to develop and promote EEO principles and practices Develop options for staged exit and post retirement “alumni” arrangements Identify, develop and promote non-monetary benefits of working at Council Devise and promote alternative professional & personal development opportunities
Staff turnover of 12% or less Lower than projected rates of exit among key age groups Employee “prospectus” developed and promoted widely Expansion and development of current programs on offer
S1
S2
S5
RLAC
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Strategy Issues Responses Indicators Corporate Strategy
A t t r a c t i o n
Identification and attraction of appropriately skilled personnel Awareness within the wider job seeker community of employment opportunities and advantages offered by Council Uncertainties associated with the changing legislative environment and consequent additional workforce demands Balancing retention of workforce capability within Council with opportunities for external resourcing / contracting
Raise image of Council in general, and specifically as an employer of choice Evaluate targeting effectiveness of current practices for job advertising Identify, develop and promote non-monetary benefits of working at Council, including EEO practices Maintain watching brief of potential requirements and assess both technological and employment based responses Assess options including alternative internal employment arrangements, recurrent short-term contracts, and external resourcing
Ratings from Community Satisfaction and Staff Surveys Job advertising contacts tracked Employee “prospectus” developed and promoted widely Options and alternatives assessed
S1
S2
S4
S5
RLAC
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Strategy Issues Responses Indicators Corporate Strategy
D e v e l o p m e n t
Adjustment of existing skill profiles to meet emerging needs, especially in Engineering and Environmental Services Shortage of mid-career personnel interested in management roles Extending the reach and relevance of current staff development initiatives
On-going evaluation of current skills base through performance review and staff survey processes Extend opportunities for higher grade experience to all employees including part-timers Devise and promote leadership specific development programs Expansion of the capacity of current programs to increase participant numbers
Skill base assessed and talent pool established Number of employees accessing alternative experience opportunities Participation levels in programs, including proportion of first time participants
S1
S2
S4
S5
RLAC
Strategy Issues Responses Indicators Corporate Strategy
T r a n s i t i o n
Retirement of 5 of the 6 members of the Senior Management Team by 2017 Potential exit of 50% of the over 55’s by 2017. Loss of embodied knowledge Information capture from all exiting employees Ageing employees who can no longer meet the physical or technical requirements of their current position
Develop options for staged retirement / exit Shadowing & skills transfer programs developed Exit interview data integrated Audit of employees to evaluate the need, extent and opportunities for redeployment
Reduced exit rate of employees Knowledge capture programs initiated Audit undertaken and action plan developed
S5
RLAC
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Appendix B: Workforce Related Policies
Computer Resource Usage Employee’s responsibilities when using computers, including disciplinary action. Read in conjunction with the Workplace Surveillance Policy
Workplace Surveillance (Overt Surveillance)
Counselling and Disciplinary Action
Policy reflecting council’s commitment to improve poor performance & conduct by using staff counselling and a performance management review process.
Fair Workplace Policy & Resolution Procedures
The Fair Workplace Policy provides standards of acceptable behaviour and demonstrates how Council supports and promotes a Fair Workplace culture (Series of Fact Sheets developed for Workplace Bullying, Workplace Discrimination, Workplace Harassment, Sexual Harassment, Behaving with Dignity and Respect, Conflict in the Workplace
EEO Management Plan
Flexitime Flexitime and Time in Lieu Policies
Job Rotation and Job Swap Policy and Procedures
This Policy is part of a range of initiatives introduced by Council to provide development opportunities for employees to enrich their work environment and to retain valuable employees who see Council as their preferred employer.
Legal Assistance to Councillors and Staff Legal assistance to councillors and staff.
Occupational Health and Safety Council's commitment to Occupational Health and Safety & related policy.
Parking Permits for Staff With Temporary or Permanent Infirmity
Approving parking permits for staff members with infirmity.
Recruitment Ensure professional recruitment strategies with effective measures to secure valued employees by Council.
Sick Leave Management Management of sick leave
Study Assistance Council’s support for staff developing skills and competencies,
Training Council’s on-going commitment in developing staff to become more efficient and effective
Study Assistance Study assistance for full-time and part-time employees
Telecommuting and Procedures Provide flexibility in work options for employees and employers.
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LONG TERM FINANCIAL PLAN
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4. Long Term Financial Plan
4.1 Introduction
4.1.1 Overview
Council has been adopting Long Term Financial Plans (LTFP) since 2006. Initially the Plan
spanned 4 to 5 year forecasts and since 2009 it was expanded to cover a 10 year period. The
LTFP has been a successful decision-making tool to assist Council in planning for future
operating and capital budgets. It has allowed council to identify opportunities and threats in
relation to future financial resource levels and funding sources.
This LTFP is a key component of the council’s Resourcing Strategy. The other components of
the Resourcing Strategy are the Workforce Strategy and Asset Management Strategy. All
three components of the Resourcing Strategy are responding to council’s Community
Strategic Plan and through our Delivery Plan and Annual Operational Plan and Budget.
This Plan will be reviewed at least annually as part of the Annual Operational Plan and
Budget each year. The LTFP will project estimates on an annual basis covering the next 10
years into the future. Each newly elected Council will also review the LTFP in accordance
with the 4 Year Delivery Plan and the other Plans required under Integrated Planning and
Reporting.
4.1.2 Purpose of Long Term Financial Plan (LTFP)
The LTFP has always been an important decision-making tool for this Council to ensure
current and future financial sustainability of our service and asset delivery to the
community. It assists in planning and identifying opportunities and threats in relation to
available and future predicted financial resources and funding options. It allows Council to
consider future funding and financial policies and/or strategies to address desired service
levels and asset replacement and maintenance required for the future.
The LTFP places us in a better position to make informed and important financial decisions
over a longer timeframe that addresses the direction aspired to by the community in the
Community Strategic Plan. It allows Council to at least maintain existing service delivery
levels to the community or review those levels based on financial outcomes. It also allows
for review of asset renewal, replacement and maintenance levels based on available funding
sources for the future. The asset review would be consistent with Asset Management
Strategies and Plans.
Based on adopted modelling and scenarios it also allows Council to move towards balanced
annual budgets and ensure a strong financial and cash position for the future.
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The first year of each LTFP mirrors the annual budget for that current year and this flow on
effect streamlines the annual budget process.
4.1.3 Preparation of the Plan
The LTFP is based on modelling financial information linked to key economic and service
level assumptions. Assumptions extend to applying annual CPI, annual wage indexation, rate
pegging limits, financial policies, financial strategies to name a few, and also extending to
one-off impacts or on-going impacts such as legislative imposts such as the carbon tax. The
LTFP is informed by and informs the Asset Management Strategy.
The development of our Asset Management Plans will provide the base data which will be reflected in the Rolling Capital Works Program as individual projects and works in priority order by asset class and also recommend levels of service for ongoing operations and maintenance over the ten year period, with that information informing the Long Term Financial Plan. This LTFP is based on known and currently planned levels of service and capital programs; it
will be reviewed annually in order to ensure a linkage between our Asset Plans and financial
strategies.
The LTFP is prepared leading up to the annual budget cycle each financial year. The LTFP,
depending on circumstances and issues, has on occasions been presented to Council prior to
firming up the annual budget (Delivery Program and Operational Plan) and on other
occasions may coincide with the consideration of the annual budget (Delivery Program and
Operational Plan). The LTFP, Delivery Program, Operational Plan and the Annual Budget
generally is adopted for public exhibition at the same time. The public exhibition timing is
usually April each year with final Council adoption being around May.
4.1.4 Financial Sustainability
A council is financially sustainable if it has the ability to financially meet future planned
service delivery levels and also meet required levels of planned spending on asset renewals
and replacements. The “best practice” achievement of financial sustainability is one where
excessive debt levels or on-going special rate increases are not compromised.
The above position is difficult to achieve in NSW local government due to the large backlog
of asset renewal required, cost shifting and ever increasing demands for increased service
levels by the community with no corresponding growth in revenue sources. Councils must
adopt financial strategies to position themselves better to meet community and asset
demands.
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We have undergone a number of assessments over the years measuring our financial
sustainability. In 2005 council engaged a financial consultant, Mr Carl Millington, to review
council’s financial capacity and sustainability into the future. The Millington Report stated
council was in a good financial position, however many challenges faced us in the future
which could deplete our financial capacity to survive. To meet these challenges the Report
recommended council develop an on-going LTFP. Since 2005 Council has produced a LTFP,
initially 4 to 5 years projections changing to a 10 year forecast period in 2009.
In addition, in 2008 an independent audit of Council’s performance under the Local
Government Reform Program – “Promoting Better Practice” found that “Council has strong
and clear leadership that is well positioned to strategically address the future needs for
Sutherland Shire”. One indicator of this finding was the fact that council adopted a LTFP and
was financially responsible in using this information.
The external auditor, PricewaterhouseCoopers, reported in their 2010-11 audit of council’s
financial position that “Council is considered to be in a sound and stable financial position.
Most indicators are better than accepted industry benchmarks.”
One reason we have been able to achieve this financial position is by developing financial
strategies and policies as a result of decision making through the LTFP.
Strategies and policies developed to continue financial sustainability include:
1. Development of a Future Works Reserve, where all efficiencies and savings from
budget reviews and year end budget results are transferred to a cash reserve to
support future budgets. This was implemented in 2005 and to date has generated
over $35 million to assist with future years budgets through the LTFP.
2. Every year since 2007 an allocation of $500,000 has been built into each year of the
LTFP recognising efficiencies to be recognised throughout the organisation. This has
been achieved every year.
3. Conservative loan borrowing levels to meet capital programs, debt service ratios have
in the norm been under 4% for a decade or more.
4. A special 4% rate variation in 2010/11 for a three year period to cover infrastructure
capital renewals and replacement.
5. Maintain a Property Investment Fund that generates around $4 million income to
council each year.
6. Maintain an Employees Leave Entitlements Reserve at a minimum 10% of Leave
Liability to meet unforeseen leave payments.
7. Maintain a comprehensive Section 94 Register that earmarks committed funds for
future project use.
8. Keeping working funds of $1.5 million uncommitted in each budget year as a “buffer”
for unforeseen financial impacts. This is reduced to $1 million from 2012/13 budget
year onwards.
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The savings and efficiencies made over many years have enabled Council:
- to expand its role in economic development, environment, the arts and tourism
- to address issues such as anti social behaviour, vandalism and graffiti
- offset cost shifting from other levels of government
- meet cost increases, especially utility charges, when rate caps did not cover these
increases
- continue a large capital program - improve service levels in parks maintenance and tree management - move to online business and dealings with our community.
This has been achieved in an era where this Council, unlike many others:
- does not charge for car parking and is the only metropolitan beachside area not to do so
- does not charge for the use of playing fields - requires that its child care centres are self funding - is one of only 18 councils in the metropolitan area which provides a voluntary
pensioner rebate; in fact the subsidy of $105 per annum is in addition to the mandatory subsidy of $250 (of which the government meets only 55%)
Continuous improvement with periodic refocus (eg competition policy), has been applied as part of management’s objectives in improving productivity and eliminating poor work practices and culture. Reviews are ongoing, for example whenever a vacancy occurs a formal justification is required before a replacement is made. These reviews will bring ongoing savings and improvements.
4.1.5 Financial Structure of the Plan and Annual Budget
The financial structure of the LTFP and annual budget is based on modelling financial
information for key economic and service level assumptions. Assumptions extend to
applying annual CPI, annual wage indexation, rate pegging limits, financial policies, financial
strategies to name a few, and also extending to one-off impacts or on-going impacts such as
legislative imposts such as the carbon tax.
Council has developed a sophisticated financial model based on many spreadsheets that
consolidate and manipulate key information into various formats as outlined as follows:
- an annual budget document by responsibility Unit and Directorate,
- an annual budget document by strategic direction as identified in the Community
Strategic Plan and Delivery Plan,
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- a LTFP up to 10 years projections based on applied economic and service level
assumptions, including one-off impacts where known,
- the LTFP documents allow presentation in budget available funds format, operating
statement, balance sheet and cash flow statement format,
- an infrastructure/ capital program identified with funding sources for the 10 year
forecast period in line with current asset management systems.
The Model Plan can have different scenarios and sensitivity criteria and assumptions applied
to view different outcomes for Council to consider financial viability and sustainability for
the future. Financial policies and strategies can be determined by considering different
scenarios.
Council usually decides on the desired service delivery levels and then projections are
carried out on revenue and expenditure estimates to meet those service levels. The residual
surplus funds, that is after expenditure is deducted from revenue, is regarded by Council as
“Discretionary Funds Available”. The Discretionary Funds Available is the general revenue
component available to meet infrastructure/ capital expenditure. Asset renewal,
replacement and maintenance levels are then applied on a priority basis from the existing
Asset Management information. Any additional funding sources for Asset Programs and
Projects are then identified and applied with the Discretionary Funds Available to
acknowledge whether funds can meet the desired Asset spending or not. If funding is short
Council then decides on remedial options such as identifying further funding sources,
reductions in either or both service delivery levels and/or asset programs and projects.
Once council adopts the suite of documents the adopted financial budget allocations are
then applied in Council’s core corporate Technology One financial system. Through the core
corporate system budgets are monitored and reported through the Budget Review process.
Council conducts quarterly budget reviews as prescribed by legislation and in addition will
usually conduct a further 3 reviews in November, February and May each year. The extra
reviews are not always required, however they have been conducted more times than not.
4.1.6 Link to Corporate Strategies
Council ‘s activities work towards achieving the community’s 2030 vision and desired
outcomes for the Shire. We do so through the implementation of 6 primary strategies and
civic life activities. The chart below shows the allocated expenditure of Council’s funds
across these 6 corporate strategies and activities in the 2012/13 Operational Plan budget.
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Expenditure 2012/13
4.2 Forecasts and Assumptions in the LTFP
4.2.1 Revenue and Funding Sources
4.2.1.1 Annual Rates
Base Level Income – Estimated 2012/13 Gross Rates and Extra Charges Income is $103.396
million, with Mandatory Government Pensioner Rebates being $3.391 million and Council
Voluntary Pensioner Rebates $1.415 million. Net rates income (including interest charges) is
therefore around $98.590 million which is around 49.2% of total operating revenues.
Rating Structure
Council’s rating policy is structured on an ad-valorem – minimum rate basis. Each year council reviews its rating strategy and structure. The minimum rate method applies throughout the Shire on a ceiling land valuation, and any property above this minimum is then rated on a Straight Ad Valorem method.
Council Ad Valorem rating is calculated as a rate-in-the-dollar on each property land
valuation. Land valuations change every three years when the NSW Valuer General issues
new valuations. It is important to understand that any change in rating structure or land
valuations does not equate to additional rate income, it merely redistributes the rating
burden across the rating categories and properties as total rating income is pegged to a
percentage allowable increase.
30%
10%
2% 1%
31%
2%
24%
Provide Effective & Integrated Infrastructure
Deliver Integrated Transport Options
Conserve Natural Resources
Protect Our Environment
Strengthen Our Community
Respect & Value all Heritage & Culture
Civic Life
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Rating Categories
Council has three ordinary rate categories – the three categories are Residential, Business – Ordinary and Business – Kurnell Industrial. Council also has a Special Rate for Cronulla CBD, however this rate is specific for that purpose and is not available for general service levels.
Rate Pegging and Special Variation Increases
The 2012/13 rates will increase in line with the rate pegging limit of 3.6% set by the Independent Pricing & Regulatory Tribunal (IPART). The full 3.6% will be applied to each rating category.
For the 2010/11 rating year Council was successful in applying for a special rate variation of 4% to apply for a period of 3 years. This variation was to fund critical infrastructure projects and was commonly referred to as an Infrastructure Levy. The Levy was applied in the first year above the rate pegged limit and was to be held for 3 years and reduced in the 2013/14 rating year.
The Levy was applied for only two of the three year period, Council has now adopted to abandon (remove) the Levy in the 2012/13 year. The capital projects originally proposed for the final year of the Infrastructure Levy will still proceed but will be funded now from Internal Funds from Council’s Property Fund. The Property Fund will be repaid the funds on a loan basis over a ten year period.
Pensioner Rate Rebates
Pensioners will receive two rebates according to their eligibility status.
• The mandatory rebate under Section 575 of the Local Government Act will be to a maximum of $250 per assessment, calculated as one half of the combined rates plus domestic waste charge - whichever is the lesser amount.
The maximum of $250 is determined by the state government and has remained unchanged at that level since 1989. The government subsidises councils with 55% of mandatory rebates granted.
• The voluntary rebate as per council policy, under Section 582 of the Local Government Act, to a maximum of $105 per assessment.
Eligibility conditions are:
(1) The ratepayer must firstly be eligible for a mandatory rebate.
(2) The ratepayer must have been a ratepayer in the Shire for the last three years.
(3) In calculating the maximum voluntary rebate, the ratepayer should be left paying an amount at least equivalent to the domestic waste charge.
As outlined, rebates are calculated on the combined levy of rates plus domestic waste charge.
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RATING INCOME– ADOPTED ASSUMPTIONS FOR LTFP
CRITERIA ADOPTED ASSUMPTIONS
Ad Valorem Rating structure To remain and applies to all forecasted years
Rate Pegging To remain and pegged limit of 3% to remain stable and applied to each year forecasted
Special Rate Variation (SRV)Increase None, no commitment to apply for a SRV for any year forecasted
Pensioner Rate Rebates Both mandatory and voluntary rebates to remain for all years forecasted
Rating Growth Minor growth has been applied for future years allowing for potential residential and strata development
4.2.1.2 Domestic Waste Management Charges
Base level Income – Domestic Waste Management Charges (including interest charges) for
2012/13 are estimated at $25.235 million which is around 12.6% of total operating revenue.
Domestic Waste Services
Domestic waste covers the services of weekly collection of putrescible waste, fortnightly
collection of greenwaste and recyclable materials, and a twice yearly clean-up service.
Under the provisions of the Local Government Act 1993, council is required to match its
domestic waste charges with the reasonable cost of the service - in other words, there must
be no subsidising of the charges from rates or other revenue. Under the Local Government
Act 1993, it is mandatory to levy a Domestic Waste Management Charge (Section 496).
Domestic Waste Management Reserve
Council retains a Domestic Waste Reserve of $3 million as a buffer to draw against in the
event of adverse movements rise and fall provisions in waste disposal contracts, impacts of
renewal / renegotiation of major waste contracts, increases in operating costs exceeding
initial budget projections (fuel and tyres). Though it is not firm policy, Council has
traditionally attempted to maintain the Reserve around the $3 million mark. Due to the
large impacts on the 2011/12 budget this level has had to be dropped down to $2 million.
Domestic Waste Management Service Charges
The present domestic waste charge is structured in two major levels, "Regular" and
"Shared" services, with the addition of a "Service Availability" charge (which mostly relates
to vacant land). It is mandatory under the Local Government Act for councils to levy a
charge on vacant land and this has been set at a token level. The "Shared" service basically
applies to any situation where a property owner shares a 240L bin for putrescible garbage
and recycling. "Shared" services exist only in home units and some villa/townhouse
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developments. A "Regular" service charge currently applies to all other domestic waste
services. They are mostly 120L bin services for putrescible waste and apply to some villa
and townhouse developments and all single dwelling households.
The "Shared" charge prior to 2011 had historically been set at approximately two thirds
(2/3) of the rate of the "Regular" service. Originally the "Shared" service was for a 120L
waste removal service per week, while a "Regular" service was for a 240L waste removal
service per week. There were no recycling or greenwaste services provided at that time.
This meant at the time the discount principle was struck, the "Shared" service was for a
lesser amount of waste service each week.
While the principle of the "Shared" service remains today, this service is now provided at
the same standard as the "Regular" service, with both receiving a 120L putrescible waste
removal service per week and weekly collections of 240L recycling or greenwaste (alternate
weeks for "Regular" service).
Alternative charging structures were presented to Council and, after consideration, Council
adopted that the charge should be more evenly spread across the Shire. The proposal is to
gradually phase in, over a four (4) year period, charges that would result in the “Shared” and
“Regular” Service Charge being the same charge by 2014/15.
Specifically this means the "Shared" service did rise from 2/3 (or 8/12) to 9/12 in the
2011/12 financial year, to 10/12 in the 2012/13 financial year, and is proposed to rise to
11/12 (2013/14 financial year) and finally 12/12 (2014/15 financial year), making it equal to
the rate charged for the "Regular" service.
The transitional shift in charges between “Regular” and “Shared” does not generate any
additional income, it merely re-distributes the charge between these two types of service.
Cost Impacts on Domestic Waste Costs in the 2012/13 year for waste disposal will increase mainly due to: - the carbon tax which will apply from 1st July 2012 is anticipated to cost Council
$1.1m - the increase in waste levies payable to the State Government will increase by 10.4%
($573k) over the 2011/12 disposal cost level and a further $327k in expected gate fee increases.
Overall the service cost will increase by $2.9m or 12.9% as follows;
Increase in Disposal Fees, including State charges and carbon tax $2m – 8.8% Increase in Council’s costs $.9m – 4.1% Overall increase in cost of service 12.9% Council report FIN155-12 outlined the impact of Carbon Pricing on landfill facilities. It is
estimated that carbon pricing accounts for a $1.1 million additional cost for 2012/13,
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$998,500 of this relating to disposal fees. Disposal fees are expected to increase by $2
million over 2011/12, as the Section 88 Waste Levy has also increased.
Based on full annual cost recovery, the DWM charges adopted by Council are:-
No.
Services
Adopted 2011/12
Adopted 2012/13
Adopted Annual
Increase
Adopted Increase
Regular Service 60,389 $293.20 $321.40 $28.20 9.62%
Shared Service 20,274 $219.90 $267.80 $47.90 21.78%
Regular Additional Service
364 $234.40 $264.60 $30.20 12.88%
Vacant Land Service Availability
453 $57.75 $65.20 $7.45 12.90%
Improved Service Availability
1,346 $119.00 $134.35 $15.35 12.90%
The above charges are based on the Shared Service Charge rising to 10/12th of the Regular
Service charge as outlined earlier. It is also based on full annual cost recovery with no
financial assistance from the Domestic Waste Management Reserve.
The total estimated expenditure for domestic waste services is $25,615,932, with the
balance funded from recycling income and diesel fuel rebates.
Review of Clean-Up Collection Service
On 5/3/12, Council considered report SAF116-12 “Review of Twice Yearly Domestic Waste
Clean-Up Collection Service” and adopted the following resolutions:-
1. That the report titled "Review of Twice Yearly Domestic Waste Clean - Up
Collection Service" be received and noted.
2. That a trial, for a 12 month period, of a twice yearly On Call Clean-up collection
service be commenced.
3. That a further report be provided to Council detailing the outcomes and
community response to the trial.
This results in the current bi-annual clean-up service moving to a 12 month trial for a twice
yearly On Call Clean-up Collection Service. The introduction of this on-call service will be
gradually phased in across the Shire once an implementation plan is adopted by Council.
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DOMESTIC WASTE - ADOPTED ASSUMPTIONS FOR LTFP
CRITERIA ADOPTED ASSUMPTIONS
That the Regular Service Charge and Shared Service Charge be gradually phased in to become the same Charge
This is incorporated in the LTFP to be 2014/15 from that date the Charges are the same. This is a shift between types of services and does not relate to generating additional income.
The carbon tax impact, increased Section 88 Levy and tip gate fee increases of 12% increase be recognised.
This impact has been built into the 2012/13 year and carried forward as an on-going impact in future forecasted years.
DWM Reserve level at around $2 million.
This reduced level down from $3 million to $2 million has been maintained throughout the LTFP. There has been no direction to increase the Reserve level.
Clean – Up trial to a demand service rather than scheduled service.
Same service levels have been applied throughout the LTFP, there has been no variance to existing levels as it is difficult to predict without the necessary trialling.
Cost and Revenue Growth Both have been increased by 3% per annum each year forecasted, after allowing for specific items recognised above.
4.2.1.3 Stormwater Management Levy
Base level Income – Stormwater Management Service Charge is estimated as $2.02 million
in 2012/13 which is around 1.0% of total operating revenue or more relevant around 4.6%
of capital expenditure.
Stormwater Levy Legislation In 2006 the NSW State Government passed legislation known as the Local Government Amendment (Stormwater) Bill 2005, which allows councils to make and levy an annual charge for the provision of stormwater management services for each parcel of rateable land for which the service is available. The amendments have effectively introduced Section 496A into the NSW Local Government Act, providing councils with the authority to make and levy this annual charge. The Local Government (General) Amendment Stormwater Regulation was issued on 13 April 2006. Clause 125AA of the Local Government (General) Regulation 2005 states that the maximum charge that may be levied on rateable land is $25 for land categorised as residential and $25 per 350 square metres (or part thereof) for land categorised as business. Under the guidelines strata properties are capped at a maximum of 50% of the residential charge adopted.
The charge is levied as an annual charge (similar to domestic waste) and will be shown on the rate notice as a separate charge to the rates. The charge is applicable only to rateable land rated as a residential or business category. Vacant land and non-rateable parcels of land are exempt from the charge.
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Levy Conditions
The charge can only be for new and additional works above the value of drainage and stormwater works regularly funded from general revenue previously. The average funding level from general revenue over the past few years is $1,006,200 p.a. This level must be maintained in the adopted budget across various allocations such as general maintenance, specific studies and other construction works.
Value of Levy Charges
In the three years since inception in 2006/07 Council raised $1.77m each year from the charge to fund the specific program adopted by Council. These programs were based on a $22 levy on residential households. In 2009/10 the charge was raised to $25 and that generated a program of $1.95m. It was adopted in this budget that the same charge apply and a $2.0 million program be funded from the Stormwater levy. This program level is based on $25 to be raised on residential households.
The value of works to be funded from the Stormwater Charge is $2.0m in 2012/13.
Stormwater Levy Charges
The legislation allows council to have some discretion with the charge especially where certain categories of ratepayers are at a disadvantage in relation to the charge. Council is proposing to assist eligible pensioners with this charge by only charging 50% of the standard charge that would be applicable.
Adopted Charge Category 2012/13
Residential house $25.00
Residential house – pensioner (50% discount) $12.50
Residential strata unit $12.50
Residential strata unit – pensioner (50% discount) $ 6.25
Recreational facilities $25.00
Commercial land Same for both years – pro rata charge of $25 for each 350 sq.m. of land area thereof, with a minimum $25 charge.
Industrial land Same for both years – pro rata charge of $25 for each 350 sq.m. of land area thereof, with a minimum $25 charge and a maximum capping of $20,000 applies for each rateable property.
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STORMWATER MANAGEMENT CHARGE - ADOPTED ASSUMPTIONS FOR LTFP
CRITERIA ADOPTED ASSUMPTIONS
Stormwater Management Charges No change to the current charges for any year forecasted in the LTFP.
Stormwater funding raised per annum is $2 million.
This figure has not been increased by growth or CPI as the Charges have been forecasted to remain the same. Therefore $ 2million is a constant income figure applied to every year of the LTFP.
4.2.1.4 Fees, Charges & Other Income
Base Level Income – Fees, Charges and other income (less Property Fund Income shown elsewhere) is estimated for 2012/13 at around $40.328 million which is around 20.1% of total operating revenues.
User Fees, Charges and Other Income
User Fees and Charges are reviewed by Council every year with the annual operating Plan and Budget. There are two category of fees:
- Regulatory, which are generally set by State Government legislation and council has no control over the level set, and
- Discretionary, which council has the capacity to determine.
It is assumed these fees and charges will continue to be provided on the same pricing basis and have been increased by 3.6 % for 2012/13 and then a general 3% per annum increase for each year of the LTFP. These fees and charges include Leisure Centre activities, community facilities use, restoration charges to name a few.
Other Income extends to property rentals, insurance and legal recovery, penalty fines, asset sales to name a few. Council’s primary asset sales relate to plant and vehicle disposals and property sales. There are no operational property sales expected in 2012/13 that relates to the Property Fund. Plant and vehicle asset disposals of an estimated $1.0m have been identified as part of the capital support program. FEES, CHARGES AND OTHER INCOME - ADOPTED ASSUMPTIONS FOR LTFP
CRITERIA ADOPTED ASSUMPTIONS
Regulatory Fees and Charges Increased by 3.6% for 2012/13
Increased by 3.0 % per annum each year from 2013/14 onwards.
Discretionary Fees and Charges. Increased by 3.6% for 2012/13
Increased by 3.0 % per annum each year from 2013/14 onwards.
Other Income Increased by 3.6% for 2012/13
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Increased by 3.0 % per annum each year from 2013/14 onwards.
Asset Sales
Only Asset sales provided is plant and vehicle disposals at $1 million for each year of the LTFP
4.2.1.5 Grants
4.2.1.5.1 Operating Grants
Base Level Income – Operating Grants are estimated in 2012/13 at around $11.239 million which is around 5.6% of total operating revenues. Financial Assistance Grants
These are Federal “untied” grants distributed through the various state local government grants commissions. There are two components to this grant – the Roads component which is based on road types and lengths within the local government area, and the General Purpose component which is distributed according to a methodology taking into account Revenue Raising Capacity and Expenditure Disabilities. Our recent presentation to the State Grants Commission highlighted how this Council, and a number of metropolitan councils, are disadvantaged by the current method of distributing the Federal Financial Assistance Grants. This council receives $20 per capita compared with: Blacktown $52 Wollongong $69 Lake Macquarie $65 Newcastle $73 Wyong $62 In 1987/88 Council received $4.4 million under FAGs; decreasing for the next 10 years to a low of $2.8 million in 1997/98. The Grant has now reached $4.418 million, i.e. 24 years after the previous peak meaning a cumulative loss against CPI of $85 million. Since 1996/97, Sutherland Shire Council has been on the per capita minimum level, which has meant that the previous decline has stopped and we now receive small annual increases more or less in line with the percentage increase overall for the state. This increase has been based on CPI for next year. It should be noted that the per capita share of the financial assistance grant represents 30% of total available funds distributed by the NSW Grants Commission, the other 70% being distributed under the perceived disability methodology.
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The budgeted estimates are in line with the standard parameters applied throughout the budget:- 2011/12 2012/13 Increase General Purpose Component $4,432,240 $4,591,801 3.6% Roads Component $1,870,907 $1,938,260 3.6% Specific Purpose Operating Grants The total value of specific purpose operating grants from year to year has been projected on a stable maintained basis. Grant levels are predicted to be similar and have been increased by CPI growth. Major operating grants in the Plan for 2012/13 include:- Children’s Services Operating (Other than Fee Relief) $ 791,304 Library Subsidy $ 410,000 Pensioner Rate Subsidy $1,865,000 Street Lighting Subsidy $ 354,251 OPERATING GRANTS - ADOPTED ASSUMPTIONS FOR LTFP
CRITERIA ADOPTED ASSUMPTIONS
Financial Assistance Grant Increased by 3.6% for 2012/13
Increased by 3.0 % per annum each year from 2013/14 onwards.
Specific Purpose Grants Increased by 3.6% for 2012/13
Increased by 3.0 % per annum each year from 2013/14 onwards
4.2.1.5.2 Capital Grants
Base Level Income – Capital Grants are estimated in 2012/13 at around $3.652 million which is around 1.8% of total operating revenues and more relevant 8.3% of capital expenditure. The total value of specific capital grants from year to year varies significantly, depending upon the level of capital works undertaken or specific projects anticipated. Grant movements are generally compensated by expenditure movements.
For the 2012/13 budget year capital grant funding for infrastructure projects totals $3.652
million.
Listed below are the major capital grants that have been included in the proposed capital and infrastructure for 2012/13, some still subject to approval of the funding (not confirmed at this stage), include:-
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Roads Construction (Roads to Recovery and Regional Roads Program) – including Captain Cook Drive - grant secured $2,062,000 Traffic Management Works $ 550,000 Grays Point Bushfire station extension $ 300,000 Menai Bushfire Station planning and construction $ 150,000 Cycleways – Bicycle Network Plan $ 150,000 Bate Bay – Cronulla Lighting Upgrades $ 100,000 Community Buildings $ 180,000 Oval irrigation Systems $ 100,000 The 2012/13 year is inflated due to the major Captain Cook Drive road widening project and the grants received for that project from the Roads to Recovery and Regional Roads Program. From 2013/14 the LTFP provides for only around $350,000 each year for these road grants. Bushfire Station grants and equipment have $800,000 allocated in the 2013/14 year , $500,000 in 2014/15 and a further grant of $150,000 for Illawong BF Station refurbishment in 2018/19. Cycleway grants have been kept at $150,000 per year for the life of the projected LTFP. Also a specific grant for $100,000 has been allocated for wharves and jetties program – Tom Ugly Wharf in 2014/15. WASIP grant funding has been continued for 2013/14 and 2014/15 at $310,000 each year. After that date no further WASIP funding has been provided as there is no further commitment given for the grant funding to continue. CAPITAL GRANTS - ADOPTED ASSUMPTIONS FOR LTFP
CRITERIA ADOPTED ASSUMPTIONS
Road Construction Grants – Roads to Recovery & Regional Roads
2012/13 $2.062 million (all for Captain Cook Drive)
2013/14 allocated $1.134 million
2014/15 a provision of $325,000 has been allocated for RTA Road Maintenance Program
From 2014/15 onwards around $351,000 gradually increasing each year to $371,000 in 2021/22 for Regional Roads Program
Roads to Recovery grants from 2014/15 to 2017/18 has been allowed at $1.0 million each year.
From 2018/19 onwards no provision is provided for Roads to Recovery Program.
WASIP Grant Funding From 2012/13 to 2014/15 funding has been provided at $310,000 per year
From 2015/16 onwards no further
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funding provided as no grant commitment
Traffic Management Program From 2012/13 onwards every year $550,000 has been provided in the LTFP
Bushfire Stations and Equipment 2012/13 $480,000 funding
2013/14 $800,000 funding
2014/15 $500,000 funding
2018/19 $150,000 funding
Every other year of LTFP no funding provided
Cycleway Grants From 2012/13 onwards $150,000 is provided each year of LTFP
Wharves and Jetties A specific allocation of $100,000 is provided in 2014/15 for Tom Ugly Wharf
4.2.1.6 Contributions (including Section 94)
4.2.1.6.1 Operating Contributions Operating Contributions are of a minor nature in Council’s revenue base. They usually
consist of community organisations reimbursing council for minor works carried out on their
behalf at council facilities. They usually extend to sporting groups, council halls and other
recreational facilities.
OPERATING CONTRIBUTIONS - ADOPTED ASSUMPTIONS FOR LTFP
CRITERIA ADOPTED ASSUMPTIONS
Operating Contributions Increased by 3.6% for 2012/13
Increased by 3.0 % per annum each year from 2013/14 onwards
4.2.1.6.2 Capital Contributions
Base Level Income – Total capital contributions are estimated in 2012/13 at $8.0 million
which is around 4.0% of total operating revenues or more relevant 18.1% of capital
expenditure. (Note: The Operating Statement recognises capital income upon receipt and
not utilisation.)
Capital contributions are mostly land dedications, contributions from external parties or
eligible works recouped from Section 94 Developer Contributions.
Land dedications can vary in quantity and dollar value year to year, however Section 94
Contributions for works are proactively planned and managed by council. Section 94
Contributions are levied on a development consent to assist in funding future infrastructure
needs within that development area. Council imposes the levy under an adopted
Contribution Plan.
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As at 30 June 2011 Section 94 Contributions held as externally restricted cash was $34.932
million. The contributions are managed in a register by each Contribution Plan and are
earmarked as planned commitments for future works and property acquisitions. Estimates
are also recognised for future cash inflows from future developments.
Suitable capital projects and land acquisitions that are included in the LTFP and are eligible
under the Contribution Plan are earmarked to be funded from Section 94 Contributions.
A total of $6.460 million funding has been applied to the 2012/13 budget year, for 2013/14
$4.760 million and then just over one million each year from 2014/15 to 2021/22. From
2018/19 through to 2020/21 an additional $12 million is earmarked from Section 94
Contributions to fund Dunningham Park/ Perryman Place Upgrade in Cronulla, including
construction of a seawall. All these contributions are included in the LTFP.
Land acquisitions for future greenspace facilities or infrastructure needs is also included in
the LTFP, with $2 million funding in 2012/13 and $1 million each year thereafter for the life
of the Plan.
It should be noted that much of these funds were received in previous years and the
Operating Statement only reflects actual receipts which are estimated at $3.0 million.
Major external contributions are included in the LTFP for the development sporting playing
fields in the new suburb of Greenhills Beach. Housing development companies are
contributing $25 million over six years to provide the facilities. Contributions are earmarked
for a Skate Park facility for $1 million scheduled for 2012/13 and $4 million for the each of
the six years from 2012/13 through to 2017/18.
CAPITAL CONTRIBUTIONS - ADOPTED ASSUMPTIONS FOR LTFP
CRITERIA ADOPTED ASSUMPTIONS
Section 94 Funded Land Acquisitions 2012/13 $2 million funding
From 2013/14 onwards $1 million each year funded
Section 94 Funded Capital Projects Playground Upgrades funded in 2012/13 $450,000
Cycleway program funded $1.75 million 2013/14
Passive Parks upgrades funded $1.320 million in 2012/13 and $850,000 in 2013/14
Sporting Facilities upgrade funded $600,000 in 2012/13
Leisure Centre upgrades funded $600,000 in each year of 2012/13 and 2013/14
Silver Beach Masterplan funded
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$200,000 in each year of 2012/13 and 2013/14
Bate Bay Program funded $600,000 in 2012/13 then major works of $ 4 million each year of 2018/19, 2019/20 and 2020/21
Scylla Bay Masterplan $600,000 funding in 2012/13 and 2013/14
Cricket and Net upgrades $60,000 each year funded from 2012/13 to 2016/17 then $30,000 thereafter each year from 2017/18
Specific External Capital Contributions - housing development contributions for recreational facilities at new Greenhills Beach Suburb
$1 million provided in 2012/13 for Skate Park facility
$24 million over 6 years, $ 4 million provided in each year from 2012/13 to 2017/18 to fund construction of playing field facilities
4.2.1.7 Income from Cash Investments
Base Level Income – Income from cash investments is estimated in 2012/13 at around $3.801 million which is around 1.9% of total operating revenues. A further $0.945 million (0.5% of total operating revenues) has been recognised for previously impaired investment asset revaluation. Council invests surplus cash in accordance with an annually adopted Cash & Investment Policy. The Policy outlines the purpose, strategy, risks and procedures associated with investing cash assets. The Policy is in accordance with the Minister’s Investment Order and guidelines published by the DLG. Income from the investment of surplus funds provides a revenue pool, however, some of the income is added to Trust or Revenue funds as per legislative requirement or Council policy. It is the Net Income to General Revenue which directly aids the budget. The expected result for 2012/13 reflects a slight increase in net revenue to general fund as the global financial position is slow in recovering, however, interest rates are predicted to be lower than current rates. The expectation is for negative growth, so the investments have been revised on levels of cashflow and expected annualised lower rates than the past 12 months. The gross income earned is predicted to be lower than the 2011/12 level, however, net income is slightly up as no further transfers to loan sinking fund are required, as the consolidated loan will be fully settled in April 2012. 2011/12 2012/13 Gross Income Earned 4,357,000 3,777,250
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Less: Income returned to:- Section 94 Trust Funds (977,000) (977,000) Property Fund (227,000) (301,000) Loan Sinking Fund (656,328) 0 Security Bonds and Other Areas (131,000) (131,000) NET INVESTMENT INCOME TO $2,365,672 $2,368,250 GENERAL REVENUE A small additional amount of $23,547 has been estimated for interest receivable on Council’s day to day bank account. INCOME FROM CASH INVESTMENTS - ADOPTED ASSUMPTIONS FOR LTFP
CRITERIA ADOPTED ASSUMPTIONS
Income from Cash Investments 2012/13 was only marginally increased based on more updated cashflow projections and expected market conditions
Increased by 3.0% each year from 2013/14 onwards
4.2.1.8 Income from Property Fund
Base Level Income – Income from Property Fund is estimated in 2012/13 at $6.401 million which is around 3.2% of total operating revenues. Over the past few years a large proportion of Property funds have been utilised to internally fund projects. Total loan funding since 1998 amounts to $30.293m, with $6.846m outstanding at 30 June 2012. From a Property Division income perspective, this has meant that interest income is received from Council rather than from external sources. Recurrent Property Division income can be summarised as follows: - 2011/12 2012/13 Gross Property Rentals and Interest Income $5,031,766 $5,249,552 Less: Associated Rental Property Expenditure - 274,774 - 301,015
TOTAL PROPERTY INCOME $4,756,992 $4,948,537 Income from Property Fund has been distributed on the basis of the historical approach, being to retain 100% of property income in the General Fund. In 2012/13 a one-off receipt of $1.151 million for the sale of the air rights in relation to the Engadine Aged Care facility has been recognised in addition to the above.
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INCOME FROM PROPERTY FUND - ADOPTED ASSUMPTIONS FOR LTFP
CRITERIA ADOPTED ASSUMPTIONS
Income from Property Fund In line with the Property Fund Business Plan:
Rental income projected 3.0% each year of the LTFP
Interest on internal funding repayments in line with scheduled project repayments.
4.2.1.9 Loan Borrowings
These funds are not part of the Operating Statement.
For many years council has maintained a borrowing program to finance its annual roads and
drainage construction works and, on certain occasions, also has borrowed to finance
building projects and other assets.
The 2012/13 Budget allows for specific purpose borrowings of $2.30 million to fund
the Cronulla Park/Esplanade Upgrade. These loans will be repaid over the next ten years.
Application has been made for this loan under the NSW Government’s Local Infrastructure
Renewal Scheme which provides for an interest rebate on amounts paid. This application
has not yet been determined.
Council also intends to borrow a further $500,000 in 2012/13 to assist in funding major
drainage upgrades for Production Road/ Bay Road at Taren Point. The repayment of this
loan is to be paid from the Stormwater levy over a period of 5 years.
Council has also determined that $2.5m will be borrowed to fund part of the capital program in 2014/15 and could again look to the Local Government Infrastructure Renewal Scheme for subsidised loan funding.
LOAN BORROWINGS - ADOPTED ASSUMPTIONS FOR LTFP
CRITERIA ADOPTED ASSUMPTIONS
Loan Borrowings Loan borrowings provided in LTFP as follows:
2012/13 year - $2.8 million, including $2.3 million subject to LIRS subsidy
2014/15 year - $2.5 million
No borrowings have been applied to any other forecasted years
4.2.1.10 Cash Reserves
These funds are not part of the Operating Statement.
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4.2.1.10.1 Internally Restricted Cash Reserves (Assets)
Internally Restricted Cash Reserves are funds held in a reserve in accordance with Council Policy or decisions. Council can change the purpose and use of these reserves as they have full control over these reserves. Council has maintained traditionally around 20 to 25 internal reserves from year to year, the major reserves being:
Employee Leave Entitlement – approximate level around $ 5 million
Building Damage Deposits – around $9 million, however use of this reserve is
limited as they are refundable deposits
Property Development Fund – approximate level around $4 to $5 million
Future Works Reserve – level varies and funds are usually already allocated to
future budgets
Works In Progress Reserve – is used as a holding reserve for capital funds unspent
on projects that have commenced but not completed at year end
Election Reserve – held to fund council elections every 4 years – approximate
$800,000 at time of elections
Child Care Centre Reserve – holds surplus operational funds to fund future capital
upgrades for centres- approximate $ 1 million held
Future Works Reserve Long Term Financial Plan funding shortfalls have been anticipated since 2005/06. Since that
time Council adopted a Future Works Reserve, where all efficiencies and savings from
budget reviews and year end budget results are transferred to a cash reserve to support
future budgets. This was implemented in 2005 and to date has generated over $35 million
to assist with future years budgets through the LTFP.
Each year of the Financial Plan is underpinned by a minimum of $1m in efficiency gains. Council, from the start of its longer term financial planning has been regularly informed of the difficulties it would face in maintaining its Capital Program. Future Works Reserve Funding will be utilised in the LTFP as follows: 2012/13 $2.923 million 2013/14 $4.358 million 2014/15 onwards $0.500 million The Financial Plan continues to require the General Manager to find $1 million per year in savings through reform and transfers to the Future Works Reserve.
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Since this requirement was introduced the following gains have been made:
Transfers to Future Works Reserve
$
Reform
$
2003/04 - 500,000
2004/05 - 500,000
2005/06 4,717,267 500,000
2006/07 6,507,336 500,000
2007/08 3,744,354 500,000
2008/09 6,057,571 500,000
2009/10 4,901,041 500,000
2010/11 5,410,647 500,000
2011/12 *3,634,402 500,000
2012/13 **500,000 500,000
Total $35,472,618 $5,000,000
*Transfers YTD, year not yet complete ** Estimated Property Development Fund Reserve The internal funding of $4.0m from the Property Fund replacing the Infrastructure Levy for 2012/13 will fund a number of projects, including roads construction, shopping centre upgrades and the public toilet upgrade program. Over the years the Property Fund has been utilised to fund a wide range of Council infrastructure works with the general fund repayments going back to the Fund. This method of funding is less expensive to Council than external borrowing costs whilst maximising budget flexibility. The Internal Funding from Council’s Property Fund for 2012/13 will fund the following projects.
2012/13
PROGRAM $'000
Roads Construction 1,500 Shopping Centres 543 Drainage Construction/ Water Quality Program 300 Cycleways 100 Active Recreation 100 Passive Reserves/ Parks Upgrades 100 Wharves & Jetties 50 Bate Bay 200 Public Toilets 707 Bushfire Stations 350 Surf Clubs/ Beach Buildings 50
TOTAL - REPLACING INFRASTRUCTURE LEVY 4,000
Captain Cook Drive Road Widening 1,934
2012/13 TOTAL FUNDING 5,934
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Over the years the Property Fund has invested in a wide range of Council infrastructure with general fund repayments going back to the Fund. These projects include: - Hazelhurst Regional Gallery - Engadine Youth Centre - Business Accelerator (SSHED) - Menai Indoor Sports Complex - Engadine Community Centre - Prince Street Seawall The amounts outstanding to the Fund at the end of each financial year are as follows: 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Outstandings $12.8m $17.0m $15.2m $13.1m $11.0m $8.8m $10.3m $8.1m $8.8m $5.5m $9.3m
The Property Fund has continued to provide Council with a steady income stream as the following table demonstrates: All figures shown are in $ million
02/03 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13
3.03 3.26 3.83 3.98 4.39 4.32 4.63 4.65 5.13 4.76 4.96
As mentioned earlier in this report, other commitments which have an annual budgetary impact are the internal amounts repaid to the Property Fund:- 2011/12 2012/13 TOTAL INTERNAL FUNDING REPAYMENTS $3,001,426 $2,672,383 The repayments outlined above relate only to those repaid from internal sources.
INTERNALLY RESTRICTED CASH RESERVES - ADOPTED ASSUMPTIONS FOR LTFP
CRITERIA ADOPTED ASSUMPTIONS
Future Works Reserve Funding recognised as follows:
2012/13 - $2.923 million
2013/14 - $4.358 million
From 2014/15 onwards $500,000 for each year applied
Property Fund Reserve Funding recognised as follows:
2012/13 - $4 million replacing dropped Infrastructure Levy to fund same capital programs
2012/13 a further $1.934 million for captain Cook Road Widening
No further reserve funds applied
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after 2012/13
Employees Leave Entitlements Reserve Policy to retain at least minimum 10% of Leave Liability, currently at 14%. No major drawdowns on the Reserve have been allowed.
Other Reserves
Maintained at similar levels to past years
4.2.1.10.2 Externally Restricted Cash Reserves (Assets)
Externally Restricted Cash Reserves, are a mandatory restriction on funds held as required
by legislation or some other external requirement. By law Council can not abolish or unduly
change the purpose for which they are held.
Council currently holds only 4 externally restricted cash reserves, they are:
Developer Contributions (mostly Section 94) unexpended approximate
level $35 million
Domestic Waste Management Reserve – surplus funds approximate level
$2 million
Stormwater Management Levy funds unspent
Specific Purpose Unexpended Grants
EXTERNALLY RESTRICTED CASH RESERVES - ADOPTED ASSUMPTIONS FOR LTFP
CRITERIA ADOPTED ASSUMPTIONS
Section 94 Contributions (See section 2.1.6.2 Capital Contributions)
Funding recognised as follows:
2012/13 - $6.460 million
2013/14 - $4.760 million
From 2014/15 to 2016/17 - $1.030 million each year
2017/18 - $1.030 million
2018/19 and 2019/20 - $5.030 million each year
2020/21 - $4.0 million
Domestic Waste Management Reserve Funding level maintained at $2 million in Reserve – no cash movements allowed in any year
Stormwater Levy Reserve The model assumes the Levies are all expended in the year they are raised.
Specific Purpose Unexpended Grants Only a minor level of unexpended grants is shown each year on the Balance Sheet
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4.2.2 Operating and Capital Expenditure
4.2.2.1 Employee Costs
Base Level Expenditure – Employee costs are estimated in 2012/13 at $96.006 million which is around 49.8% of total operating expenditure. Salary and Wages Salary and wages estimates have been projected in accordance with expected levels of staffing and future increases of 3.25% in 2012/13 and 3.0% for each year thereafter. Staffing levels are projected to be maintained at existing levels as per the Workforce Strategy Plan. Employee Leave Entitlements Employee Leave Entitlement related estimates for 2012/13 have been included at an increased level in comparison to 2011/12 (up 4.21%), to account for expected retirement and leave patterns. Estimates for employees leave entitlements have been comprehensively reviewed to attempt to reflect patterns over the life of the LTFP. In general, increases of between 4% to 6% have been projected and is a consistent movement from year to year. This pattern mainly reflects the expected increase and growth in leave liability. Superannuation
The Local Government Superannuation Scheme (LGSS) for a number of years required no council contribution rate for the Retirement Fund. In 2006/07 the council contribution required was re-introduced, and for 2008/09 and subsequent years the contribution required was increased. With the recent global financial crisis the LGSS suffered significant investment losses and a revised actuarial assessment proposed a variation to the method applied by the LGSS whereby Council would have to contribute 3.8 times the contribution of the employee for 2010/11. This increased the Retirement Fund contribution from $1.1m in 2005/06 to $4.3m in 2010/11, a significant increase. The LGSS again reviewed the contribution methodology by actuarial assessment for 2011/12 and this resulted in a decrease in expected contributions for council. It is estimated that the 2012/13 contribution will be $3.380m. This is the same level as last year, as this is a closed scheme with employees exiting but no additions. The second component of Council’s superannuation expense is the non-contributory scheme (from the employee’s perspective) whereby Council pays into a super fund a percentage of an employee’s annual salary. Currently, the contribution rate is 9%, being the maximum level. Council’s superannuation expense in relation to the non-contributory scheme should reflect only the increase in salary and wages levels and the growth in the base of employees for whom Council must make contributions. Generally all new staff will
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create a liability for Council, unless they are currently within local government and are members of the LGSS. This contribution is estimated at $5.9m for 2012/13, an increase of $312,200 or 5.575%. The overall impact on Council’s working funds for 2012/13 for all superannuation costs is an increase in expenditure of $312k. Superannuation increases in the LTFP have been assessed on historical trends and expected growth in new staff coming onto the non-contributory scheme this provides for 3.5% to 4.5% increases in future years.
EMPLOYEE COSTS - ADOPTED ASSUMPTIONS FOR LTFP
CRITERIA ADOPTED ASSUMPTIONS
Salaries and Wages 2012/13 3.25% increase
Each year from 2013/14 onwards projected at 3.0% per year
Employee Leave Entitlements In general increases of between 4% to 6% is projected for each year of the LTFP
Superannuation Costs In general increases of between 3.5% to 4.5% is projected for each year of the LTFP
4.2.2.2 Materials & Contracts
Base Level Expenditure – Materials and contracts are estimated in 2012/13 at $34.634
million which is around 17.9% of operating expenditure.
Materials and services estimates have been projected to a maximum of 3.0%, where
applicable, to take account of the Reserve Bank of Australia's target for the underlying CPI
rate over the next 12 months.
Carbon Pricing Increase Report FIN155-12 outlined the major impacts of the introduction of the Carbon Pricing mechanism on Council's expenditure. As further information comes forward, some adjustments across the areas identified in FIN155-12 for general revenue impacts need to be applied. Adjustments between specific electricity categories have changed the original table in FIN155-12, however, the overall net impact of these adjustments is minimal, the impact still being close to that originally reported. All the impacts identified have been built into the appropriate budgets where clearly earmarked. The other general tipping item and indirect costs amounting to $184,000 is
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difficult to distribute and has been built into the budget as a specific allocation in the Non-Divisional section of the Budget. MATERIALS AND CONTRACTS - ADOPTED ASSUMPTIONS FOR LTFP
CRITERIA ADOPTED ASSUMPTIONS
General Materials and Contracts Applied 3.0% increase for each year of the LTFP.
Carbon Tax Items An increase of $1.9 million has been applied to specific items in the 2012/13 budget where carbon tax cost impacts have been identified. Domestic Waste has worn $1.1 million of this with the additional cost being built into and recovered from the DWM Charge. The remaining $800,000 has been applied across general revenue budgets as an additional cost with no revenue offset. The inflated 2012/13 items have then been increased by 3.0% for each year of the LTFP.
4.2.2.3 Debt Servicing - Interest on Borrowings and Principal Repayments
Base Level Expenditure – Borrowing Costs are estimated in 2012/13 at $1.429 million (including interest on finance leases and bank overdraft) which is around 0.7% of total operating expenditure. Principal repayments are not part of the Operating Statement. In 2004/05, Council refinanced and consolidated its general purpose external debt into one interest only loan that required specific annual payments into a sinking fund. This loan ($20m) will be fully settled in April 2012. General purpose loans are those loan funds treated as part of operating income, do not relate to any specific project and are incorporated in the debt reduction strategy implemented through the Mayoral Minute adopting the 2000/01 Budget. Specific purpose loans are those loans procured for the undertaking of a specific project, and where a specific source of funding the repayments, in full or in part, has been identified. Specific purpose loans in recent years have been for the Cronulla Community Complex and Engadine Community Facilities. Debt servicing costs are as follows:- GENERAL PURPOSE LOANS 2011/12 2012/13 Interest $1,173,545 $ 595,736 Principal Repayments 419,450 716,605 Sinking Fund Repayments 2,666,049 0 Interest Earned (663,428) 0
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3,595,616 1,312,341 Less Loan Borrowings (3,900,000) 0 NETT DEBT SERVICING COSTS $( 304,384) $1,312,341 Net Principal Outstanding $8.69m $7.97m * The proposed borrowing under the LIRS arrangement is shown separately as a Special Purpose loan below.
SPECIFIC PURPOSE LOANS 2011/12 2012/13 Interest (Net) $ 536,982 $ 674,552 Principal Repayments 1,914,899 2,141,657 Chargeback to Ridge Complex Income (428,835) (680,761) Engadine Community Facilities - Stage 2 Income (300,000) (448,262) 1,723,046 1,687,186 Less Loan Borrowings 0 500,000 DEBT SERVICING COSTS $1,723,046 $1,187,186 Principal Outstanding $10.25m $ 8.60m ** The proposed borrowing in 2012/13 relates to Bay Road / Production Avenue major drainage upgrade. Loan repayments will be funded over the next 5 years from the Stormwater Levy.
SPECIAL PURPOSE LOAN 2011/12 2012/13 Interest - Gross 0 $ 36,762 Interest Rebate 0 (22,623) Principal Repayments 0 0 0 14,139 Less: Loan Borrowings 0 (3,200,0000) DEBT SERVICING COSTS 0 $(3,185,861) Principal Outstanding 0 $ 3.20m * This loan is proposed to be taken up to fund the Cronulla Park - The Esplanade Seawall. The proposal is submitted to take advantage of the arrangements under the State Government Local Infrastructure Renewal Scheme (LIRS).
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In summary:
The LIRS will provide a 4% interest subsidy to assist councils with infrastructure
backlogs to cover the cost of borrowing. The incentive is to make debt funding
more attractive to accelerate infrastructure backlogs.
The LIRS is being administered by the Division of Local Government.
Councils are allowed to submit a maximum of two projects per round. There will
be two to three rounds over the next three years.
Preference will be given to projects or group of projects of similar nature that can
be packaged as a single program with a total cost of at least $1 million.
LIRS should be for specific new works, upgrades, or renewal of infrastructure of the
council that meets a core purpose of local government and is intended for
community use – e.g. roads, community halls, libraries, parks, sports grounds.
External Debt (General Purpose) As at 30 June
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Outstandings
$21.7m
$19.9m
$17.5m
$15.3m
$12.9m
$10.5m
$7.9m
$8.6m
$7.9m
$8.7m
$8.0m
Council’s outstanding debt and debt service ratio provide scope for future borrowing should Council so decide. The table below shows debt levels and debt service ratios based on Council’s current adopted borrowing strategy.
2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21
Outstanding Principal ($’000)
14,693 18,935 18,876 16,153 16,870 14,938 12,782 10,455 7,944 5,234 3,019
Debt Servicing Ratio (%)
7.84 3.84 2.90 2.46 2.13 2.14 2.14 2.11 2.08 2.05 1.72
DEBT SERVICING - ADOPTED ASSUMPTIONS FOR LTFP
CRITERIA ADOPTED ASSUMPTIONS
Principal Repayments on Loans Each year is actual figures based on the financial institutions loan repayment schedule plus estimated loan reschedules for future borrowings.
Interest Repayments on Loans Each year is actual figures based on the financial institutions loan repayment schedule plus estimated loan reschedules for future borrowings.
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4.2.2.4 Depreciation
Base Level Expenditure – Depreciation expense is estimated at $23.459 million in 2012/13
which is around 12.2% of total operating expenditure.
Depreciation is a major expense item shown on the Income Statement representing the
estimated value of the deterioration of council fixed assets over a financial year. The value
of depreciation is calculated by taking the total value of each council fixed asset class,
including regular re-valuations, divided by that asset class useful life.
By accounting standards Council should be spending at least the equivalent of the
depreciation value each year for their existing asset base to keep up with the rate of asset
wear and tear each year on those assets. Newly created assets would be capital expenditure
in addition to the desired depreciation value that should be spent.
Council’s Asset Renewal Ratio performance indicator at 142.2% suggests this is being
achieved.
Depreciation has been charged using the straight-line depreciation method, based on
varying rates applicable to each asset category. This ranges between 1.52% and 1.57% of
the gross asset value each year.
As on-going capital works are undertaken, specifically rectification works, it is expected that
the condition assessment of the asset will improve resulting in an extension of the useful
life. This impacts on the rate of depreciation as the applied method of depreciation
(straight-line) takes account of the asset’s remaining life.
Periodic asset revaluations have also been considered in line with prescribed requirements
for these revaluations.
DEPRECIATION - ADOPTED ASSUMPTIONS FOR LTFP
CRITERIA ADOPTED ASSUMPTIONS
Depreciation Calculated on the straight-line method with rates varying dependent upon asset class. Between 1.52% and 1.57% of gross asset value with consideration given to revaluation and amended useful life due to works undertaken.
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4.2.2.5 Other Operating Expenses
Base Level Expenditure – Other Operating Expenses (including loss on disposal of assets) are estimated at $37.424 million which is around 19.4% of total operating expenses. Energy and Water charges Ever increasing utility costs are absorbing an extraordinary proportion of Council’s annual budget. Last year it was reported: “One third of the 2.8% rate rise will be absorbed in utility charges increasing above 2010/11 levels, specifically electricity up $226,891 (20%), gas up $36,713 (5%) and water charges up $194,132 (20%). This is on top of street lighting charges expected to increase by $375,540 (8.9%), which is on top of a $1m increase in 2010/11.” The $1m increase in 2010/11 represented a 54% increase in street lighting. FIN155-12 outlined the predicted impact of carbon tax on the 2012/13 Budget. Government & Statutory Charges A number of fees are levied upon local government by various state government bodies. The comparative allocations are as follows:-
2011/12 2012/13 Variance
Charge Charge $ %
Fire & Rescue NSW 2,881,299 3,025,364 144,065 5.00
Contribution to S.E.S 241,884 250,350 8,466 3.50
Contribution to Rural Fire Service 465,500 550,000 84,500 18.15
Department of Planning 365,114 376,067 10,953 3.00
Valuer General (in Finance Unit Budget)
307,000 320,000 13,000 4.20
Street Lighting Charges (part of Roads & Traffic Management)
4,604,590 5,133,728 529,138 11.5
All charges, other than the Valuer General’s fees which are fixed by IPART for a five year period, have been estimated on advice received or in line with past history. The Street Lighting Charges include the allowance for carbon pricing and the increase is consistent with advice received from an SSROC energy consultant. Efficiencies Allocation The funding strategies adopted in Mayoral Minute No 23/10-11 “Draft 2011/12 Budget” also allowed for an organisational annual provision of $500,000 for each year representing efficiency gains. The budget recognises this allocation and the efficiency savings of $500,000 have already been achieved in the 2011/12 budget.
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An allowance of $500,000 for efficiencies has been recognised for each year of the 10 Year Financial Plan from 2013/14 onwards. Council and staff will continue to recognise efficiencies to satisfy organisation reform for the future years of the Plan.
OTHER OPERATING EXPENSES - ADOPTED ASSUMPTIONS FOR LTFP
CRITERIA ADOPTED ASSUMPTIONS
Energy & Water Charges A specific increase of $492,000 is allocated in 2012/13 for estimated impacts related to carbon tax
Each year of the LTFP has been increased at a rate of 3%, including 2012/13 on top of the carbon tax
Government & Statutory Charges 2012/13 charges are increased as outlined in table above.
Each year from 2013/14 the Fire & Rescue NSW contribution has been increased by 5% along historical data
Every other statutory contribution from 2013/14 has been increased by 3% each year
Other Expenses All years in the LTFP have been increased by 3%
4.2.2.6 Discretionary Funds Program
4.2.2.6.1 Capital Infrastructure Program
In conjunction with council asset management planning specific capital and infrastructure upgrades and maintenance have been incorporated into the LTFP. As outlined earlier, council projects operating service levels and recognises operating revenue for each year of the LTFP, the excess of revenue over operating expenditure provides council with a level of “discretionary funds” available for spending on capital requirements. Capital spending is provided in the LTFP identifying appropriate other sources of capital funding to assist with the discretionary revenue funds available. Like many other councils, the required level of funding does not satisfy the level of funding available. For Council to maintain its capital programs for 2013/14 to 2021/22, it will need to take further decisions as to how these programs will be funded.
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There are many options, including: - Borrow internally from the Property Fund if funds are available - Borrow externally, including under the LIRS - Utilise Section 94 Funds where permitted - Approaches to IPART for special variations - Review of future year operating levels and capital programs Savings and efficiencies will continue but the return will diminish and it is anticipated that future councils will be reluctant to seek special rate variations from IPART.
CAPITAL INFRASTRUCTURE EXPENDITURE - ADOPTED ASSUMPTIONS FOR LTFP
CRITERIA ADOPTED ASSUMPTIONS
Specific Capital Projects and Programs Outlined in Section 5.5 is the full capital program for each year 2012/13 to 2021/22 including sources of capital funding
4.2.2.6.2 Corporate Support Program
The Corporate Support program is regarded as a discretionary spending program as
opposed to an on-going service level delivery (operating expense).
The items included under this program are :
- acquisition and sale of plant and vehicles,
- new technology/ corporate initiatives,
- library capital resources,
- NSW Rural Fire Service equipment,
- NSW State Emergency Service equipment
CORPORATE SUPPORT PROGRAM - ADOPTED ASSUMPTIONS FOR LTFP
CRITERIA ADOPTED ASSUMPTIONS
Acquisition and sale of Plant and Vehicles Base level for 2012/13 is $1.175 million acquisitions and $1 million in sales. Each year after the base level is increased by $25,000 for acquisitions. Sales have been kept at $ 1 million throughout the LTFP.
New Technology/ Corporate Initiatives 2012/13 to 2014/15 is $300,000 each year. From 2015/16 onwards it is increased to $400,000.
Library Capital Resources Base level for 2012/13 is $1.080 million. Each year thereafter increments of $40,000 to $60,000 has been applied.
NSW Rural Fire Service equipment Every year of the LTFP is $50,000
NSW State Emergency Service equipment
Every year of the LTFP is $30,000
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4.3 Financial Risk Assessment, Strategies and Sensitivity Analysis
4.3.1 IPART Rates Review & Rate Pegging
The Independent Pricing and Regulatory Tribunal (IPART) was established by the NSW State
Government in 1992 as a separate independent body to review pricing and financial policy
matters referred to it by the NSW Government. IPART now regulates council rates and
charges on an annual review basis including development of an annual local government
cost index, recognition of an annual industry productivity factor, setting the rate pegging
limit and assessment of all council requests for a special rate variation. This relationship was
established in 2009.
Rate pegging was introduced in 1977 and has remained in NSW local government since. It is
the only state that imposes rate pegging limits. For the first time since rate pegging was
introduced, under the new IPART regime, a council who demonstrates high quality
performance in strategic and financial management may be granted exemption from rate
pegging for up to four years. No council has been granted this exemption to date.
Rate pegging has been set at conservative levels in the LTFP as outlined in the Plan, with the
assumption that rate pegging continues and council does not apply for any special rate
variation in the life of the current adopted LTFP.
It is possible that rate pegged limits applied in this model may be above or below those
assumed, however it is forecast that any movement either way would also have a similar
movement in CPI which would move expenditure in a similar pattern. This is based on the
fact that rate pegging is mostly aligned to the Local Government Cost Index developed by
IPART each year.
4.3.2 Changes in Economic Conditions and Investment Markets
The LTFP is framed around stable economic and investment conditions over the life of the
Plan. Investments and expenditure are based on conservative market growth with no major
changes in conditions impacting.
Changes in economic and investment conditions can impact on many assumptions within
the Plan, including but not limited to investment returns, revenue and expenditure slow
down or growth, superannuation contributions, employment conditions, grants, borrowing
levels, changing demand for services and assets, population growth to name a few.
It is therefore difficult to factor in major shifts in markets as the combination of scenarios
and options becomes excessively large and without reasonable relevance. Stable conditions
have therefore been forecast in the LTFP.
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However, major changes are a threat to financial sustainability and must be recognised as a
possible reality.
4.3.3 Grant Dependency
There is a strong reliance on the continuation of the Financial Assistance Grant (FAG) in the
LTFP. The $4.6 million grant level has been continued throughout the LTFP based on CPI
growth each year. The assumption is that the per capita minimum grant will be maintained
for Council.
A number of reviews are scheduled over the next few years to look at efficiency and equity
factors relating to the distribution and process of the FAG system. One outcome could be a
reduction or elimination of the current level provided to council. A reduction in the current
level would have a significant impact on the LTFP, possibly millions of dollars each year.
Elimination of the grant would be a current $4.6 million impact each year.
Council would need to look at many options to offset any reductions, including a special rate
variation, reduction in service levels or a reduced or slow down in capital infrastructure
replacement and renewal.
Other than the FAG, there is not a strong reliance on other grants in Council’s revenue base,
only reoccurring operating grants and specific capital grants offsetting projects has been
allowed in the LTFP.
4.3.4 Cost Shifting
Based on the latest figures released, cost shifting by other governments to councils remains
high at 5.74% of local government’s total income. Even though cost shifting has been
recognised for many years two new cost shifting examples have emerged – revenue
restrictions on Council managed Crown Lands and the shortfall in cost recovery for
development applications as a result of fire regulation.
Council finances are placed under extreme pressure whenever cost shifting occurs without
any shift in funding. Usually funding is not provided, hence it is a pure cost impost on council
to meet from the existing revenue base.
Future cost shifting has not been recognised in the LTFP, however any future cost shifting
without funds provided will pose a real financial threat on levels projected in the current
LTFP.
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4.3.5 Change in Employee Costs and Liability Conditions
Council’s total employee costs, including superannuation and leave entitlements, is around
$90 million which accounts for approximately 45% of the operating budget. A shift of 1%
equates to $900,000 which is a large impost if any conditions change in employee cost
assumptions or conditions.
It is not expected that wage indexation will dramatically rise above the 3.0% allowed each
year in the LTFP, however changes to employer superannuation contributions could affect
financial levels. If the defined benefits (retirement) scheme or national non-contributory
scheme required increased employer contributions then council faces a financial challenge
to meet the additional costs.
At this stage the LTFP has built in current levels of staff and superannuation contributions
with no expected increased levels.
4.3.6 Change in Future Community Service and Infrastructure Demands
Assumptions in the current LTFP are aligned with outcomes from the Community Strategic
Plan, Delivery Program and Asset Management Strategy. It is therefore based on current
information and does not allow for any significant changes in community demands and
shifts in relation to operating service levels or asset infrastructure priorities.
It is unlikely that any major shifts would occur as the Community Strategic Plan should have
already identified these shifts, however it is worth noting that major change in population
demographics, economic climate or rapid technology changes may cause shifts in services
and asset considerations.
It is difficult here to assess what, if any, impact could occur in LTFP projections, however it
should be noted.
4.3.7 Condition of Infrastructure Assets and Ageing
Special Schedule No 7 of the 2010/11 Statement of Account show the “Condition of Public Works”. Estimated cost to bring up to a satisfactory condition/standard $96.373m Required Annual Maintenance $15.009m Current Annual Maintenance $15.516m Whilst current spending levels are around what is required, the backlog is not being addressed. Finance Committee Report FIN169-12 provides Council with information on the condition of road pavement and footpaths. Additional funds of $2.0m for road pavement rehabilitation
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and an extra $100,000 for footpath maintenance in the 2012/13 Budget will assist, however current funding sources will never breech the gap in bringing all assets any way near a satisfactory condition. All councils and the State Government face the same issue. The Local Infrastructure Renewal Scheme will assist but the $70m interest subsidy will not meet the reported $1b backlog in NSW councils. Finance Report FIN169-12 provided the example of footpaths with $4.46m of defects which have not been scheduled for rectification. The condition of Council’s buildings are also being assessed. An unexpected failure of an asset is also a possibility, even though asset management systems are in place to detect any failings earlier than later. It is a challenge to ensure asset systems contain the best and up to date asset information, however the implementation of our Asset Management Capability Improvement Plan will ensure this happens within a reasonable timeframe.
4.3.8 Continual Increased Governance Requirements
Continually the NSW State Government imposes new governance requirements on local
councils. Requirements such as strategic and integrated planning reforms, codes and best
practice guidelines, internal audit and corruption strategies, onerous freedom of
information processes to name a few.
It is important that these measures are acknowledged as essential and good management
practice, however in many cases the requirements are extremely prescriptive and at a cost
to the community. In most cases resources are required to service these requirements,
most councils can not increase their resources due to lack of funds, so the usual outcome is
to shift existing resources to accommodate the requirements. This shift can come at the
expense of a front line service. Weighing up the benefits of these requirements against
delivering front line services
4.3.9 Other Unexpected Impacts
It is difficult to cover all events that may impact financially on the LTFP. Certain possibilities
are covered in section 3.1 to 3.8 of this document. Assumptions and testing is based on
existing knowledge and some degree of uncertainty exists that all parameters will be met as
projected in the LTFP.
Events such as natural disasters, climate change, changing legislation, shifts in asset
management plans, more rapid deterioration of assets etc may have significant cost impacts
that are real but unexpected at this stage.
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The LTFP has been prepared on best information and forecasts, however it should be
acknowledged that unexpected events can vary the modelling as it now stands.
4.4 Financial Performance Monitoring
The following table shows Council’s sound financial performance for some of the reported indicators over the past 7 years: June
05 June 06
June 07
June 08
June 09
June 10
June 11
Unrestricted Current Ratio
168 221 253 145 183 153 169
Debt Service Ratio 4.05 3.82 3.67 3.70 3.18 4.11 7.84
Rates Coverage Ratio
58 59 60 62 56 59 60
Rates Outstanding Radio
4.76 6.08 5.19 5.02 5.06 4.72 4.32
The external auditor as part of the 2010/11 Audit Report commented on Council’s financial reports and financial indicators as follows: “Council is considered to be in a sound and stable financial position. Most indicators are better than accepted industry benchmarks”. Council will continue to monitor financial health through relevant performance indicators to assist financial sustainability and to recognise any early signs of financial stress. The financial performance indicators to be used for future monitoring are outlined in this section.
4.4.1 Operating Result
The Operating Result shows council’s ability to fund operating services. It can be shown
before capital revenue and after capital revenue. It is derived from the Operating Income
Statement where total operating expenses are deducted from total operating revenue. The
Operating Result before capital revenue provides a more stringent measure of Council’s
financial position.
In both bases, the result does not indicate Council’s cash position as the ratio is highly
influenced by depreciation calculations which are a non-cash expense. Depreciation
represents a council’s ongoing consumption of the assets in its ownership or control. It is
extremely difficult to fully fund the level of depreciation as capital allocation is generally on
a priority basis and resources are limited without compromising existing service levels and
community expectation.
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Targets
Operating Result including capital revenue Greater than equivalent total capital
revenue shown on Income Statement
Operating Result before capital revenue Greater than $0 (zero)
The 2010/11 Results
Operating Result including capital revenue $18.9 million was slightly under capital
revenue of $19.3 million
Operating Result before capital revenue Slightly below zero, $404,000 deficit
4.4.2 Unrestricted Current Ratio
The Unrestricted Current Ratio measures short term liquidity. It shows the ability to fund
short term financial commitments and obligations. It is derived from the Balance Sheet
where unrestricted current liabilities are deducted from unrestricted current assets,
excluding external restricted assets.
Target
Unrestricted Current Ratio Greater than 1:1
The 2010/11 Results
Unrestricted Current Ratio 1.69:1 better than target
4.4.3 Debt Service Ratio
The Debt Service Ratio shows what percentage of council’s revenue is being consumed to
service total debt. Debt service cost of annual principal and interest payments is divided by
operating revenue which excludes capital revenue and any specific purpose grants and
contributions. It is derived from a combination of information from the Income Statement
and Balance Sheet.
Target
Debt Service Ratio Less than 10%
The 2010/11 Results
Debt Service Ratio 7.84% better than target.
**Note : 2010/11 was an abnormal year for this ratio, as normal level has been around 4%
in past years. The inflated figure was due to a once off large loan payment of $6.9 million.
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4.4.4 Rates and Annual Charges Coverage Ratio
This ratio shows what percentage of council’s revenue is reliant on rates and annual charges
income. It is derived from the Income Statement simply as a percentage of rates and annual
charges revenue to total operating revenue. It basically shows the dependency council has
on rate revenue to fund operating levels.
Target
Rates and Annual Charges Coverage Ratio Greater than 50%
The 2010/11 Results
Rates and Annual Charges Coverage Ratio 60.07% better than target.
4.4.5 Rates and Annual Charges Outstanding Ratio
This ratio measures the impact of uncollected rates and annual charges on council liquidity
and the adequacy of recovery efforts. It is derived from information from both the Income
statement and Balance Sheet.
Target
Rates and Annual Charges Outstanding Ratio Less than 5%
The 2010/11 Results
Rates and Annual Charges Outstanding Ratio 4.32%, better than target.
**Note : The Outstanding Ratio includes outstanding rates for pensioners and deferred
rates which is a council policy not to pursue recovery action. The ratio is therefore inflated
due to this non recovery policy for these class of debtors.
4.4.6 Asset Renewal Ratio
This ratio measures the rate at which assets are being renewed relative to the rate at which
they are depreciating. The information is derived from the Income Statement and Balance
Sheet where asset renewal expenditure is divided by depreciation. The asset renewal
expenditure is for infrastructure and building assets only.
Target
Asset Renewal Ratio Greater than 100%
The 2010/11 Results
Asset Renewal Ratio 142.2%, better than target.
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4.5 Financial 10 Year Projections, Strategies and Outcomes
4.5.1 Listing of Adopted Decisions and Assumptions Applied in LTFP
Listed as follows are the adopted decisions and assumptions that have been applied to the
LTFP. The tables are repeated from the applicable content outlined in section 4.2 of this
document with reference back to the related section if more information is required.
All assumptions are used in ALL three financial models shown in sections 4.5.2 – 4.5.4 unless
otherwise stated in that model.
RATING INCOME– ADOPTED ASSUMPTIONS FOR LTFP – Refer Section 4.2.1.1
CRITERIA ADOPTED ASSUMPTIONS
Ad Valorem Rating structure To remain and applies to all forecasted years
Rate Pegging To remain and pegged limit of 3% to remain stable and applied to each year forecasted
Special Rate Variation (SRV)Increase None, no commitment to apply for a SRV for any year forecasted
Pensioner Rate Rebates Both mandatory and voluntary rebates to remain for all years forecasted
Rating Growth Minor growth has been applied for future years allowing for potential residential and strata development
DOMESTIC WASTE - ADOPTED ASSUMPTIONS FOR LTFP – Refer Section 4.2.1.2
CRITERIA ADOPTED ASSUMPTIONS
That the Regular Service Charge and Shared Service Charge be gradually phased in to become the same Charge
This is incorporated in the LTFP to be 2014/15 from that date the Charges are the same. This is a shift between types of services and does not relate to generating additional income.
The carbon tax impact, increased Section 88 Levy and tip gate fee increases of 12% increase be recognised.
This impact has been built into the 2012/13 year and carried forward as an on-going impact in future forecasted years.
DWM Reserve level at around $2 million.
This reduced level down from $3 million to $2 million has been maintained throughout the LTFP. There has been no direction to increase the Reserve level.
Clean – Up trial to a demand service rather than scheduled service.
Same service levels have been applied throughout the LTFP, there has been no variance to existing levels as it is difficult to predict without the necessary trialling.
Cost and Revenue Growth Both have been increased by 3% per annum each year forecasted, after allowing for specific items recognised above.
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STORMWATER MANAGEMENT CHARGE - ADOPTED ASSUMPTIONS FOR LTFP – Refer Section 4.2.1.3
CRITERIA ADOPTED ASSUMPTIONS
Stormwater Management Charges No change to the current charges for any year forecasted in the LTFP.
Stormwater funding raised per annum is $2 million.
This figure has not been increased by growth or CPI as the Charges have been forecasted to remain the same. Therefore $ 2million is a constant income figure applied to every year of the LTFP.
FEES, CHARGES AND OTHER INCOME - ADOPTED ASSUMPTIONS FOR LTFP – Refer Section 4.2.1.4
CRITERIA ADOPTED ASSUMPTIONS
Regulatory Fees and Charges Increased by 3.6% for 2012/13
Increased by 3.0 % per annum each year from 2013/14 onwards.
Discretionary Fees and Charges. Increased by 3.6% for 2012/13
Increased by 3.0 % per annum each year from 2013/14 onwards.
Other Income
Increased by 3.6% for 2012/13
Increased by 3.0 % per annum each year from 2013/14 onwards.
Asset Sales
Only Asset sales provided is plant and vehicle disposals at $1 million for each year of the LTFP
OPERATING GRANTS - ADOPTED ASSUMPTIONS FOR LTFP – Refer Section 4.2.1.5.1
CRITERIA ADOPTED ASSUMPTIONS
Financial Assistance Grant Increased by 3.6% for 2012/13
Increased by 3.0 % per annum each year from 2013/14 onwards.
Specific Purpose Grants Increased by 3.6% for 2012/13
Increased by 3.0 % per annum each year from 2013/14 onwards
CAPITAL GRANTS - ADOPTED ASSUMPTIONS FOR LTFP – Refer Section 4.2.1.5.2
CRITERIA ADOPTED ASSUMPTIONS
Road Construction Grants – Roads to Recovery & Regional Roads
2012/13 $2.062 million (all for Captain Cook Drive)
2013/14 allocated $1.134 million
2014/15 a provision of $325,000 has been allocated for RTA Road Maintenance Program
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From 2014/15 onwards around $351,000 gradually increasing each year to $371,000 in 2021/22 for Regional Roads Program
Roads to Recovery grants from 2014/15 to 2017/18 has been allowed at $1.0 million each year.
From 2018/19 onwards no provision is provided for Roads to Recovery Program.
WASIP Grant Funding From 2012/13 to 2014/15 funding has been provided at $310,000 per year
From 2015/16 onwards no further funding provided as no grant commitment
Traffic Management Program From 2012/13 onwards every year $550,000 has been provided in the LTFP
Bushfire Stations and Equipment 2012/13 $480,000 funding
2013/14 $800,000 funding
2014/15 $500,000 funding
2018/19 $150,000 funding
Every other year of LTFP no funding provided
Cycleway Grants From 2012/13 onwards $150,000 is provided each year of LTFP
Wharves and Jetties A specific allocation of $100,000 is provided in 2014/15 for Tom Ugly Wharf
OPERATING CONTRIBUTIONS - ADOPTED ASSUMPTIONS FOR LTFP – refer Section 4.2.1.6.1
CRITERIA ADOPTED ASSUMPTIONS
Operating Contributions Increased by 3.6% for 2012/13
Increased by 3.0 % per annum each year from 2013/14 onwards
CAPITAL CONTRIBUTIONS - ADOPTED ASSUMPTIONS FOR LTFP – Refer Section 4.2.1.6.2
CRITERIA ADOPTED ASSUMPTIONS
Section 94 Funded Land Acquisitions 2012/13 $2 million funding
From 2013/14 onwards $1 million each year funded
Section 94 Funded Capital Projects Playground Upgrades funded in 2012/13 $450,000
Cycleway program funded $1.75 million 2013/14
Passive Parks upgrades funded $1.320 million in 2012/13 and $850,000 in 2013/14
Sporting Facilities upgrade funded
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$600,000 in 2012/13
Leisure Centre upgrades funded $600,000 in each year of 2012/13 and 2013/14
Silver Beach Masterplan funded $200,000 in each year of 2012/13 and 2013/14
Bate Bay Program funded $600,000 in 2012/13 then major works of $ 4 million each year of 2018/19, 2019/20 and 2020/21
Scylla Bay Masterplan $600,000 funding in 2012/13 and 2013/14
Cricket and Net upgrades $60,000 each year funded from 2012/13 to 2016/17 then $30,000 thereafter each year from 2017/18
Specific External Capital Contributions - housing development contributions for recreational facilities at new Greenhills Beach Suburb
$1 million provided in 2012/13 for Skate Park facility
$24 million over 6 years, $ 4 million provided in each year from 2012/13 to 2017/18 to fund construction of playing field facilities
INCOME FROM CASH INVESTMENTS - ADOPTED ASSUMPTIONS FOR LTFP – Refer Section 4.2.1.7
CRITERIA ADOPTED ASSUMPTIONS
Income from Cash Investments 2012/13 was only marginally increased based on more updated cashflow projections and expected market conditions
Increased by 3.0% each year from 2013/14 onwards
INCOME FROM PROPERTY FUND - ADOPTED ASSUMPTIONS FOR LTFP – Refer Section 4.2.1.8
CRITERIA ADOPTED ASSUMPTIONS
Income from Property Fund In line with the Property Fund Business Plan:
Rental income projected 3.0% each year of the LTFP
Interest on internal funding repayments in line with scheduled project repayments.
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LOAN BORROWINGS - ADOPTED ASSUMPTIONS FOR LTFP – Refer Section 4.2.1.9
CRITERIA ADOPTED ASSUMPTIONS
Loan Borrowings Loan borrowings provided in LTFP as follows:
2012/13 year - $2.8 million, including $2.3 million subject to LIRS subsidy
2014/15 year - $2.5 million
No borrowings have been applied to any other forecasted years
INTERNALLY RESTRICTED CASH RESERVES - ADOPTED ASSUMPTIONS FOR LTFP – Refer Section 4.2.1.10.1
CRITERIA ADOPTED ASSUMPTIONS
Future Works Reserve Funding recognised as follows:
2012/13 - $2.923 million
2013/14 - $4.358 million
From 2014/15 onwards $500,000 for each year applied
Property Fund Reserve Funding recognised as follows:
2012/13 - $4 million replacing dropped Infrastructure Levy to fund same capital programs
2012/13 a further $1.934 million for captain Cook Road Widening
No further reserve funds applied after 2012/13
Employees Leave Entitlements Reserve Policy to retain at least minimum 10% of Leave Liability, currently at 14%. No major drawdowns on the Reserve have been allowed.
Other Reserves
Maintained at similar levels to past years
EXTERNALLY RESTRICTED CASH RESERVES - ADOPTED ASSUMPTIONS FOR LTFP – Refer Section 4.2.1.10.2
CRITERIA ADOPTED ASSUMPTIONS
Section 94 Contributions (See section 2.1.6.2 Capital Contributions)
Funding recognised as follows:
2012/13 - $6.460 million
2013/14 - $4.760 million
From 2014/15 to 2016/17 - $1.030 million each year
2017/18 - $1.030 million
2018/19 and 2019/20 - $5.030 million each year
2020/21 - $4.0 million
Domestic Waste Management Reserve Funding level maintained at $2 million in Reserve – no cash
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movements allowed in any year
Stormwater Levy Reserve The model assumes the Levies are all expended in the year they are raised.
Specific Purpose Unexpended Grants Only a minor level of unexpended grants is shown each year on the Balance Sheet
EMPLOYEE COSTS - ADOPTED ASSUMPTIONS FOR LTFP – Refer Section 4.2.2.1
CRITERIA ADOPTED ASSUMPTIONS
Salaries and Wages 2012/13 3.25% increase
Each year from 2013/14 onwards projected at 3.0% per year
Employee Leave Entitlements In general increases of between 4% to 6% is projected for each year of the LTFP
Superannuation Costs In general increases of between 3.5% to 4.5% is projected for each year of the LTFP
MATERIALS AND CONTRACTS - ADOPTED ASSUMPTIONS FOR LTFP – Refer Section 4.2.2.2
CRITERIA ADOPTED ASSUMPTIONS
General Materials and Contracts Applied 3.0% increase for each year of the LTFP.
Carbon Tax Items An increase of $1.9 million has been applied to specific items in the 2012/13 budget where carbon tax cost impacts have been identified. Domestic Waste has worn $1.1 million of this with the additional cost being built into and recovered from the DWM Charge. The remaining $800,000 has been applied across general revenue budgets as an additional cost with no revenue offset. The inflated 2012/13 items have then been increased by 3.0% for each year of the LTFP.
DEBT SERVICING - ADOPTED ASSUMPTIONS FOR LTFP – Refer Section 4.2.2.3
CRITERIA ADOPTED ASSUMPTIONS
Principal Repayments on Loans Each year is actual figures based on the financial instituitions loan repayment schedule plus estimated loan reschedules for future borrowings.
Interest Repayments on Loans Each year is actual figures based on the financial instituitions loan repayment schedule plus estimated loan reschedules for future borrowings.
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DEPRECIATION - ADOPTED ASSUMPTIONS FOR LTFP – Refer Section 4.2.2.4
CRITERIA ADOPTED ASSUMPTIONS
Depreciation Calculated on the straight-line method with rates varying dependent upon asset class. Between 1.52% and 1.57% of gross asset value with consideration given to revaluation and amended useful life due to works undertaken.
OTHER OPERATING EXPENSES - ADOPTED ASSUMPTIONS FOR LTFP – Refer Section 4.2.2.5
CRITERIA ADOPTED ASSUMPTIONS
Energy & Water Charges A specific increase of $492,000 is allocated in 2012/13 for estimated impacts related to carbon tax
Each year of the LTFP has been increased at a rate of 3%, including 2012/13 on top of the carbon tax
Government & Statutory Charges 2012/13 charges are increased as outlined in table above.
Each year from 2013/14 the Fire & Rescue NSW contribution has been increased by 5% along historical data
Every other statutory contribution from 2013/14 has been increased by 3% each year
Other Expenses All years in the LTFP have been increased by 3%
CAPITAL INFRASTRUCTURE PROGRAM - ADOPTED ASSUMPTIONS FOR LTFP – Refer Section 4.2.2.5.1
CRITERIA ADOPTED ASSUMPTIONS
Specific Capital Projects and Programs Outlined in Section 5.5 is the full capital program for each year 2012/13 to 2021/22 including sources of capital funding
CORPORATE SUPPORT PROGRAM - ADOPTED ASSUMPTIONS FOR LTFP – Refer Section 4.2.2.5.2
CRITERIA ADOPTED ASSUMPTIONS
Acquisition and sale of Plant and Vehicles Base level for 2012/13 is $1.175 million acquisitions and $1 million in sales. Each year after the base level is increased by $25,000 for acquisitions. Sales have been kept at $ 1 million throughout the LTFP.
New Technology/ Corporate Initiatives 2012/13 to 2014/15 is $300,000 each year.
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From 2015/16 onwards it is increased to $400,000.
Library Capital Resources Base level for 2012/13 is $1.080 million. Each year thereafter increments of $40,000 to $60,000 has been applied.
NSW Rural Fire Service equipment Every year of the LTFP is $50,000
NSW State Emergency Service equipment
Every year of the LTFP is $30,000
4.5.2 Financial Model 1 – Base Scenario Commentary and Outcomes
The Base Scenario represents the current adopted council budget framed on existing service
levels and the capital program as consulted to the community. It is based on all the
assumptions and decisions as listed in Section 4.5.1 and explained in detail in Section 4.2 of
this document.
The only variation to the LTFP adopted by council is that any annual shortfall result in any
years is assumed to be adjusted by reducing the future capital program rather than service
levels. Any income gains are assumed to be offset by expenditure and service level
increases. The reduced capital programs in future years have an effect on the level of asset
renewal and replacement spending.
This model demonstrates the effect of reducing the planned capital expenditure and the
impact it has on council’s fixed asset base.
The following statements are enclosed within this Section of the document and comments
on each are as follows:
Projected Discretionary Funds Budget Statement
Under this Model proposed annual general revenue discretionary funds available is mainly
constant each year from 2014/15 through to 2021/22 at around $15 to $16 million.
Discretionary funds for 2013/14 are higher at $18.4 million which is attributable to greater
level of funds being available through the Future Works Reserve, that is $4.358 million in
2013/14 compared to only $500,000 estimated from 2014/15 onwards.
The Proposed Infrastructure/ Capital Program has been reduced to meet the discretionary
funds available.
Proposed Gross Capital Works generally decreases each year from $33.4 million in 2013/14
down to $20.9 million. This trend is mainly due to reduced capital funding which is difficult
to estimate in future years.
The Discretionary Funds available are fairly constant to meet similar asset spending levels,
however the lack of identifying future other capital funding sources results in the gross
capital spending level.
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Projected Financial Performance Indicators
Operating Result
Within Model 1, Operating Result including Capital Revenue in the earlier years of the
financial projections reflects positive results (surpluses) before deficits occur in the latter
periods. This is primarily due to the level of capital revenues currently identified. It would be
expected that as these years approach, additional funding, particularly from grants, will be
available to support the capital program.
The Operating Result before Capital Revenue in each year of the projections reflects deficit
results. This does not mean that Council hasn’t the funds to continue operating, as the main
contributor to the deficits is depreciation, which is a non-cash recognition of Council’s
consumption of its assets.
The reality in this Model is that Council has maintained an extensive capital program,
however, the level of depreciation is very high due to the significant number and value of
Council’s assets. The Projected Discretionary Funds Budget Statement is a more accurate
portrayal of Council’s financial capacity to provide current services as well as undertake
capital works.
Unrestricted Current Ratio
Throughout the 10 year period covered, the Unrestricted Current Ratio is well above the
target level and the industry benchmark of 1 : 1 which indicates Council’s sound financial
position and ability to satisfy short term obligations from current funds available.
Debt Servicing Ratio
Throughout the 10 year period covered, the Debt Service Ratio is well below the target level
of 10%. This indicates that Council has significant capacity to increase borrowings if so
desired and be able to service the debt without compromising the financial position. The
ratio is progressively decreasing over the period as debt is repaid and finalised. No
borrowings have been identified in this model after 2014/15 meaning that outstanding debt
and the subsequent servicing costs are decreasing resulting in the decreasing ratio.
2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22
Operating Result including Capital Revenue ('000) $7,261 $6,212 $5,560 $2,702 $2,297 $2,418 ($2,905) ($3,443) ($4,407) ($5,143)
Operating Result before Capital Revenue ('000) ($4,391) ($3,732) ($4,726) ($6,354) ($6,764) ($6,648) ($7,126) ($7,514) ($8,478) ($9,214)
Unrestricted Current Ratio 1.48 : 1 1.41 : 1 1.34 : 1 1.42 : 1 1.44 : 1 1.46 : 1 1.49 : 1 1.47 : 1 1.45 : 1 1.43 : 1
Debt Service Ratio 2.79% 2.36% 2.02% 2.02% 1.99% 1.94% 1.84% 1.80% 1.40% 1.16%
Rates and Annual Charges Coverage Ratio 62.62% 63.28% 63.41% 63.96% 64.04% 64.10% 65.53% 65.60% 65.74% 65.76%
Rates and Annual Charges Outstanding Ratio 4.94% 4.94% 4.94% 4.94% 4.95% 4.95% 4.95% 4.95% 4.95% 4.95%
Assets Renewals Ratio 190% 143% 139% 109% 110% 103% 123% 121% 120% 93%
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Rates and Annual Charges Coverage Ratio
Throughout the 10 year period covered, the Rates and Annual Charges Coverage Ratio is
well above the target level of 50%. This indicates that Council has maintained a significant
degree of dependence upon revenue from rates and annual charges which reflects the
security of Council’s income over the period.
Rates and Annual Charges Outstanding Ratio
This ratio has remained stable across the period of the financial plan and marginally below
the target level of 5%. Although this ratio generally indicates the effectiveness of Council’s
recovery action, consideration should be given to Council’s existing policy of not pursuing
recovery action for pensioners and deferred rates which make up a considerable proportion
of the total outstandings. This policy results in an inflated outcome to this ratio.
Asset Renewal Ratio
For all but the last year of the financial plan the Asset Renewal Ratio of 100% has been
satisfied. The ratio fluctuates between periods depending on the level of capital expenditure
allocated to the relevant assets. Although the ratio has fallen below the target level in the
final year, amendments to the capital program, through reallocation of funds of
approximately $1.0 million, would result in the ratio increasing above the target level.
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$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
Discretionary Funds Available
Available Working Funds Brought Forward 500 500 -
Recurrent Operations 143,722 12,659 12,987 15,104 15,073 14,910 14,744 14,526 14,249 14,603 14,867
Future Works Reserve 11,281 2,923 4,358 500 500 500 500 500 500 500 500
Organisational Reform 4,066 - 66 500 500 500 500 500 500 500 500
Engadine Community Facilities Stage II 1,214 20 974 220 - - - - - - -
Additional Borrowing (Net of Debt Servicing Costs) - - - - - - - - - - -
Other - 160,783 - 16,102 - 18,385 - 16,324 - 16,073 - 15,910 - 15,744 - 15,526 - 15,249 - 15,603 - 15,867
Proposed General Revenue Capital Program 160,783 16,102 18,385 16,324 16,073 15,910 15,744 15,526 15,249 15,603 15,867
* Funding Sources to be Considered for Future Budgets - - - - - - - - - -
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
TOTAL PROGRAM
General Revenue Funding 130,312 13,451 15,685 13,549 13,123 12,885 12,634 12,331 11,969 12,248 12,437
Other Funds 111,599 241,911 27,098 40,549 14,178 29,863 13,066 26,615 9,416 22,539 9,241 22,126 9,666 22,300 8,451 20,782 8,221 20,190 8,171 20,419 4,091 16,528
General Revenue Funding 30,471 2,651 2,700 2,775 2,950 3,025 3,110 3,195 3,280 3,355 3,430
Other Funds 10,000 40,471 1,000 3,651 1,000 3,700 1,000 3,775 1,000 3,950 1,000 4,025 1,000 4,110 1,000 4,195 1,000 4,280 1,000 4,355 1,000 4,430
TOTAL PROPOSED GROSS CAPITAL WORKS 282,382 44,200 33,563 30,390 26,489 26,151 26,410 24,977 24,470 24,774 20,958
GENERAL REVENUE COMPONENT OF PROGRAM
130,312 13,451 15,685 13,549 13,123 12,885 12,634 12,331 11,969 12,248 12,437
30,471 2,651 2,700 2,775 2,950 3,025 3,110 3,195 3,280 3,355 3,430
TOTAL PROPOSED GROSS CAPITAL WORKS 160,783 16,102 18,385 16,324 16,073 15,910 15,744 15,526 15,249 15,603 15,867
TEN YEAR FINANCIAL PLAN MODEL - MODEL I
TOTAL 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22
Annual Surplus/Shortfall - - - - - -
Cumulative Surplus/Shortfall - - -
- - - - -
-
PROPOSED INFRASTRUCTURE/CAPITAL PROGRAM - MODEL I
TOTAL 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19
- - - - - -
Proposed Gross Other Capital Works
2019/20 2020/21 2021/22
Proposed Gross Infrastucture Program
Proposed Gross Other Capital Works
Proposed Gross Infrastucture Program
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30 June 2013 30 June 2014 30 June 2015 30 June 2016 30 June 2017 30 June 2018 30 June 2019 30 June 2020 30 June 2021 30 June 2022
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
INCOMERevenue:
Rates and Annual Charges 125,381 129,082 132,894 136,820 140,864 145,029 149,320 153,739 158,290 162,979
User Charges & Fees 28,838 29,703 30,594 31,512 32,457 33,431 34,434 35,467 36,531 37,627
Interest and Investment Revenue 4,265 4,393 4,524 4,660 4,800 4,944 5,092 5,245 5,402 5,564
Investment Revaluation Increases (See note) 945 870 388 51 - - - - - -
Other Revenues 17,892 18,429 18,982 19,551 20,137 20,742 21,364 22,005 22,665 23,345
Grants and Contributions - Operating 11,239 11,576 11,923 12,281 12,650 13,029 13,420 13,822 13,823 14,237
Grants and Contributions - Capital Purposes 11,652 9,944 10,286 9,056 9,061 9,066 4,221 4,071 4,071 4,071
Other income: - - - - - - - - - -
Profit from Disposal of Assets - - - - - - - - - -
Profit from Interests in Joint Ventures and Associates - - - - - - - - - -
Total Income from Continuing Operations 200,212 203,997 209,591 213,931 219,969 226,241 227,851 234,349 240,782 247,823
EXPENSESEmployee Costs 96,006 99,305 102,705 106,234 109,896 113,697 117,643 121,738 125,991 130,406
Materials and Contracts 34,633 34,800 35,936 37,108 38,319 39,570 40,863 42,197 43,576 45,000
Borrowing Costs 1,429 1,352 1,206 1,161 1,025 875 712 537 366 320
Depreciation & Amortisation 23,459 23,797 24,512 25,879 26,374 26,376 26,950 27,409 27,982 28,563
Interest & Investment Losses - - - - - - - - - -
Other Expenses from Ordinary Activities 36,924 38,031 39,172 40,347 41,558 42,805 44,088 45,411 46,774 48,177
Loss from Disposal of Assets 500 500 500 500 500 500 500 500 500 500
Loss from Interests in Joint Ventures and Associates - - - - - - - - - -
Total Expenses from Continuing Operations 192,951 197,785 204,031 211,229 217,672 223,823 230,756 237,792 245,189 252,966
NET OPERATING RESULT FOR YEAR 7,261 6,212 5,560 2,702 2,297 2,418 (2,905) (3,443) (4,407) (5,143)
Net Operating Result Attributable to Council 7,261 6,212 5,560 2,702 2,297 2,418 (2,905) (3,443) (4,407) (5,143)
Net Operating Result Attributable to Minority Interests - - - - - - - - - -
7,261 6,212 5,560 2,702 2,297 2,418 (2,905) (3,443) (4,407) (5,143)
Net Operating Result for the year before Grants and
Contributions provided for Capital Purposes (4,391) (3,732) (4,726) (6,354) (6,764) (6,648) (7,126) (7,514) (8,478) (9,214)
Note: This amount represents investment revaluations for unrealised losses previously identified in the financial statements
INCOME STATEMENT (MODEL I) FOR THE YEAR ENDED
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30 June 2013 30 June 2014 30 June 2015 30 June 2016 30 June 2017 30 June 2018 30 June 2019 30 June 2020 30 June 2021 30 June 2022
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
ASSETSCurrent Assets
Cash and cash equivalents 12,000 12,000 12,000 12,000 12,000 12,000 12,000 12,000 12,000 12,000
Investments 59,393 56,745 60,293 65,724 69,163 72,351 72,250 72,324 72,307 76,322
Receivables 11,775 12,069 12,455 12,745 13,124 13,515 13,870 14,276 14,702 15,141
Inventories 5,249 5,258 5,268 5,278 5,288 5,299 5,309 5,321 5,332 5,344
Other 1,546 1,593 1,640 1,689 1,740 1,792 1,846 1,901 1,958 2,017
Total Current Assets 89,963 87,665 91,656 97,436 101,315 104,957 105,275 105,822 106,299 110,824
Non-Current Assets
Investments 2,000 2,000 2,000 - - - - - - -
Receivables 1,090 1,115 1,148 1,183 1,218 1,255 1,292 1,331 1,371 1,413
Infrastructure, property, plant & equipment 1,119,352 1,130,437 1,183,114 1,203,318 1,202,746 1,217,742 1,216,989 1,213,601 1,209,943 1,201,888
Investment property 50,943 53,375 55,922 58,591 61,387 64,316 67,386 70,602 73,971 77,501
Other 640 423 184 - - - - - - -
Total Non-Current Assets 1,174,025 1,187,350 1,242,368 1,263,092 1,265,351 1,283,313 1,285,667 1,285,534 1,285,285 1,280,802
TOTAL ASSETS 1,263,988 1,275,015 1,334,024 1,360,528 1,366,666 1,388,270 1,390,942 1,391,356 1,391,584 1,391,626
LIABILITIESCurrent Liabilities
Payables 17,562 18,089 18,632 19,191 19,766 20,359 20,970 21,599 22,247 22,914
Interest bearing liabilities 3,104 2,693 2,874 3,129 3,331 3,427 3,651 3,181 2,645 1,893
Provisions 38,062 40,509 42,986 45,484 47,996 50,509 53,015 55,496 57,937 60,321
Total Current Liabilities 58,728 61,291 64,492 67,804 71,093 74,295 77,636 80,276 82,829 85,128
Non-Current Liabilities
Interest bearing liabilities 17,186 15,323 15,803 13,556 11,133 8,641 5,952 3,763 2,283 1,441
Provisions 4,692 4,858 5,029 5,203 5,382 5,565 5,751 5,941 6,134 6,332
Total Non-Current Liabilities 21,878 20,181 20,832 18,759 16,515 14,206 11,703 9,704 8,417 7,773
TOTAL LIABILITIES 80,606 81,472 85,324 86,563 87,608 88,501 89,339 89,980 91,246 92,901
NET ASSETS 1,183,382 1,193,543 1,248,700 1,273,965 1,279,058 1,299,769 1,301,603 1,301,376 1,300,338 1,298,725
EQUITYRetained earnings 1,057,129 1,063,341 1,068,901 1,071,603 1,073,900 1,076,318 1,073,413 1,069,970 1,065,563 1,060,420
Revaluation reserves 126,253 130,202 179,799 202,362 205,158 223,451 228,190 231,406 234,775 238,305
Council equity interest 1,183,382 1,193,543 1,248,700 1,273,965 1,279,058 1,299,769 1,301,603 1,301,376 1,300,338 1,298,725
Minority equity interest - - - - - - - - - -
TOTAL EQUITY 1,183,382 1,193,543 1,248,700 1,273,965 1,279,058 1,299,769 1,301,603 1,301,376 1,300,338 1,298,725
SUTHERLAND SHIRE COUNCIL
BALANCE SHEET (MODEL I) AS AT
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30 June 2013 30 June 2014 30 June 2015 30 June 2016 30 June 2017 30 June 2018 30 June 2019 30 June 2020 30 June 2021 30 June 2022
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts:
Rates and Annual Charges 125,176 128,907 132,713 136,635 140,673 144,833 149,117 153,530 158,075 162,757
User Charges & Fees 28,703 29,564 30,451 31,365 32,305 33,275 34,273 35,301 36,360 37,451
Interest 5,128 5,209 4,857 4,654 4,741 4,883 5,030 5,180 5,336 5,496
Grants and Contributions 18,061 17,563 18,163 17,396 17,691 18,075 17,667 17,881 17,872 18,286
Other 18,206 18,753 19,316 19,895 20,492 21,107 21,740 22,392 23,064 23,756
Payments :
Employee Costs (93,674) (96,712) (100,079) (103,582) (107,228) (111,023) (114,975) (119,091) (123,381) (127,851)
Materials and Contracts (34,499) (34,661) (35,793) (36,962) (38,168) (39,415) (40,702) (42,032) (43,406) (44,825)
Interest (1,429) (1,352) (1,206) (1,161) (1,025) (875) (712) (537) (366) (320)
Other (37,233) (37,781) (38,897) (40,127) (41,520) (42,766) (44,049) (45,370) (46,731) (48,133)
Net cash provided by (or used in) operating activities 28,439 29,490 29,525 28,113 27,961 28,094 27,389 27,254 26,823 26,617
CASH FLOWS FROM INVESTING ACTIVITIES
Receipts:
Sale of Investments 10,528 2,647 - - - - 102 - 17 -
Sale of Real Estate Assets - - - - - - - - - -
Sale of Property, Plant and Equipment 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000
Sales of Interests in Joint Venturers/Associates - - - - - - - - - -
Other - - - - - - - - - -
Payments:
Purchase of Investments - - (3,548) (3,431) (3,439) (3,189) - (74) - (4,016)
Purchase of Real Estate Assets - - - - - - - - - -
Purchase of Property, Plant and Equipment (39,950) (30,863) (27,640) (23,689) (23,301) (23,510) (26,027) (25,520) (25,824) (22,008)
Purchase of Investment Property - - - - - - - - - -
Purchases of Interests in Joint Venturers/Associates - - - - - - - - - -
Net cash provided by (or used in) investing activities (28,422) (27,216) (30,188) (26,120) (25,740) (25,699) (24,925) (24,594) (24,807) (25,024)
CASH FLOWS FROM FINANCING ACTIVITIES
Receipts:
Borrowings and Advances 2,800 - 2,500 - - - - - - -
Lease Liabilities 900 900 900 900 900 900 900 900 900 900
Payments:
Borrowings and Advances (2,858) (2,316) (1,881) (2,038) (2,268) (2,443) (2,513) (2,710) (2,068) (1,647)
Lease Liabilities (859) (858) (856) (855) (853) (852) (851) (850) (848) (846)
Net cash provided by (or used in) financing activities (17) (2,274) 663 (1,993) (2,221) (2,395) (2,464) (2,660) (2,016) (1,593)
Net increase/(decrease) in cash held - - - - - - - - - -
Cash assets at beginning of reporting period 12,000 12,000 12,000 12,000 12,000 12,000 12,000 12,000 12,000 12,000
Cash assets at end of reporting period 12,000 12,000 12,000 12,000 12,000 12,000 12,000 12,000 12,000 12,000
NOTE : Investments will be purchased and sold at different rates throught each of the periods depending on interest rates, terms, opportunities etc.
The figures shown above in relation to investments reflect the net result of the sale and purchase throughout the year.
STATEMENT OF CASH FLOWS (MODEL I) FOR THE YEAR ENDED
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4.5.3 Financial Model 2 – Improved Scenario Commentary and Outcomes
The Improved Scenario represents an improved position on Model 1- Base Scenario and the
assumptions applied in that model. Again it is based on all the assumptions and decisions as
listed in Section 4.5.1 and explained in detail in Section 4.2 of this document, except for the
specific assumptions outlined below.
The variations to Model 1 – the Base Scenario are:
- a 1.0% reduction in operating expenses across the council without affecting current
service levels (council resolution adopted in Mayoral Minute 22/11-12 of 21/5/12)
- recognition of specific rating growth for new properties around $200,000 for 3 years,
this income is projected forward as part of council’s rate income base for future years,
- The Ridge Golf Course becoming full operative will inflate income and expense levels,
however it is a self sufficient funding entity which will not impact on working funds
but will increase figures on the Income Statement,
- capital asset program levels that were reduced in Model 1 to fund any annual
shortfalls have been re-instated,
- after allowing for income and expenditure adjustments above any further annual
shortfalls have been adjusted by re-visiting capital program levels and applying any
necessary reductions.
The following statements are enclosed within this Section of the document and comments
on each are as follows:
Projected Discretionary Funds Budget Statement
Under this Model proposed annual general revenue discretionary funds available is
increased over time by around $2million each year compared to Model 1. Around $934,000
is identified as expenditure reductions due to applying the 1% cut in operating expenses. In
addition an increased allocation of around $200,000 for each of three years for rating
growth has been applied. The 1% expenditure cuts impacts in 2012/13 and is projected
through the years of the Plan, as is the rating growth which impacts in 2013/14 and also
compounds in the revenue base into the future.
Discretionary funds from recurrent operations are mainly constant each year from 2014/15
through to 2021/22 at around $16 to $17 million. Discretionary funds for 2013/14 are higher
at $18.4 million which is attributable to greater level of funds being available through the
Future Works Reserve, that is $4.358 million in 2013/14 compared to only $500,000
estimated from 2014/15 onwards.
The Proposed Infrastructure/ Capital Program has been reduced to meet the discretionary
funds available.
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Proposed Gross Capital Works generally decreases each year from $33.4 million in 2013/14
down to $20.9 million. This trend is mainly due to reduced capital funding which is difficult
to estimate in future years.
The Discretionary Funds available are fairly constant to meet similar asset spending levels,
however the lack of identifying future other capital funding sources results in the gross
capital spending level.
Projected Financial Performance Indicators
Operating Result
Within Model 2, Operating Result including Capital Revenue in the earlier years of the
financial projections reflects positive results (surpluses) before deficits occur in the latter
periods. This is primarily due to the level of capital revenues currently identified. It would be
expected that as these years approach, additional funding, particularly from grants, will be
available to support the capital program.
The Operating Result before Capital Revenue in each year of the projections reflects deficit
results. This does not mean that Council hasn’t the funds to continue operating, as the main
contributor to the deficits is depreciation, which is a non-cash recognition of Council’s
consumption of its assets.
The reality in this Model is that Council has maintained an extensive capital program,
however, the level of depreciation is very high due to the significant number and value of
Council’s assets. The Projected Discretionary Funds Budget Statement is a more accurate
portrayal of Council’s financial capacity to provide current services as well as undertake
capital works.
Unrestricted Current Ratio
Throughout the 10 year period covered, the Unrestricted Current Ratio is well above the
target level and the industry benchmark of 1 : 1 which indicates Council’s sound financial
position and ability to satisfy short term obligations from current funds available.
2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22
Operating Result including Capital Revenue ('000) $8,195 $7,979 $7,872 $5,239 $4,862 $5,012 ($282) ($790) ($1,722) ($2,426)
Operating Result before Capital Revenue ('000) ($3,457) ($1,965) ($2,414) ($3,817) ($4,199) ($4,054) ($4,503) ($4,861) ($5,793) ($6,497)
Unrestricted Current Ratio 1.51 : 1 1.42 : 1 1.37 : 1 1.46 : 1 1.49 : 1 1.53 : 1 1.57 : 1 1.56 : 1 1.55 : 1 1.56 : 1
Debt Servicing Ratio 2.79% 2.35% 2.01% 2.00% 1.97% 1.92% 1.83% 1.78% 1.39% 1.15%
Rates and Annual Charges Coverage Ratio 62.62% 63.04% 63.21% 63.79% 63.87% 63.93% 65.35% 65.42% 65.55% 65.58%
Rates and Annual Charges Outstanding Ratio 4.94% 4.93% 4.93% 4.92% 4.93% 4.93% 4.93% 4.93% 4.93% 4.93%
Assets Renewals Ratio 190% 150% 144% 115% 116% 109% 129% 127% 126% 98%
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Debt Servicing Ratio
Throughout the 10 year period covered, the Debt Service Ratio is well below the target level
of 10%. This indicates that Council has significant capacity to increase borrowings if so
desired and be able to service the debt without compromising the financial position. The
ratio is progressively decreasing over the period as debt is repaid and finalised. No
borrowings have been identified in this model after 2014/15 meaning that outstanding debt
and the subsequent servicing costs are decreasing resulting in the decreasing ratio.
Rates and Annual Charges Coverage Ratio
Throughout the 10 year period covered, the Rates and Annual Charges Coverage Ratio is
well above the target level of 50%. This indicates that Council has maintained a significant
degree of dependence upon revenue from rates and annual charges which reflects the
security of Council’s income over the period.
Rates and Annual Charges Outstanding Ratio
This ratio has remained stable across the period of the financial plan and marginally below
the target level of 5%. Although this ratio generally indicates the effectiveness of Council’s
recovery action, consideration should be given to Council’s existing policy of not pursuing
recovery action for pensioners and deferred rates which make up a considerable proportion
of the total outstandings. This policy results in an inflated outcome to this ratio.
Asset Renewal Ratio
For all but the last year of the financial plan the Asset Renewal Ratio of 100% has been
satisfied. The ratio fluctuates between periods depending on the level of capital expenditure
allocated to the relevant assets. Although the ratio has fallen minimally below the target
level in the final year, amendments to the capital program, through reallocation of funds of
approximately $350,000, would result in the ratio increasing above the target level.
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Page 119 Asset Management
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
Discretionary Funds Available
Available Working Funds Brought Forward 500 500 -
Recurrent Operations 163,398 13,593 14,205 16,902 17,125 17,024 16,921 16,769 16,559 16,982 17,318
Future Works Reserve 10,781 1,989 5,292 500 500 500 500 500 500 500
Organisational Reform 4,066 - 66 500 500 500 500 500 500 500 500
Engadine Community Facilities Stage II 1,214 20 974 220 - - - - - - -
Additional Borrowing (Net of Debt Servicing Costs) - - - - - - - - - - -
Other - 179,959 - 16,102 - 20,537 - 18,122 - 18,125 - 18,024 - 17,921 - 17,769 - 17,559 - 17,982 - 17,818
Proposed General Revenue Capital Program 179,959 16,102 20,537 18,122 18,125 18,024 17,921 17,769 17,559 17,982 17,818
* Funding Sources to be Considered for Future Budgets - - - - - - - - - -
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
TOTAL PROGRAM
General Revenue Funding 149,488 13,451 17,837 15,347 15,175 14,999 14,811 14,574 14,279 14,627 14,388
Other Funds 111,599 261,087 27,098 40,549 14,178 32,015 13,066 28,413 9,416 24,591 9,241 24,240 9,666 24,477 8,451 23,025 8,221 22,500 8,171 22,798 4,091 18,479
General Revenue Funding 30,471 2,651 2,700 2,775 2,950 3,025 3,110 3,195 3,280 3,355 3,430
Other Funds 10,000 40,471 1,000 3,651 1,000 3,700 1,000 3,775 1,000 3,950 1,000 4,025 1,000 4,110 1,000 4,195 1,000 4,280 1,000 4,355 1,000 4,430
TOTAL PROPOSED GROSS CAPITAL WORKS 301,558 44,200 35,715 32,188 28,541 28,265 28,587 27,220 26,780 27,153 22,909
GENERAL REVENUE COMPONENT OF PROGRAM
149,488 13,451 17,837 15,347 15,175 14,999 14,811 14,574 14,279 14,627 14,388
30,471 2,651 2,700 2,775 2,950 3,025 3,110 3,195 3,280 3,355 3,430
TOTAL PROPOSED GROSS CAPITAL WORKS 179,959 16,102 20,537 18,122 18,125 18,024 17,921 17,769 17,559 17,982 17,818
TEN YEAR FINANCIAL PLAN MODEL - MODEL II
TOTAL 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22
Annual Surplus/Shortfall - - - - - -
Cumulative Surplus/Shortfall - - -
- - - - -
-
PROPOSED INFRASTRUCTURE/CAPITAL PROGRAM - MODEL II
TOTAL 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19
- - - - - -
Proposed Gross Other Capital Works
2019/20 2020/21 2021/22
Proposed Gross Infrastucture Program
Proposed Gross Other Capital Works
Proposed Gross Infrastucture Program
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30 June 2013 30 June 2014 30 June 2015 30 June 2016 30 June 2017 30 June 2018 30 June 2019 30 June 2020 30 June 2021 30 June 2022
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
INCOMERevenue:
Rates and Annual Charges 125,381 129,253 133,270 137,407 141,469 145,653 149,962 154,400 158,971 163,680
User Charges & Fees 28,838 30,553 31,469 32,414 33,386 34,387 35,419 36,482 37,576 38,703
Interest and Investment Revenue 4,265 4,392 4,524 4,660 4,800 4,944 5,092 5,245 5,402 5,564
Investment Revaluation Increases (See note) 945 870 388 51 - - - - - -
Other Revenues 17,892 18,429 18,982 19,551 20,137 20,742 21,364 22,005 22,665 23,345
Grants and Contributions - Operating 11,239 11,576 11,924 12,281 12,650 13,029 13,420 13,822 13,823 14,237
Grants and Contributions - Capital Purposes 11,652 9,944 10,286 9,056 9,061 9,066 4,221 4,071 4,071 4,071
Other income: - - - - - - - - - -
Profit from Disposal of Assets - - - - - - - - - -
Profit from Interests in Joint Ventures and Associates - - - - - - - - - -
Total Income from Continuing Operations 200,212 205,017 210,843 215,420 221,503 227,821 229,478 236,025 242,508 249,600
EXPENSESEmployee Costs 95,539 98,824 102,210 105,723 109,370 113,155 117,085 121,164 125,399 129,796
Materials and Contracts 34,447 34,907 36,046 37,222 38,437 39,692 40,987 42,326 43,708 45,136
Borrowing Costs 1,429 1,352 1,206 1,161 1,025 875 712 537 367 320
Depreciation & Amortisation 23,459 23,797 24,566 25,978 26,524 26,579 27,207 27,722 28,353 28,993
Interest & Investment Losses - - - - - - - - - -
Other Expenses from Ordinary Activities 36,643 37,658 38,443 39,597 40,785 42,008 43,269 44,566 45,903 47,281
Loss from Disposal of Assets 500 500 500 500 500 500 500 500 500 500
Loss from Interests in Joint Ventures and Associates - - - - - - - - - -
Total Expenses from Continuing Operations 192,017 197,038 202,971 210,181 216,641 222,809 229,760 236,815 244,230 252,026
NET OPERATING RESULT FOR YEAR 8,195 7,979 7,872 5,239 4,862 5,012 (282) (790) (1,722) (2,426)
Net Operating Result Attributable to Council 8,195 7,979 7,872 5,239 4,862 5,012 (282) (790) (1,722) (2,426)
Net Operating Result Attributable to Minority Interests - - - - - - - - - -
8,195 7,979 7,872 5,239 4,862 5,012 (282) (790) (1,722) (2,426)
Net Operating Result for the year before Grants and
Contributions provided for Capital Purposes (3,457) (1,965) (2,414) (3,817) (4,199) (4,054) (4,503) (4,861) (5,793) (6,497)
Note: This amount represents investment revaluations for unrealised losses previously identified in the financial statements
INCOME STATEMENT (MODEL II) FOR THE YEAR ENDED
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30 June 2013 30 June 2014 30 June 2015 30 June 2016 30 June 2017 30 June 2018 30 June 2019 30 June 2020 30 June 2021 30 June 2022
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
ASSETSCurrent Assets
Cash and cash equivalents 12,000 12,000 12,000 12,000 12,000 12,000 12,000 12,000 12,000 12,000
Investments 60,327 57,296 61,410 67,425 71,465 75,273 75,808 76,539 77,199 82,411
Receivables 11,775 12,069 12,455 12,745 13,124 13,515 13,870 14,276 14,702 15,142
Inventories 5,249 5,258 5,268 5,278 5,288 5,298 5,309 5,320 5,332 5,344
Other 1,546 1,592 1,640 1,689 1,740 1,792 1,846 1,901 1,959 2,017
Non-current assets classified as held for sale - - - - - - - - - -
Total Current Assets 90,897 88,215 92,773 99,137 103,617 107,878 108,833 110,036 111,192 116,914
Non-Current Assets
Investments 2,000 2,000 2,000 - - - - - - -
Receivables 1,090 1,115 1,148 1,183 1,218 1,255 1,293 1,331 1,371 1,412
Inventories - - - - - - - - - -
Infrastructure, property, plant & equipment 1,119,352 1,132,589 1,187,010 1,209,167 1,210,559 1,227,530 1,228,762 1,227,371 1,225,720 1,219,186
Investments account for using equity method - - - - - - - - - -
Investment property 50,943 53,375 55,922 58,591 61,387 64,316 67,386 70,602 73,971 77,501
Intangible assets - - - - - - - - - -
Other 640 423 184 - - - - - - -
Total Non-Current Assets 1,174,025 1,189,502 1,246,264 1,268,941 1,273,164 1,293,101 1,297,441 1,299,304 1,301,062 1,298,099
TOTAL ASSETS 1,264,922 1,277,717 1,339,037 1,368,078 1,376,781 1,400,979 1,406,274 1,409,340 1,412,254 1,415,013
LIABILITIESCurrent Liabilities
Payables 17,562 18,089 18,632 19,191 19,766 20,359 20,970 21,599 22,247 22,915
Interest bearing liabilities 3,104 2,693 2,874 3,129 3,330 3,427 3,651 3,180 2,645 1,893
Provisions 38,062 40,509 42,986 45,484 47,996 50,510 53,015 55,496 57,937 60,321
Total Current Liabilities 58,728 61,291 64,492 67,804 71,092 74,296 77,636 80,275 82,829 85,129
Non-Current Liabilities
Payables - - - - - - - - - -
Interest bearing liabilities 17,186 15,323 15,803 13,556 11,133 8,641 5,952 3,763 2,283 1,441
Provisions 4,692 4,858 5,029 5,203 5,382 5,564 5,751 5,941 6,134 6,331
Total Non-Current Liabilities 21,878 20,181 20,832 18,759 16,515 14,205 11,703 9,704 8,417 7,772
TOTAL LIABILITIES 80,606 81,472 85,324 86,563 87,607 88,501 89,339 89,979 91,246 92,901
NET ASSETS 1,184,316 1,196,245 1,253,713 1,281,515 1,289,174 1,312,478 1,316,935 1,319,361 1,321,008 1,322,112
EQUITYRetained earnings 1,058,064 1,066,043 1,073,915 1,079,154 1,084,016 1,089,028 1,088,746 1,087,956 1,086,234 1,083,808
Revaluation reserves 126,252 130,202 179,798 202,361 205,158 223,450 228,189 231,405 234,774 238,304
Council equity interest 1,184,316 1,196,245 1,253,713 1,281,515 1,289,174 1,312,478 1,316,935 1,319,361 1,321,008 1,322,112
Minority equity interest - - - - - - - - - -
TOTAL EQUITY 1,184,316 1,196,245 1,253,713 1,281,515 1,289,174 1,312,478 1,316,935 1,319,361 1,321,008 1,322,112
SUTHERLAND SHIRE COUNCIL
BALANCE SHEET (MODEL II) AS AT
Background Workforce Planning
Long Term Financial Plan
Page 122 Asset Management
30 June 2013 30 June 2014 30 June 2015 30 June 2016 30 June 2017 30 June 2018 30 June 2019 30 June 2020 30 June 2021 30 June 2022
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts:
Rates and Annual Charges 125,176 129,078 133,089 137,222 141,278 145,455 149,758 154,191 158,756 163,458
User Charges & Fees 28,703 30,414 31,326 32,266 33,234 34,232 35,258 36,316 37,406 38,528
Interest 5,128 5,209 4,857 4,654 4,741 4,883 5,029 5,180 5,336 5,496
Grants and Contributions 18,061 17,563 18,163 17,396 17,691 18,075 17,667 17,881 17,872 18,286
Other 18,207 18,753 19,316 19,896 20,492 21,107 21,740 22,392 23,064 23,756
Payments :
Employee Costs (93,207) (96,231) (99,583) (103,071) (106,702) (110,481) (114,417) (118,517) (122,789) (127,242)
Materials and Contracts (34,312) (34,769) (35,904) (37,076) (38,286) (39,536) (40,826) (42,160) (43,538) (44,961)
Interest (1,429) (1,352) (1,206) (1,161) (1,025) (875) (712) (537) (367) (320)
Other (36,953) (37,407) (38,168) (39,377) (40,747) (41,969) (43,228) (44,525) (45,861) (47,237)
Net cash provided by (or used in) operating activities 29,374 31,258 31,890 30,749 30,676 30,891 30,269 30,221 29,879 29,764
CASH FLOWS FROM INVESTING ACTIVITIES
Receipts:
Sale of Investments 9,593 3,031 - - - - - - - -
Sale of Real Estate Assets - - - - - - - - - -
Sale of Property, Plant and Equipment 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000
Sales of Interests in Joint Venturers/Associates - - - - - - - - - -
Other - - - - - - - - - -
Payments:
Purchase of Investments - - (4,115) (4,015) (4,040) (3,808) (535) (731) (660) (5,212)
Purchase of Real Estate Assets - - - - - - - - - -
Purchase of Property, Plant and Equipment (39,950) (33,015) (29,438) (25,741) (25,415) (25,687) (28,270) (27,830) (28,203) (23,959)
Purchase of Investment Property - - - - - - - - - -
Purchases of Interests in Joint Venturers/Associates - - - - - - - - - -
Net cash provided by (or used in) investing activities (29,357) (28,984) (32,553) (28,756) (28,455) (28,495) (27,805) (27,561) (27,863) (28,171)
CASH FLOWS FROM FINANCING ACTIVITIES
Receipts:
Borrowings and Advances 2,800 - 2,500 - - - - - - -
Lease Liabilities 900 900 900 900 900 900 900 900 900 900
Payments:
Borrowings and Advances (2,858) (2,316) (1,881) (2,038) (2,268) (2,443) (2,513) (2,710) (2,068) (1,647)
Lease Liabilities (859) (858) (856) (855) (853) (853) (851) (850) (848) (846)
Net cash provided by (or used in) financing activities (17) (2,274) 663 (1,993) (2,221) (2,396) (2,464) (2,660) (2,016) (1,593)
Net increase/(decrease) in cash held - - - - - - - - - -
Cash assets at beginning of reporting period 12,000 12,000 12,000 12,000 12,000 12,000 12,000 12,000 12,000 12,000
Cash assets at end of reporting period 12,000 12,000 12,000 12,000 12,000 12,000 12,000 12,000 12,000 12,000
NOTE : Investments will be purchased and sold at different rates throught each of the periods depending on interest rates, terms, opportunities etc.
The figures shown above in relation to investments reflect the net result of the sale and purchase throughout the year.
STATEMENT OF CASH FLOWS (MODEL II) FOR THE YEAR ENDED
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4.5.4 Financial Model 3 – Borrowing Scenario Commentary and Outcomes
The Borrowing Scenario is based on Model 2 where reduced capital levels to fund annual
shortfalls are re-instated and replaced by loan borrowings. Again it is based on all the
assumptions and decisions as listed in Section 4.5.1 and explained in detail in Section 4.2 of
this document, except those specific assumptions introduced in Model 2 and this Model.
The variations to Model 2 – the Improved Scenario are:
- capital asset program levels that were reduced in Model 2 to fund any annual
shortfalls have been re-instated,
- annual shortfalls each year are now replaced by loan borrowings.
The following statements are enclosed within this Section of the document and comments
on each are as follows:
Projected Discretionary Funds Budget Statement
Under this Model proposed annual general revenue discretionary funds available is
increased by up to $2 million each year from 2013/14 to 2016/17 compared to Model 1,
however, as this Model is based on increased borrowings, the level of increased
discretionary funds progressively decreases after this until only about $800,000 more in
2021/22 due to the impact of loan repayments. In comparison to Model 2, discretionary
funds remain at a similar level until 2015/16 when again they progressively reduce due to
the impact of the loan repayments. Around $934,000 is identified as expenditure
reductions due to applying the 1% cut in operating expenses. In addition an increased
allocation of around $200,000 for each of three years for rating growth has been applied.
The 1% expenditure cuts impacts in 2012/13 and is projected through the years of the Plan,
as is the rating growth which impacts in 2013/14 and also compounds in the revenue base
into the future.
Utilisation of the Future Works Reserve funds is the same in this Model as in Model 2.
The Proposed Infrastructure/ Capital Program has not been reduced and the shortfalls each
year have been supported by borrowings. As previously stated, the borrowings begin to
have a major impact on the discretionary funds available from 2016/17 when debt servicing
costs begin to take effect. Although the discretionary funds have been reduced comparably,
the level of capital works has actually increased.
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Projected Financial Performance Indicators
Operating Result
Within Model 3, Operating Result including Capital Revenue in the earlier years of the
financial projections reflects positive results (surpluses) before deficits occur in the latter
periods. This is primarily due to the level of capital revenues currently identified. It would be
expected that as these years approach, additional funding, particularly from grants, will be
available to support the capital program. Because this model relies on additional borrowings
to maintain the proposed capital program, the operating result is slightly less than the
previous models from 2015/16 as the impact of the borrowing costs are recognised.
The Operating Result before Capital Revenue in each year of the projections reflects deficit
results. This does not mean that Council hasn’t the funds to continue operating, as the main
contributor to the deficits is depreciation, which is a non-cash recognition of Council’s
consumption of its assets.
The reality in this Model is that Council has maintained an extensive capital program,
however, the level of depreciation is very high due to the significant number and value of
Council’s assets. The Projected Discretionary Funds Budget Statement is a more accurate
portrayal of Council’s financial capacity to provide current services as well as undertake
capital works.
Unrestricted Current Ratio
Throughout the 10 year period covered, the Unrestricted Current Ratio is well above the
target level and the industry benchmark of 1:1 which indicates Council’s sound financial
position and ability to satisfy short term obligations from current funds available. The level
of the ratio is slightly less than the previous models as borrowings are undertaken and the
next year’s principal repayments are recognised as current liabilities.
Debt Servicing Ratio
Throughout the 10 year period covered, the Debt Service Ratio is well below the target level
of 10%. This indicates that Council has significant capacity to increase borrowings if so
desired and be able to service the debt without compromising the financial position. The
2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22
Operating Result including Capital Revenue ('000) $8,195 $7,979 $7,872 $5,218 $4,692 $4,683 ($768) ($1,485) ($2,725) ($3,753)
Operating Result before Capital Revenue ('000) ($3,457) ($1,965) ($2,414) ($3,838) ($4,369) ($4,383) ($4,989) ($5,556) ($6,796) ($7,824)
Unrestricted Current Ratio 1.51 : 1 1.42 : 1 1.37 : 1 1.45 : 1 1.48 : 1 1.51 : 1 1.54 : 1 1.51 : 1 1.49 : 1 1.49 : 1
Debt Servicing Ratio 2.79% 2.35% 2.01% 2.01% 2.09% 2.19% 2.24% 2.38% 2.25% 2.28%
Rates and Annual Charges Coverage Ratio 62.62% 63.04% 63.21% 63.79% 63.87% 63.93% 65.35% 65.42% 65.55% 65.58%
Rates and Annual Charges Outstanding Ratio 4.94% 4.93% 4.93% 4.92% 4.93% 4.93% 4.93% 4.93% 4.93% 4.93%
Assets Renewals Ratio 190% 150% 144% 120% 122% 114% 136% 136% 135% 104%
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Page 125 Asset
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ratio has decreasing over the period as current debt is repaid and finalised, however, as the
Model is predicated on increasing borrowings to maintain the proposed capital program
from 2015/16, the ratio continues an upward trend after this year in recognition of the
repayment of the new loans.
Rates and Annual Charges Coverage Ratio
Throughout the 10 year period covered, the Rates and Annual Charges Coverage Ratio is
well above the target level of 50%. This indicates that Council has maintained a significant
degree of dependence upon revenue from rates and annual charges which reflects the
security of Council’s income over the period.
Rates and Annual Charges Outstanding Ratio
This ratio has remained stable across the period of the financial plan and marginally below
the target level of 5%. Although this ratio generally indicates the effectiveness of Council’s
recovery action, consideration should be given to Council’s existing policy of not pursuing
recovery action for pensioners and deferred rates which make up a considerable proportion
of the total outstandings. This policy results in an inflated outcome to this ratio.
Asset Renewal Ratio
For all years of the financial plan the Asset Renewal Ratio of 100% has been satisfied. The
ratio fluctuates between periods depending on the level of capital expenditure allocated to
the relevant assets. This model, in comparison to the previous models, maintains the level
of capital expenditure at the current proposed level resulting in renewals being undertaken
at a greater rate ensuring the ratio is above the target amount.
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$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
Discretionary Funds Available
Available Working Funds Brought Forward 500 500 -
Recurrent Operations 155,601 13,593 14,205 16,902 17,104 16,767 16,372 15,877 15,212 14,982 14,587
Future Works Reserve 10,781 1,989 5,292 500 500 500 500 500 500 500
Organisational Reform 4,066 - 66 500 500 500 500 500 500 500 500
Engadine Community Facilities Stage II 1,214 20 974 220 - - - - - - -
Additional Borrowing (Net of Debt Servicing Costs) - - - - - - - - - - -
Other - 172,162 - 16,102 - 20,537 - 18,122 - 18,104 - 17,767 - 17,372 - 16,877 - 16,212 - 15,982 - 15,087
Proposed General Revenue Capital Program 172,162 16,102 20,537 18,122 18,104 17,767 17,372 16,877 16,212 15,982 15,087
* Funding Sources to be Considered for Future Budgets - - - - - - - - - -
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
TOTAL PROGRAM
General Revenue Funding 141,691 13,451 17,837 15,347 15,154 14,742 14,262 13,682 12,932 12,627 11,657
Other Funds 136,999 278,690 27,098 40,549 14,178 32,015 13,066 28,413 11,066 26,220 11,641 26,383 12,116 26,378 11,751 25,433 12,871 25,803 13,621 26,248 9,591 21,248
General Revenue Funding 30,471 2,651 2,700 2,775 2,950 3,025 3,110 3,195 3,280 3,355 3,430
Other Funds 10,000 40,471 1,000 3,651 1,000 3,700 1,000 3,775 1,000 3,950 1,000 4,025 1,000 4,110 1,000 4,195 1,000 4,280 1,000 4,355 1,000 4,430
TOTAL PROPOSED GROSS CAPITAL WORKS 319,161 44,200 35,715 32,188 30,170 30,408 30,488 29,628 30,083 30,603 25,678
GENERAL REVENUE COMPONENT OF PROGRAM
141,691 13,451 17,837 15,347 15,154 14,742 14,262 13,682 12,932 12,627 11,657
30,471 2,651 2,700 2,775 2,950 3,025 3,110 3,195 3,280 3,355 3,430
TOTAL PROPOSED GROSS CAPITAL WORKS 172,162 16,102 20,537 18,122 18,104 17,767 17,372 16,877 16,212 15,982 15,087
TEN YEAR FINANCIAL PLAN MODEL - MODEL III
TOTAL 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22
Annual Surplus/Shortfall - - - - - -
Cumulative Surplus/Shortfall - - -
- - - - -
-
PROPOSED INFRASTRUCTURE/CAPITAL PROGRAM - MODEL III
TOTAL 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19
- - - - - -
Proposed Gross Other Capital Works
2019/20 2020/21 2021/22
Proposed Gross Infrastucture Program
Proposed Gross Other Capital Works
Proposed Gross Infrastucture Program
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30 June 2013 30 June 2014 30 June 2015 30 June 2016 30 June 2017 30 June 2018 30 June 2019 30 June 2020 30 June 2021 30 June 2022
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
INCOMERevenue:
Rates and Annual Charges 125,381 129,253 133,270 137,407 141,469 145,652 149,962 154,400 158,971 163,680
User Charges & Fees 28,838 30,553 31,469 32,414 33,386 34,387 35,419 36,482 37,576 38,703
Interest and Investment Revenue 4,265 4,392 4,524 4,660 4,800 4,944 5,092 5,245 5,402 5,565
Investment Revaluation Increases (See note) 945 870 388 51 - - - - - -
Other Revenues 17,892 18,429 18,982 19,551 20,137 20,742 21,364 22,005 22,665 23,345
Grants and Contributions - Operating 11,239 11,576 11,924 12,281 12,650 13,029 13,420 13,822 13,823 14,237
Grants and Contributions - Capital Purposes 11,652 9,944 10,286 9,056 9,061 9,066 4,221 4,071 4,071 4,071
Other income: - - - - - - - - - -
Profit from Disposal of Assets - - - - - - - - - -
Profit from Interests in Joint Ventures and Associates - - - - - - - - - -
Total Income from Continuing Operations 200,212 205,017 210,843 215,420 221,503 227,820 229,478 236,025 242,508 249,601
EXPENSESEmployee Costs 95,539 98,824 102,210 105,723 109,370 113,156 117,085 121,164 125,399 129,796
Materials and Contracts 34,447 34,907 36,046 37,219 38,436 39,663 40,934 42,243 43,619 45,044
Borrowing Costs 1,429 1,352 1,206 1,185 1,156 1,137 1,109 1,113 1,173 1,369
Depreciation & Amortisation 23,459 23,797 24,566 25,978 26,564 26,673 27,349 27,924 28,638 29,364
Interest & Investment Losses - - - - - - - - - -
Other Expenses from Ordinary Activities 36,643 37,658 38,443 39,597 40,785 42,008 43,269 44,566 45,904 47,281
Loss from Disposal of Assets 500 500 500 500 500 500 500 500 500 500
Loss from Interests in Joint Ventures and Associates - - - - - - - - - -
Total Expenses from Continuing Operations 192,017 197,038 202,971 210,202 216,811 223,137 230,246 237,510 245,233 253,354
NET OPERATING RESULT FOR YEAR 8,195 7,979 7,872 5,218 4,692 4,683 (768) (1,485) (2,725) (3,753)
Net Operating Result Attributable to Council 8,195 7,979 7,872 5,218 4,692 4,683 (768) (1,485) (2,725) (3,753)
Net Operating Result Attributable to Minority Interests - - - - - - - - - -
8,195 7,979 7,872 5,218 4,692 4,683 (768) (1,485) (2,725) (3,753)
Net Operating Result for the year before Grants and
Contributions provided for Capital Purposes (3,457) (1,965) (2,414) (3,838) (4,369) (4,383) (4,989) (5,556) (6,796) (7,824)
Note: This amount represents investment revaluations for unrealised losses previously identified in the financial statements
INCOME STATEMENT (MODEL III) FOR THE YEAR ENDED
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30 June 2013 30 June 2014 30 June 2015 30 June 2016 30 June 2017 30 June 2018 30 June 2019 30 June 2020 30 June 2021 30 June 2022
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
ASSETSCurrent Assets
Cash and cash equivalents 12,000 12,000 12,000 12,000 12,000 12,000 12,000 12,000 12,000 12,000
Investments 60,327 57,296 61,410 67,449 71,550 75,451 76,153 77,136 78,144 83,777
Receivables 11,776 12,069 12,455 12,745 13,124 13,515 13,870 14,276 14,702 15,142
Inventories 5,249 5,258 5,268 5,278 5,288 5,299 5,309 5,320 5,332 5,344
Other 1,546 1,592 1,640 1,689 1,740 1,792 1,846 1,901 1,959 2,017
Non-current assets classified as held for sale - - - - - - - - - -
Total Current Assets 90,898 88,215 92,773 99,161 103,702 108,057 109,178 110,633 112,137 118,280
Non-Current Assets
Investments 2,000 2,000 2,000 - - - - - - -
Receivables 1,090 1,115 1,148 1,183 1,218 1,255 1,292 1,331 1,371 1,412
Inventories - - - - - - - - - -
Infrastructure, property, plant & equipment 1,119,352 1,132,589 1,187,010 1,210,796 1,214,291 1,233,068 1,236,567 1,238,276 1,239,791 1,235,655
Investments account for using equity method - - - - - - - - - -
Investment property 50,943 53,375 55,922 58,591 61,387 64,316 67,386 70,602 73,971 77,501
Intangible assets - - - - - - - - - -
Other 640 423 184 - - - - - - -
Total Non-Current Assets 1,174,025 1,189,502 1,246,264 1,270,570 1,276,896 1,298,639 1,305,245 1,310,209 1,315,133 1,314,568
TOTAL ASSETS 1,264,923 1,277,717 1,339,037 1,369,731 1,380,598 1,406,696 1,414,423 1,420,842 1,427,270 1,432,848
LIABILITIESCurrent Liabilities
Payables 17,562 18,089 18,632 19,215 19,849 20,534 21,281 22,106 23,020 24,018
Interest bearing liabilities 3,104 2,693 2,874 3,253 3,644 3,945 4,449 4,379 4,328 4,094
Provisions 38,063 40,509 42,986 45,484 47,996 50,510 53,015 55,496 57,937 60,321
Total Current Liabilities 58,729 61,291 64,492 67,952 71,489 74,989 78,745 81,981 85,285 88,433
Non-Current Liabilities
Payables - - - - - - - - - -
Interest bearing liabilities 17,186 15,323 15,803 15,081 14,745 14,185 13,998 15,260 17,546 20,003
Provisions 4,692 4,858 5,029 5,204 5,382 5,564 5,751 5,941 6,135 6,331
Total Non-Current Liabilities 21,878 20,181 20,832 20,285 20,127 19,749 19,749 21,201 23,681 26,334
TOTAL LIABILITIES 80,607 81,472 85,324 88,237 91,616 94,738 98,494 103,182 108,966 114,767
NET ASSETS 1,184,316 1,196,245 1,253,713 1,281,494 1,288,982 1,311,958 1,315,929 1,317,660 1,318,304 1,318,081
EQUITYRetained earnings 1,058,064 1,066,043 1,073,915 1,079,133 1,083,825 1,088,508 1,087,740 1,086,255 1,083,530 1,079,777
Revaluation reserves 126,252 130,202 179,798 202,361 205,157 223,450 228,189 231,405 234,774 238,304
Council equity interest 1,184,316 1,196,245 1,253,713 1,281,494 1,288,982 1,311,958 1,315,929 1,317,660 1,318,304 1,318,081
Minority equity interest - - - - - - - - - -
TOTAL EQUITY 1,184,316 1,196,245 1,253,713 1,281,494 1,288,982 1,311,958 1,315,929 1,317,660 1,318,304 1,318,081
SUTHERLAND SHIRE COUNCIL
BALANCE SHEET (MODEL III) AS AT
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30 June 2013 30 June 2014 30 June 2015 30 June 2016 30 June 2017 30 June 2018 30 June 2019 30 June 2020 30 June 2021 30 June 2022
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts:
Rates and Annual Charges 125,176 129,078 133,089 137,222 141,278 145,455 149,758 154,191 158,756 163,458
User Charges & Fees 28,703 30,414 31,326 32,266 33,234 34,231 35,258 36,316 37,406 38,528
Interest 5,128 5,209 4,857 4,654 4,741 4,883 5,029 5,180 5,336 5,496
Grants and Contributions 18,061 17,563 18,163 17,396 17,691 18,075 17,667 17,881 17,872 18,286
Other 18,207 18,753 19,316 19,921 20,551 21,199 21,876 22,589 23,329 24,086
Payments :
Employee Costs (93,207) (96,231) (99,583) (103,071) (106,702) (110,481) (114,417) (118,517) (122,789) (127,242)
Materials and Contracts (34,312) (34,769) (35,904) (37,073) (38,285) (39,508) (40,773) (42,078) (43,449) (44,869)
Interest (1,429) (1,352) (1,206) (1,185) (1,156) (1,137) (1,109) (1,113) (1,173) (1,369)
Other (36,953) (37,407) (38,168) (39,377) (40,747) (41,969) (43,228) (44,525) (45,861) (47,237)
Net cash provided by (or used in) operating activities 29,374 31,258 31,890 30,753 30,605 30,748 30,061 29,924 29,427 29,137
CASH FLOWS FROM INVESTING ACTIVITIES
Receipts:
Sale of Investments 9,593 3,031 - - - - - - - -
Sale of Real Estate Assets - - - - - - - - - -
Sale of Property, Plant and Equipment 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000
Sales of Interests in Joint Venturers/Associates - - - - - - - - - -
Other - - - - - - - - - -
Payments:
Purchase of Investments - - (4,115) (4,039) (4,101) (3,901) (701) (983) (1,009) (5,633)
Purchase of Real Estate Assets - - - - - - - - - -
Purchase of Property, Plant and Equipment (39,950) (33,015) (29,438) (27,370) (27,558) (27,588) (30,678) (31,133) (31,653) (26,728)
Purchase of Investment Property - - - - - - - - - -
Purchases of Interests in Joint Venturers/Associates - - - - - - - - - -
Net cash provided by (or used in) investing activities (29,357) (28,984) (32,553) (30,409) (30,659) (30,489) (30,379) (31,116) (31,662) (31,361)
CASH FLOWS FROM FINANCING ACTIVITIES
Receipts:
Borrowings and Advances 2,800 - 2,500 1,650 2,400 2,450 3,300 4,650 5,450 5,500
Lease Liabilities 900 900 900 900 900 900 900 900 900 900
Payments:
Borrowings and Advances (2,858) (2,316) (1,881) (2,039) (2,392) (2,757) (3,031) (3,509) (3,267) (3,330)
Lease Liabilities (859) (858) (856) (855) (854) (852) (851) (849) (848) (846)
Net cash provided by (or used in) financing activities (17) (2,274) 663 (344) 54 (259) 318 1,192 2,235 2,224
Net increase/(decrease) in cash held - - - - - - - - - -
Cash assets at beginning of reporting period 12,000 12,000 12,000 12,000 12,000 12,000 12,000 12,000 12,000 12,000
Cash assets at end of reporting period 12,000 12,000 12,000 12,000 12,000 12,000 12,000 12,000 12,000 12,000
NOTE : Investments will be purchased and sold at different rates throught each of the periods depending on interest rates, terms, opportunities etc.
The figures shown above in relation to investments reflect the net result of the sale and purchase throughout the year.
STATEMENT OF CASH FLOWS (MODEL III) FOR THE YEAR ENDED
Background Workforce Planning
Long Term Financial Plan
Page 130 Asset
Management
4.5.5 Current Adopted 10 Year Discretionary Funds Program – Capital Infrastructure and
Corporate Support Program
To be inserted at a later date (Blue Pages).
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