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Leichhardt Council Budget 2011

Annandale Priority Projects

• Water Damage to Annandale Neighbourhood Centre upstairs SW wall
• Storm Water Drains Collins Street, at Trafalgar and Wells Street
• Flooding around 165 Parramatta Road
• Traffic Calming, Booth Street
• Address Excessive Lighting Intersection of Collins and Trafalgar Streets
• Introduction of LED Lighting

Planning

Below is extract from presentations to 14 March 2011 Leichhardt Council Budget and Task Force Meeting - original documents available at LMC Website

Infrastructure and Service Delivery
Budget and Parking Management Taskforce
14th March 2011
Peter Gainsford

• Infrastructure Program
  Past few years we have focussed on increased funding of core infrastructure such as roads, footpaths, bridges drains and sea walls.
  Continued development of 10 year infrastructure plans for all each asset category.
  Need to match funding in 10 year Long Term Financial Plan to Infrastructure needs which requires increased funding in parks, buildings, stormwater, seawalls and wharves.
• Budget Challenges Buildings
  LPAC – requires $5.5M funding over next 10 years
  Increased Fire Safety requirements for Council buildings
  Dawn Fraser Pool – Fire safety and accessibility upgrade
  Annandale Town Hall – Main hall floor upgrade
  Birchgrove Oval – New storage shed and building upgrades in accordance with POM
  Lambert Park – POM building requirements $1.45M
  2-8 Weston Street upgrade of Bells store $1.3M
  Continued public toilet and facility upgrades
• Budget Challenges Parks
  Need to develop park lighting upgrade budget.
  Recurrent playground funding needs to increase from $100,000 to $160,000/yr to cater for shade structures, soft fall and greater community expectations.
  Need increased funding $130,000/yr to undertake playing field renovations every 15 years.
  Lambert Park playing surface.
  Many Plan of Management projects not funded in LTFP.
• Budget Challenges Stormwater Drainage
  Much of Council’s drainage system is quite old and Council has had to develop a priority rehabilitation program for high risk areas.
  Councils CCTV program of pipelines has identified $3M worth of rehabilitation works.
  Council also needs to allow a minimum $150,000 per annum for stormwater capacity improvements and will need to consider further funding increases once the flood risk management plan has been finalised.
  Council will also need to consider funding for water quality and water conservation projects
• Budget Challenges Traffic
  $140,000/yr funding allocated in LTFP for LATM works and $689,000 listed as current priorities for key projects such as; Booth Street $240,000
  Wortley $115,000
  Curtis Road $189,000
  Evans Street $50,000
  Lords Road $10,000
  Reynolds Street $20,000
  Grove Street Birchgrove $18,000
• Bike Program
  After 10/11 funding is spent we have $1.9M remaining works which will take five years to complete with current funding levels of $400,000/yr.
  In addition to the above funding the following projects require funding;
  Johnston's Creek Bike Path - $115,000 for lighting and $100,000 for path works.
  Johnston Street Flagship route preliminary costs $400,000 stage 1 line marking and other works or $2.4M full separated path and landscaping.
• Mainstreet program 11-12
  Parramatta Road – Annandale Street to Young Street combine with flooding works
  Marion Street – Edith Street to Flood Street (north side)
  Darling Street – Union Street to Johnston Street
  Annandale – Booth Street – supplement traffic calming

Budget and Parking Management Taskforce
14 March 2011
David Marshall
Director Corporate Services
Financial Issues

• Long Term Financial Plan
  Adopted in 2010/11
  10 Year timeframe
  Financial projections, operating statement, balance sheet for 10 years
  Annual budgeting provides a short term focus and loses sight of the future cost of decisions
  LTFP provides a framework for identifying over the longer term the funding available to deliver services and look after infrastructure
• Financial Goals and Indicators
  Achieving a budget operating surplus so that future ratepayers are not left with an excessive share of the cost of capital works (includes cost of depreciation of assets)
  Operating Surplus
  Ensuring infrastructure is maintained and renewed so that it is safe, meets the needs of the community, and so that these costs are not transferred to future generations
  Infrastructure gap, Infrastructure renewal ratio
  Ensure levels of debt remain affordable
  Debt service ratio
  Ensure enough working capital and reserves to provide adequate liquidity as a buffer against future adverse circumstances and unforseen events, and to set aside funds for long term requirements
  Unrestricted Current Ratio, level of Working Funds and Reserves
• Long Term Financial Plan
  This presents a model based on continuing the existing revenue streams to provide the funding for future services and infrastructure
  It is assumed that existing services and service levels continue, and that costs will not increase beyond available revenues.
  This model is then tested by showing the sensitivity of the long term budget to key assumptions
• Model Outputs 10 year:
  Operating Statement
  Capital Funding Statement
  Balance Sheet
  Reserves and Working Funds Statement
  Financial Key Performance Indicators – graphically presented
• Long Term Financial Plan
  Reserves are funds set aside for specific future purposes, such as for future property renewal, capital works, or to fund employee liabilities.
  Internal Reserves are funds set aside at Council's discretion. External Reserves are required to be set aside due to external regulation, such as for the Garbage Service.
  Working funds are general funds not set aside for specific purposes, as a buffer in case of adverse financial circumstances which add to general liquidity.
  It is the level of Internal Reserves and Working Funds combined which are a key determinant of financial health, and influence the UCR referred to previously.
  Plotted on the above chart is the level of combined Reserves and Working funds. Also shown is the required level of Reserves and Working Funds to maintain the UCR above 2.0, the target.
  The model shows that there are surplus funds available each year that could be spent while maintaining the UCR at 2.0.
  These funds are largely in Council's Property and Special Rates Reserves.
  There is also a significant discretionary reserve for employee entitlements, which while not required by law to be set aside is recommended for prudent financial management.
  
• Long Term Financial Plan
  Sensitivity Testing - Impact on Internal Reserves and Working Fund Balances
  1. Internal Reserves and Working Funds - 'Base' assumptions
  2. Base with labour changed from 3.4% to 4.0% increase pa
  3. 'Base with labour changed from 3.4% to 4.0% increase pa, Materials and Contracts from 3.0% to 4.0% increase pa
  4. Base with Rates changed from 3.3% to 2.8% pa
  5. Base with Rates changed from 3.3% to 4.0% pa
  Minimum Internal Reserves and Working Funds for UCR = 2.0
  30 June 2011 Budget 30 June 2012 Budget 30 June 2013 Budget 30 June 2014 Budget 30 June 2015 Budget 30 June 2016 Budget 30 June 2017 Budget 30 June 2018 Budget 30 June 2019 Budget 30 June 2020 Budget
  The above chart shows a range of outcomes for various changes in assumptions.
  Council's finances are particularly sensitive to increases in labour costs and also rates revenue. A small change in these factors can dramatically change the financial outcome.
  The Base case provides for estimated existing revenues to continue, with ongoing expenses limited to this same level. To keep within these limits, there would be no capacity to expand Council's current services. In addition, ongoing costs reductions would be required to offset inevitable cost increases above the assumed escalation levels.
  It is considered that over the long term, an outcome in line with model 2 or 3 is more likely given revenue constraints.
  These models show the budget being balanced by utilising funds otherwise allocated to Reserves (or other expenditure such as infrastrructure)
• Debt – peaked at $20M in 2001.
  Debt - Loan Principal Outstanding and New Loans
  New borrowing
  Debt - Loans Outstanding forecast
  
  30 June 2009 Actual 30 June 2010(excludingcarryover loan) 30 June 2010 (including carryover loan) 30 June 2011 30 June 2012 30 June 2013 30 June 2014 30 June 2015 30 June 2016 30 June 2017 30 June 2018 30 June 2019 30 June 2020 Budget
  Beyond 2009/10, Council does not have any new borrowing planned. On this basis, it would be debt free by 2020.
  Loan borrowing can be a prudent way to fund major capital works and enables the cost of assets to be shared by both current and future residents.
  Loans can also smooth out peaks and troughs in required expenditure.
  Further Loan borrowing is an option available to Council in the future.
  
• Long Term Financial Plan
  Renewals Ratio - Buildings and Infrastructure(excludes parks, parking meters, waste, plant)
  Renewal capex - buildings and infrastructure
  Depreciation - building and infrastructure
  Renewals Ratio - Building & Infrastructure
  This chart shows renewal expenditure compared to depreciation for all Building and Infrastructure, excluding parks and other assets.
  The assets included in this indicator are as per the Department of Local Government requirements.
  Ratio is boosted by additional building renewals in 2010/11 for public toilets $200,000
  Council has an asset renewal gap. That is, assets are depreciating in value faster than they are being renewed.
• Cost Shifting
  Cost shifting from other levels of Government has had a big impact on
  Council finances:
  Examples of where State and Federal Government has transferred costs,imposed obligations or withdrawn funding;
  Fire Brigades, SES, road safety, administration of Companion Animal Act, Administration of Protection of the Environment Operations Act, Administration of Contaminated Land Management Act, administering food safety regulation, aged and disability services, youth services, community safety, aboriginal services, school subsidies including sporting facilities, transport, public libraries, citizenship ceremonies, pensioner rates rebate, Callan Park
  Other big costs: Council’s ability to fund future works has been detrimentally impacted by the very large increases to electricity costs and superannuation (defined benefit scheme contributions due to GFC) - approx $1m in 2010/11
• Budget Impacts 2011/12
  Rates
  IPART increase only 2.8%
  Wages Award labour increase 3.25% effective from 1/7/2011
  Gap = $100,000 pa approx
  Fire and SES levy- increased 11.6% in
  2010/11or $95k over budget – have to find every year from now on
  Budget Impacts
  SASS Super – increase due to GFC has been adjusted.
  In 2011/12 Budget allowed $450k but adjusted amount
  $300,000 (payment series reduces over time)
  Superannuation Guarantee Levy to increase from 9% to 12% from 2013/14 to 2019/20
  Additional cost $4.2 million over 10 years
  TOTAL OF CHANGES – net additional cost $6 million approx over 10 years
  Other impacts not taken into account above:
  continued energy cost escalation
  Additional revenue from higher interest on investments if interest rates remain high
• Summary of Modelling
  Council is currently in good financial health based on key financial indicators
  Original LTFP estimated up to $16 million in Reserves able to be spent over the next 10 years while maintaining acceptable financial KPI’s (this is expenditure over and above existing services or programmed works).
  However this is likely to reduce in the next iteration by approximately $6 million as outlined above
• Unfunded Future Capital Works
  Revised LTFP likely to show approximately $10 million ‘discretionary’ funding over 10 years.
  However infrastructure requirements modelled last year showed an additional $22 million was required over 10 years for Renewal, plus:
  A range of possible future capital works such as parks plans of management, Balmain depot, Leichhardt Civic Precinct, amounting to some $40 to 50 million
  Without additional revenue, the reality is that most of the additional capital works, along with possible expansion to services and service levels, cannot be funded.
• Conclusions
  Council is currently in good financial health and the long term financial plan provides a basis for this to continue, while recognising limited capacity to meet full infrastructure and capital requirements.
  While progress has been made in increasing infrastructure renewal expenditure, a significant infrastructure gap will remain under current revenue structures.
  The modelling has shown that if revenues are restricted to current sources and limits, there will be no capacity to expand services or service levels without utilising funds otherwise available for reserves or capital works.
• Timetable from here
  Draft Budget will be prepared and presented to a Budget & Parking Management Taskforce on Tuesday 17 May 2011.
  Budget will be presented to Council for exhibition on Tuesday 24 May 2011
  Following the exhibition period the Budget will be presented to Council for adoption on 28 June 2011

This page www.ramin.com.au/annandale/leichhardt-council-budget-2011.shtml.shtml Last Updated: 16 October 2011.