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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
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
- 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
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
14 March 2011
Director Corporate Services
- 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)
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
- Model Outputs
Capital Funding Statement
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
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
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
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
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
- 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.
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
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
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