Financial Management Strategy & LongTermFinancialPlan 2017 ... · Huon Valley Council – Financial Management Strategy and Long Term Financial Plan 2017/2018 – 2026/2027 Page 7

Financial Management Strategy &

Long Term Financial Plan

2017/2018 – 2026/2027

Approved by Council at a meeting held on 30 November 2016

Resolution No. 16.021/16*

Huon Valley Council – Financial Management Strategy and Long Term Financial Plan 2017/2018 – 2026/2027 Page 3 █

Table of Contents

SECTION ONE: EXECUTIVE SUMMARY ................................................................................................61.1 THE FINANCIAL MANAGEMENT STRATEGY AND LONG TERM FINANCIAL PLAN 61.2 FINANCIAL MANAGEMENT STRATEGY AND LONG TERM FINANCIAL PLAN

OBJECTIVES................................................................................................................ 71.3 STRATEGIC FINANCIAL DIRECTION ......................................................................... 91.4 KEY STRATEGIC OUTCOMES.................................................................................. 10

SECTION TWO: LINKING THE LONG TERM FINANCIAL PLAN AND STRATEGIC PLAN .................132.1 STRATEGIC PLANNING FRAMEWORK.................................................................... 13

SECTION THREE: HUON VALLEY COUNCIL FINANCIAL INDICATORS............................................143.1 INTRODUCTION......................................................................................................... 143.2 ANALYSIS OF THE COUNCIL’S FINANCIAL SUSTAINABILITY............................... 15

3.2.1 Financial Sustainability........................................................................................... 153.2.2 Cumulative Underlying Operating Surplus/Deficit .................................................. 153.2.3 Liquidity.................................................................................................................. 163.2.4 Rate Effort.............................................................................................................. 173.2.5 Cost and Efficiency ................................................................................................ 173.2.6 Rates Affordability .................................................................................................. 173.2.7 Population Growth.................................................................................................. 17

SECTION FOUR: LONG-TERM BORROWING STRATEGIES...............................................................194.1 INTRODUCTION......................................................................................................... 194.2 BACKGROUND TO COUNCIL’S DEBT PORTFOLIO ................................................ 194.3 MEASURING WHICH LEVEL OF DEBT IS APPROPRIATE...................................... 194.4 WHAT DO THE FINANCIAL INDICATORS MEAN?................................................... 20

4.4.1 Liquidity.................................................................................................................. 204.4.2 Debt Exposure ....................................................................................................... 204.4.3 Debt Management – Total Debt as a Percentage of Rate Revenue ...................... 204.4.4 Debt Servicing Costs – Costs as a Percentage of Total Revenue ......................... 21

4.5 WHAT IS A PRUDENT DEBT LEVEL?....................................................................... 214.6 FUTURE LOAN PROGRAM ....................................................................................... 22

SECTION FIVE: STATUTORY AND DISCRETIONARY RESERVES.....................................................235.1 INTRODUCTION......................................................................................................... 235.2 NATURE AND PURPOSE OF RESERVES................................................................ 23

SECTION SIX: RATING AND OTHER REVENUE STRATEGIES ..........................................................256.1 INTRODUCTION......................................................................................................... 256.2 VALUATIONS ............................................................................................................. 25

6.2.1 General Valuation .................................................................................................. 256.2.2 Definitions of Valuations......................................................................................... 256.2.3 Supplementary Valuations ..................................................................................... 25

6.3 BACKGROUND TO THE PRESENT RATING SYSTEM ............................................ 266.4 COMPONENTS OF THE COUNCIL’S RATING BASE ............................................... 266.5 ASSESSMENT OF CURRENT RATING LEVELS ...................................................... 276.6 RATES AND CHARGES BUDGET – 2016/2017 ........................................................ 28

6.6.1 Revenue – Rate Increase – 2016/2017.................................................................. 286.6.2 Developer Contributions......................................................................................... 286.6.3 Borrowing Strategy................................................................................................. 286.6.4 Other Revenue Raising Options............................................................................. 28

6.7 RATING STRATEGY .................................................................................................. 286.7.1 Principles and Options ........................................................................................... 28

6.8 GRANT REVENUE ..................................................................................................... 296.8.1 Principles and Options ........................................................................................... 29


6.8.2 Grants Commission................................................................................................ 296.9 FEES AND CHARGES REVENUE ............................................................................. 296.10 DISTRIBUTIONS RECEIVED ..................................................................................... 296.11 INTEREST REVENUE ON INVESTMENTS ............................................................... 29

SECTION SEVEN: ASSET MANAGEMENT...........................................................................................317.1 INTRODUCTION......................................................................................................... 317.2 BACKGROUND TO THE COUNCIL’S TOTAL ASSET PORTFOLIO AT 30 JUNE 2015

317.3 SUMMARY OF FIXED ASSETS ................................................................................. 327.4 KEY QUESTIONS TO DETERMINE SERVICE LEVEL/INVESTMENT ...................... 327.5 SUSTAINABILITY INDEX ........................................................................................... 337.6 ASSET CONDITION ASSESSMENT.......................................................................... 337.7 STRATEGIC ASSET MANAGEMENT ........................................................................ 34

7.7.1 Strategic Levels of Service: Asset Management Plans .......................................... 357.8 FUTURE ASSET MANAGEMENT .............................................................................. 35

SECTION EIGHT: CAPITAL WORKS PROGRAM (RENEWAL) ............................................................378.1 INTRODUCTION......................................................................................................... 378.2 LEVEL AND NATURE OF CAPITAL WORKS RENEWAL.......................................... 378.3 CAPITAL WORKS ASSET REPLACEMENT PROGRAM 2016/17 – 2026/27............ 388.4 CAPITAL RENEWAL INVESTMENT LEVELS............................................................ 388.5 CAPITAL FUNDING SOURCES ................................................................................. 388.6 CONCLUSION ............................................................................................................ 38

SECTION NINE: CAPITAL WORKS PROGRAM (NEW)........................................................................409.1 INTRODUCTION......................................................................................................... 409.2 LEVEL AND NATURE OF NEW CAPITAL WORKS................................................... 409.3 10 YEAR NEW ASSET PROGRAM 2016/17 – 2026/27 ............................................. 409.4 NEW CAPITAL INVESTMENT LEVELS ..................................................................... 419.5 CAPITAL FUNDING SOURCES ................................................................................. 419.6 CONCLUSION ............................................................................................................ 41

SECTION TEN: SERVICE PROVISION AND PLANNING......................................................................4210.1 INTRODUCTION......................................................................................................... 4210.2 OPERATING EXPENDITURE/REVENUE .................................................................. 4210.3 GROWTH OF THE COUNCIL..................................................................................... 4310.4 SERVICE PROVISION AND PLANNING.................................................................... 4310.5 CONCLUSION ............................................................................................................ 44

SECTION ELEVEN: LONG TERM FINANCIAL PLAN ...........................................................................4511.1 INTRODUCTION......................................................................................................... 4511.2 MODELLING METHODOLOGY.................................................................................. 4511.3 FINANCIAL ASSUMPTIONS ...................................................................................... 46

10.3.1 Labour and On-Costs............................................................................................. 4610.3.2 Depreciation........................................................................................................... 4610.3.3 Materials and Contracts ......................................................................................... 4610.3.4 Borrowing Costs..................................................................................................... 4610.3.5 Rate Revenue ........................................................................................................ 4610.3.6 Recurrent Grant Funding ....................................................................................... 4610.3.7 Fees and Charges.................................................................................................. 4610.3.8 Statutory Fees and Fines ....................................................................................... 4610.3.9 Interest on Investments.......................................................................................... 4610.3.10 Capital Grants ........................................................................................................ 4710.3.11 Capital Expenditure................................................................................................ 47

11.4 CONCLUSION ............................................................................................................ 47APPENDIX A: GLOSSARY OF TERMS - DEFINITIONS........................................................................48


APPENDIX B: FINANCIAL STATEMENTS ............................................................................................4910 YEAR LONG TERM FINANCIAL PLAN .............................................................................. 4910 YEAR LONG TERM BALANCE SHEET.............................................................................. 5010 YEAR LONG TERM CASH FLOW ...................................................................................... 51


SECTION ONE: EXECUTIVE SUMMARY

1.1 THE FINANCIAL MANAGEMENT STRATEGY AND LONG TERM FINANCIAL PLAN

The Financial Management Strategy and Long Term Financial Plan (LTFP) is the key ten yearfinancial planning document of the Council that is governed by a series of financial strategies andaccompanying performance indicators that the Council considers and adopts. It establishes thefinancial framework upon which sound financial decisions are made.

The Council has a legislative requirement to comply with Part 8 (Financial ManagementDivision 1 – Funds, Expenditure and Investments) of the Local Government Act 1993.

A key component of sound financial management is the preparation of longer term financialstrategies, plans and budgets. The Council has prepared forward budgets for the ten years2016/17 to 2025/26 that includes detailed ten year renewal and new capital expenditureprograms. The development and adherence to longer term business/service plans is critical toensure the Council remains financially sustainable.

The Plan is constantly under review and is modified on an as needs basis usually duringquarterly budget reviews and during the annual budget preparation process.

The Long Term Financial Plan, and indeed the accompanying Financial Strategies do not have tobe re-created each year, but rather they should be continually reviewed and modified. The Planas such will become the detailed business working papers that support the financial costing thatappear in each Annual Budget.

The key reasons for the development of a long term financial framework are:

• To establish a financial framework over the next ten years to ensure the Council’s strategicobjectives are achieved;

• To provide an assessment of the resources (financial and non-financial) required toaccomplish the objectives and strategies included in the Council’s Strategic Plan (nonfinancial resources are assumed to include human resources and Council’s asset base);

• To establish a basis to measure the Council’s adherence to its policies and strategies; and

• To assist Council to comply with sound financial management principles, in accordance withthe Local Government Act 1993 and to plan for the long term financial sustainability of themunicipal area


1.2 FINANCIAL MANAGEMENT STRATEGY AND LONG TERM FINANCIAL PLANOBJECTIVES

The LTFP is intended to achieve the following objectives in the ten year time frame:

• Maintain the existing range and level of service provision and develop the capacity to growand add new services where appropriate;

• Maintain a strong cash position, ensuring the Council remains financially sustainable in thelong term;

• Achieve operating statement surpluses with the exclusion of all nonoperational items such asgranted assets and capital income;

• Maintain debt levels below prudential guidelines;• Continue to pursue recurrent grant funding for strategic capital funds from the state and

federal government; and• Provide for rate increases that establish a funding level for a sustainability index of 1,

including increasing funding for capital works (asset renewal, new/expansion, upgrade) andasset maintenance.


Financial sustainability is explained in the following diagram.

The Council is presently in the medium range of the sustainability pyramid. It may bedifficult to reach all the long term sustainability goals however the Council continues toimprove its sustainability. This improved sustainability is demonstrated by an adequate cashposition, improving capital expenditure and a continued closure of the infrastructure fundinggap.


1.3 STRATEGIC FINANCIAL DIRECTION

The Council, as part of developing its LTFP, establishes its borrowing strategy, assetmanagement, capital investment, discretionary and statutory reserves, capital worksprogram, the range and level of services provided and the revenue raising strategy.

A number of strategic challenges remain ahead including renewing existing assets,continuing to provide an appropriate range and level of services to a growing and changingcommunity, maintaining a sound financial position and addressing the need for capitalexpansion. The other key related issue is the risk and liability that the Council and thecommunity face if the Council does not invest in asset renewal at an adequate rate.

The LTFP establishes the strategic financial direction for the Council to meet the funding andinvestment challenges that lie ahead in the next ten years. The LTFP is prepared inconjunction with the Council’s Strategic Plan to ensure the affordability of activities includedin the Council Strategic Plan.

A Glossary of Terms is attached in Appendix A. Appendix B details Council’s FinancialStatements, which are an outcome of this LTFP.


1.4 KEY STRATEGIC OUTCOMES

The following table highlights the outcomes, strategies and key actions of this LTFP. Eachsection includes detailed analysis to support the strategies. The key strategies providedirection for the preparation of the Council’s Budgets.

Section Outcomes Strategy Key ActionsSection 3:FinancialIndicators

That the Council ensuressustainability to enableservice delivery to bemaintained and theflexibility to respond toopportunities as they arise.

That the Council targets to achievea consistent and graduallystrengthening underlying surplusresults in the income statement inorder to ensure the ongoingdelivery of services and capitalworks programs.

That the liquidity ratio of theCouncil in the LTFP be targeted toshow a strengthening trendaverage of at least a 1.5:1 ratio inthe later years of the Plan.

That the budgeted cash position besufficient to fund daily cashrequirements as well as provideopportunities for funding of newacquisitions and short termcontingencies.

That the Council invests in highsecurity, low risk financialinstruments to safeguard theCouncil’s financial position.

That the Council considersopportunities tobenchmark with otherTasmanian councils andthose of a similar size andcouncil category.

That the Council appliesthe outcomes of theadopted LTFP to the2016/17 budget and futurebudgets

The Council monitorscompliance with itsInvestment policy

Section 4:Long TermBorrowingStrategies

That the Councilundertakes actions toconsider options availableso that it continues tominimise overall reliance onborrowings

Any new loan borrowings are to beused to fund intergenerationalcapital investments where thecommunity benefits are long term

That the Council borrowsfunds for capital expansionprojects that provideintergenerational equity.

That the Council retains itsdebt servicing andredemption costs at orbelow 10 cents in the raterevenue dollar over the lifeof this LTFP.

Section 5:StatutoryandDiscretionaryReserves

That the Council generatessufficient funds fromoperations to fund dailyoperations and replaceassets

That wherever possible anymaterial favorable budget variationsrealised in a given financial year bespecifically quarantined andreserved.

That the Council maintainsdiscretionary reserves forstand-alone operations orprojects.


Section Outcomes Strategy Key ActionsSection 6:Rating andotherRevenueStrategies

To provide a reasonabledegree of consistency andstability in the level of therates burden

That the Council consider themost appropriate ratingstrategy to provide adequatefunds to:

a. Achieve a graduallystrengthening underlyingsurplus in the incomestatement

b. Achieve a sustainablecash flow; and

c. Fund capital renewalprojects

That the Council retains itsvaluation base.

That the Council, in 2016/17,restricts the increase in totalrevenue for rates and chargesas determined to 4% or less. Aconsistent rate increase isapplied to the LTFP.

That Council pursues a policyof applying funds receivedfrom Federal AssistanceGrants above that required foroperational purposes to fundfirstly, asset renewal and thenthe new asset program.

That the Council pursuesrecurrent grant funding andstrategic capital fundingaligned with the Council’sStrategic Plan objectives,including benchmarking ofresults with other councils.

Council investigates otherrevenue raising sources toreduce burden on rate payers.

Section 7:AssetManagement

The Council’s assets will befit for purpose to providethe desired level of serviceto the community.

Any new capital works (capitalexpenditure) proposals mustinclude a lifecycle costevaluation exercise thatidentifies and costs the assetconstruction, maintenance,operating and depreciationcosts i.e. Whole of lifecyclecosts.

That the Council updatesAsset Management Plans forall classes of the Council’sassets with a focus onensuring the assets are fit forpurpose and provide thedesired level of service to thecommunity.

That the Council, havingestablished its critical renewalinvestment levels updates it’sdetailed Asset ManagementPlans for all classes of Councilassets incorporating servicelevel assessments.

That the Council, in updatingits Asset Management Plans,determines how service levelswill be reached including acombination of improvedrevenue raising, review ofexisting service levels, assetdisposal and composition ofthe asset portfolio.

That the Council allocatessufficient funds to the renewalof existing assets and anyoperational surpluses beinvested into constructing newassets.


Section Outcomes Strategy Key ActionsSection 8:CapitalWorksProgram(Renewal)

That the Council allocatesfrom operations cash fundsequivalent to depreciationexpense. This will enablethe Council to achieve arenewal index of at least1:1.

That capital expenditure on assetrenewal projects is funded throughthe depreciation expenseallocation.

That the Council updatesit’s 10 Year AssetRenewal Program toensure that Counciladequately maintains itsexisting asset base.

The Council cash fundsdepreciation.

Section 9:CapitalWorksProgram(New)

That the Council onlyallocates operationalsurpluses or funding fromexternal sources towardsnew capital works.

To consider all relevant factorswhen reviewing the 10 year newasset program, including whole oflife cycle cost evaluation.

That the Council maintainsa 10 Year New AssetProgram which enablesthe planned provision ofnew infrastructure.

Section 10:ServiceProvisionand Planning

That the Council generatessufficient funds fromoperations to continue toprovide the existing level ofservices to our community.

That the Council determine howdesired service levels will bereached including a combination ofimproved revenue raising,rationalisation and review ofexisting service levels.

That the Council utilises itsStrategic Plan todetermine the range ofservices to be provided tothe community through theannual budget processbased on an analysis oforganisational andfinancial capability.

Section 11:Long TermFinancialPlan

That the Council ensuresthe provision of areasonable degree ofconsistency and stability inthe level of the ratesburden.

That the Council ensurescompliance with the LTFP whendeveloping future budgets.

That the Council reviewsand updates the LTFP onan annual (ongoing) basis.


SECTION TWO: LINKING THE LONG TERM FINANCIAL PLAN AND STRATEGIC PLAN

2.1 STRATEGIC PLANNING FRAMEWORK

The diagram below shows the links between the LTFP and the balance of the corporate planningframework.

The key strategic documents include the Council’s Community Plan, Strategic Plan and theAnnual Plans in accordance with legislative requirements and Council policies.

The Council sets the strategic direction to provide the General Manager with the necessaryguidance to develop and implement plans, actions and strategies to achieve these strategicoutcomes.

2020 Community Plan

10 Year StrategicPlan

Long Term Financial Plan

10 YearOperational

Budget

10 YearAsset

RenewalBudget

10 YearNew Asset

Budget

Annual Plan

Annual Budget

The Organisation

ExecutiveServices

Regulatory&

DevelopmentServices

InfrastructureServices

FamilyServices

CorporateServices


SECTION THREE: HUON VALLEY COUNCIL FINANCIAL INDICATORS

3.1 INTRODUCTION

Over recent years financial sustainability of local government has been the cause for ongoingconcern as requests from communities for expanded services beyond those traditionally providedhave not always been matched by expanded revenue streams and improved operationalefficiencies. Local Government responsibilities have increased over many years in a number ofareas including health, aged care, social services, community safety, accessible transport andenvironmental management.

Reasons for the increase in local government diversification of functions include:

• Devolution with Federal or State Governments requiring local government to takeresponsibility for services;

• Raising the bar, where other tiers of Government increase the complexity or standard of aLocal Government service;

• Cost shifting, where the withdrawal of federal/state funding support to local government toprovide a service previously provided by another level of government; and

• Increased community expectations and policy choice where council’s voluntarily choose toexpand their service provision.

Due to the limited revenue base of local government (municipal rates, user charges andgrants/subsidies) councils have needed to be proactive in the minimisation of costs and themaximisation of efficiencies in order to maintain an increasingly diverse service delivery.Successful initiatives have included outsourcing, structural reforms, corporatisation of commercialactivities and shared services.

As with any organisation, councils can experience sustainability challenges if they do not haverobust financial planning, management, and governance. This should include a strong ten yearplan, consistent annual budgets and detailed half-yearly financial position reviews. Themanagement quality and financial discipline needs support via effective governance from aCouncil who can clearly establish what outcomes a community expects and then monitors andguides the General Manager to deliver on those outcomes.

Developing financial strategies for councils is often a difficult process. Key questions to considerare:

• Is council achieving a sufficient amount of revenue to provide services to the community andwhat alternative revenue streams are there?

• What is Council’s targeted renewal investment and is this maintaining an acceptable level ofservice for the community?

• What should the target be in respect to resourcing expenditure on new assets (capitalexpenditure)?


• What is an acceptable rate and charge increase?

• What is an acceptable level of debt?

Some of the answers to these questions come from the use of financial indicators that assess thecomparative financial position of each council in Tasmania, providing a valuable source ofinformation in establishing financial strategies. The indicators are used to identify trends infinancial sustainability.

This section considers:

• Analysis of the Council’s financial sustainability from the perspective of the financial indicatorsas required in the Annual Report; and

• Operating surplus exclusive of capital income and abnormal items.

3.2 ANALYSIS OF THE COUNCIL’S FINANCIAL SUSTAINABILITY

3.2.1 Financial Sustainability

The Australian Local Government Association’s (ALGA’s) definition of financial sustainability is:

“A Council’s long-term financial performance and position is sustainable whereplanned long term service and infrastructure levels and standards are metwithout unplanned increases in rates or disruptive cuts to services.”

It is against this definition then that the sustainability of the Huon Valley Council can beassessed. Council’s has an average positive operating surplus ratio over the four year periodindicating low financial sustainability risk.

3.2.2 Cumulative Underlying Operating Surplus/Deficit

Operating surplus / (deficit) – is total operating revenue less total operating expenses (includingdepreciation expense). It is an indicator of a council’s ability to meet its operating expenses fromoperating revenue. The operating result has a direct impact on the equity or net worth of theCouncil. A surplus result contributes to the net worth, whilst a deficit result reduces the net worthof the Council.

To be able to provide a given level of recurrent services it is important to achieve consistentsurplus operating results on a yearly basis. The Council must strategically plan to be able to fullyfund asset replacement over a given period of time. This can only be achieved if viable operatingresults are achieved on a continual basis. The operating result, before taking into account ‘oneoff’ or non-recurrent items, is commonly referred to as the 'underlying result'.

The underlying operating result is assessed following removal of gifted assets, developercontributions, asset revaluations, and write offs and impacts of asset sales.

Capital income is further deducted on the grounds it represents an “unmatched” income(expenditure is not included) and it is a non-recurring income source. The aim is to reach anunderlying operating position and then to assess whether this has added or eroded the net assetbase of the Council.

Huon Valley Council – Financial Management Strategy and Long Term Financial Plan 2017/2018

Differing views exist as to the exclusion/inclusion of capital income in this analysisCouncil focuses on an underlying result ex

Source: Huon Valley Council’s Annual Report on the Financial Statements 2014

Council recorded and average oindicated that it generated sufficient revenue to fulfill its operating requirements, including itsdepreciation charges.

3.2.3 Liquidity

Liquidity (or current assets divided by current liabilities, also known as working capital ratio) is ameasure of the Council’s ability to pay existing liabilities within the next 12 months.more than 1.5:1 is the preferred position

The assets and liabilities in the balance sheet are dissected into ‘current’ and ‘noncurrent’components.

This ratio is one of several ratios that are disclosed in the annual financial statements. It is alsoone of the key indicators used by the Australian Loan Cofrom Tasmanian Councils. It is critical that the ratioassets exceed current liabilities.generally considered desirable. The analysis considers that Councils with working capital above2:1 may have the capacity to reduce longwas 3.25:1.

0

0.01

0.02

0.03

0.04

0.05

0.06

0.07

2012

Operating Surplus Ratio

Financial Management Strategy and Long Term Financial Plan 2017/2018 – 2026/2027

Differing views exist as to the exclusion/inclusion of capital income in this analysisCouncil focuses on an underlying result exclusive of this income.

Huon Valley Council’s Annual Report on the Financial Statements 2014

Council recorded and average operating surplus ratio of 3.92 over the past four years, whichindicated that it generated sufficient revenue to fulfill its operating requirements, including its

Liquidity (or current assets divided by current liabilities, also known as working capital ratio) is ameasure of the Council’s ability to pay existing liabilities within the next 12 months.more than 1.5:1 is the preferred position.

s and liabilities in the balance sheet are dissected into ‘current’ and ‘noncurrent’

This ratio is one of several ratios that are disclosed in the annual financial statements. It is alsoone of the key indicators used by the Australian Loan Council when assessing loan applicationsfrom Tasmanian Councils. It is critical that the ratio remains above 1:1assets exceed current liabilities. It is generally accepted that a working capital ratio of 2

desirable. The analysis considers that Councils with working capital abovemay have the capacity to reduce long-term debt. Council’s liquidity rate as at 30 June 2014

2013 2014 2015

Operating Surplus Ratio

2026/2027 Page 16 █

Differing views exist as to the exclusion/inclusion of capital income in this analysis however

Huon Valley Council’s Annual Report on the Financial Statements 2014-15

over the past four years, whichindicated that it generated sufficient revenue to fulfill its operating requirements, including its

Liquidity (or current assets divided by current liabilities, also known as working capital ratio) is ameasure of the Council’s ability to pay existing liabilities within the next 12 months. A ratio of

s and liabilities in the balance sheet are dissected into ‘current’ and ‘noncurrent’

This ratio is one of several ratios that are disclosed in the annual financial statements. It is alsouncil when assessing loan applications

remains above 1:1 to ensure that currentworking capital ratio of 2:1 is

desirable. The analysis considers that Councils with working capital aboveCouncil’s liquidity rate as at 30 June 2014

2015


Source: Huon Valley Council’s Annual Report on the Financial Statements 2014-15

Council recorded positive net financial liabilities over the four year period under review. Thesepositive ratios indicated a strong liquidity position, with Council able to meet its existingcommitments. Council’s cash and financial assets are subject to a number of internal andexternal restrictions that limit the amount available for discretionary use. Restrictions on fundsneed to be taken into consideration when assessing Council’s overall liquidity position.

The net financial liabilities ratio is calculated on net financial liabilities over the operating income.At 30 June 2015 Council had a ratio of 30.18%, which indicates that Council can fully pay theliabilities that require cash payment.

3.2.4 Rate Effort

Rate effort is a measure of the rate levels relative to local income and is a significant factor indetermining whether the Council’s financial sustainability is potentially at risk.

3.2.5 Cost and Efficiency

The Huon Valley Council has achieved positive results as a “low cost” council. As at 30 June2015, Huon Valley Council’s average rate per rateable valuation was $1,020 against the Stateaverage of $1,410, whilst the rate revenue per head of population was $653 against the Stateaverage of $946. (Refer to Page 27 for table of comparison between other Councils).

3.2.6 Rates Affordability

Council recognises that it must consider the affordability of rates by its residents therefore hasgiven guidance that rates should remain consistent and increases are limited to 4% or less. It isthe responsibility of Council’s management to manage its resources to achieve the service levelsrequired within this rate cap.

3.2.7 Population Growth

Population changes have a direct impact on the Council costs. For example, population declinescan result in higher unit costs of service delivery because of the fixed nature of some costs.Rapid population growth can place significant financial pressure on councils to put new orexpanded services in place.The gradual position population growth in the Huon Valley municipal area indicates that this islow risk to Council’s financial sustainability.

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

2012 2013 2014 2015

Net Financial Laibilities Ratio


OUTCOME

1. That the Council ensures sustainability to enable service delivery to be maintainedand the flexibility to respond to opportunities as they arise.

STRATEGY

1. That the Council targets to achieve a consistent underlying surplus result in theincome statement in order to ensure the ongoing delivery of services and capitalworks programs.

2. That the liquidity ratio of the Council in the Financial Management Strategy andLong Term Financial Plan be targeted to show a strengthening trend average of atleast, a 1.5:1 ratio in the later years of the Plan.

3. That the budgeted cash position be sufficient to fund daily cash requirements aswell as provide opportunities for funding of new acquisitions and short termcontingencies.

4. That the Council invests in high security, low risk financial instruments to safeguardthe Council’s financial position.

KEY ACTIONS

1. That the Council considers opportunities to benchmark with other Tasmaniancouncils and those of a similar size and council category.

2. That the Council applies the outcomes of the adopted Financial ManagementStrategy and Long Term Financial Plan to the 2016/17 Budget and future budgets.

3. The Council monitors compliance with its Investment policy.


SECTION FOUR: LONG-TERM BORROWING STRATEGIES

4.1 INTRODUCTION

This section includes:

• Background to the Council’s current debt portfolio;

• Measuring what level of debt is appropriate;

• Borrowings assessment;

• Financial indicators;

• Prudent debt level;

• Future loan program.

4.2 BACKGROUND TO COUNCIL’S DEBT PORTFOLIO

As at 30 June 2016, Council has no loan borrowing liabilities.

4.3 MEASURING WHICH LEVEL OF DEBT IS APPROPRIATE

Deciding an appropriate debt level is a difficult task. Each council is different and the level of debtthat is appropriate for the Huon Valley Council may not be acceptable for another council.

The following factors are seen as important issues for consideration by the Huon Valley Council:

• level of debt servicing as a proportion of rate revenue (compliance with Section 80 of theLocal Government Act 1993);

• ability to raise revenue in addition to rates;• level of realisable assets to support the indebtedness;• achieving the right mix of capital works and debt commitments;• growth rate of municipal area;• community needs; and• demographics

The Council is responsible and accountable for indebtedness and the cost of debt servicingneeds to be controlled to manageable levels.

• The Council’s financial ratios are within State Government Prudential Guidelines.• Council in the 2016/17 budget has made no allowance to borrow any funds.• The Council’s debt commitment will be 0% of revenue of the preceding financial year.


4.4 WHAT DO THE FINANCIAL INDICATORS MEAN?

The graph below details the above mentioned financial indicators and presents the Council’sposition graphically. The threshold detailed against each indicator is the minimum level councilmust meet in order to achieve approval to borrow from the State Government.

4.4.1 Liquidity – Threshold 1.1:1Current Assets to Current Liabilities

This indicator reflects the short-term liquidity position; that is, the Council’s ability to repay currentcommitments from cash or near cash assets. Councils with a ratio of 1.1:1 and below mayindicate a risk that the Council may not be able to meet creditors’ financial commitments. Thebelow table has been based on the Councils financial statements for the last 4 years. Thebenchmark has also been included for comparison.

The Huon Valley Council liquidity ratio (current ratio) for the four year period ending 30 June2015 was 3.25:1 against a bench mark of 1:1.

4.4.2 Debt Exposure – Threshold 50%Total Indebtedness / Realisable Assets

This indicator reflects the ability to acquit liabilities with the proceeds from the disposal of itsrealisable assets. Ideally, total liabilities should be significantly less than 50% of total realisableassets.

There are no debts therefore the indicator is zero.

4.4.3 Debt Management – Total Debt as a Percentage of Rate Revenue

The Local Government Act 1993 requires that all loans are secured against the revenue streamfrom rates. A council with total debt in excess of the revenue from rates would be unable to meetall debt commitments from rate revenue should they be required to be repaid at the one time.


2.9

2.022.28

3.25

1.1 1.1 1.1 1.1

0

0.5

1

1.5

2

2.5

3

3.5

2011/12 2012/13 2013/14 2014/2015

Financial Year

Liquidity Ratio (Current Ratio)

Huon Valley Benchmark


4.4.4 Debt Servicing Costs – Costs as a Percentage of Total Revenue

This indicator reflects the proportion of total revenue that is used to service debt (interest onoutstanding debt and any loan administration charges) and which cannot be used directly forservice delivery.

The Council’s strategy is to fund long term intergenerational assets from loan funds to ensureintergenerational equity.


4.5 WHAT IS A PRUDENT DEBT LEVEL?

The Council’s current borrowing strategy is to borrow for fifteen years at a fixed rate of interest.This strategy is prudent in times of low interest rates; it also enables Council a degree of certaintyregarding the expected payment over the ensuing fifteen years.

A fifteen year loan is acceptable since infrastructure projects are generally designed to last well inexcess of this time span. That is, the life of the capital works project should exceed the life of theloan from which it was funded. This will assist to spread the financial burden across generationswho will utilise the resultant services.

It is proposed that the Council retains debt commitment costs below 10 cents in the rate revenuedollar. That is, for every dollar of rate revenue received, the cost to service debt (principal andinterest) should not exceed 10 cents. Section 80 of the Local Government Act 1993 stipulatesthat council’s debt commitment costs must not exceed 30% of prior year revenue (excludingGrants made to a council for specific purposes).

It is further proposed that the Council only borrow for capital projects that provideintergenerational equity. That is, borrowings will only occur for assets, where the asset life isgreater than one generation.

Council at 30 June 2016 has no loan debt.


4.6 FUTURE LOAN PROGRAM

The LTFP for the period 2016/17 to 2025/26 does not contain any future borrowings. However, iffuture reviews of the plan include borrowings then the following will apply.

OUTCOME

1. That the Council undertakes actions to consider options available so that itcontinues to minimise overall reliance on borrowings.

STRATEGY

1. Any new loan borrowings are to be used to fund intergenerational capitalinvestments where the community benefits are long term.

KEY ACTIONS

1. That the Council borrows funds for capital expansion projects that provideintergenerational equity.

2. That the Council retains its debt servicing and redemption costs at or below 10cents in the rate revenue dollar over the life of this LTFP.


SECTION FIVE: STATUTORY AND DISCRETIONARY RESERVES

5.1 INTRODUCTION

Councils have traditionally operated with reserve funds that are allocated for specific purposes.The following section details the Huon Valley Council’s statutory and discretionary reserves.

5.2 NATURE AND PURPOSE OF RESERVES

The Council’s reserve funds at 30 June 2015.

Discretionary Reserve Actual 30 June 2015

$000

Asset Replacement 1,130

New Asset 688

Other Reserves to be listed 5,119

Total 6,937

Statutory Reserve Actual 30 June 2015

$000

Employee Entitlements 1,951

Retirement Village - Entrance Fees 31

Waste Management Bond 100

Public Open Space -

Total 2,082

Total Discretionary and Statutory 9,019

The Asset Replacement Reserve is to be identified for specific purposes and is cash backed.

The Public Open Space Reserve receives inflows from sub divisional income that is transferredto this reserve for future allocation to Capital Projects. Legislation requires sub-divider’scontributions be spent on acquiring or improving land for use as public open space.

General Reserve – While not a statutory requirement for the purposes of legislative or AccountingStandards reporting, the Council maintains general reserves to fund specific and carried forwardprojects.

Employee Entitlements – Council is required to “cash back” sufficient funds to repay all LongService Leave entitlements and Annual Leave.


OUTCOME

1. That the Council generates sufficient funds from operations to fund daily operationsand replace assets.

STRATEGY

1. That wherever possible any material favorable budget variations realised in a givenfinancial year be specifically quarantined and reserved.

KEY ACTIONS

1. That the Council maintains discretionary reserves for stand-alone operations orprojects.


SECTION SIX: RATING AND OTHER REVENUE STRATEGIES

6.1 INTRODUCTION


• Valuations;• Background to present rating system;• Components of Council’s rating base;• Assessment of current rating levels;• Rates and charges Budget 2015/16;• Rating strategy;• Grant revenue;• Tasmanian Grants Commission; and• Fees and charges revenue.

6.2 VALUATIONS

6.2.1 General Valuation

Valuations are conducted under the provisions of the Valuation of Land Act 2001 with all ratableland valued at its Capital Improved Value (CIV). Valuations are carried out by the StateGovernment Valuer-General.

A general valuation (revaluation) establishes the value of a property relative to all otherproperties, that is, its market relativity. Valuations form the basis of the Council’s rating system;therefore, their accuracy is of paramount importance.

General valuations are required every 6 years. This ensures a common date is used for allvaluations. The 2015 revaluation was undertaken based on property values as at 01/07/2015.The revaluation does not in itself raise the total rate income for the Council, as the rates aredistributed based on the property value of all properties across the municipal area.

As a result of the revaluation, some property owners may pay more in rates and others less,depending on the new valuation of their property, relative to others.

6.2.2 Definitions of Valuations

The Huon Valley Council currently uses the Capital Improved Value (CIV) method of valuation.Other options available are Assessed Annual Value (AAV) and Land Value (LV).

6.2.3 Supplementary Valuations

Supplementary valuations are made during the financial year when a significant change to thevaluation occurs. The most common causes for supplementary valuations are:

• Construction of a new dwelling or building;• Subdivision of a property; or• Consolidation of properties.

As a result of a supplementary valuation, a rate notice is issued to reflect any change in rates.


6.3 BACKGROUND TO THE PRESENT RATING SYSTEM

Prior to dealing with the rating strategy, it is important to have a broad knowledge of the presentrating structure. The table below outlines the initial rates levied for 2015/16.

Rating Categories 2015/16 2015/16 2015/16

$ No of properties Rate in dollar (cents)

Charges (dollars)

General Rate 9,094,582 10,652 General 0.3235

Industrial 0.4625

Commercial 0.5440

Waste ManagementService Charge

648,384 4,229 120 Ltr Bin - $138

240 Ltr Bin - $185

Recycling ServiceCharge

298,224 4,176 $71 per bin

Stormwater Charge 288,000 3,052 $98 per property

TOTAL 9,504,496 n/a n/a

6.4 COMPONENTS OF THE COUNCIL’S RATING BASE

6.4.1 IntroductionThe Council levies annual service charges and a municipal rate, to raise its annual rates andcharges revenue. The legislative basis of the following and details of how they apply to the HuonValley are available upon request:

• Municipal Rates;• Waste Management Charge;• Stormwater Charges; and• Rebates and Concessions


6.5 ASSESSMENT OF CURRENT RATING LEVELS

Comparing the relativity of rating levels between councils can be a difficult exercise due to debateover the most appropriate methods to use and the inability to take into account the intricacies ofrating structures in different councils. Also, cash holdings of municipal areas vary and councilshave significantly different infrastructure needs and geographic sizes. The following extract fromthe Auditor - Generals report contains the following which gives a fair indication of rating levelsapplied in the Huon Valley against other Council’s in Tasmania.

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Rateable ComparisonSource: Auditor Generals Reprot 2014/2015

Average Rate Per Rateable Valuation $ Rate Revenue Per Head of Population $


6.6 RATES AND CHARGES BUDGET – 2016/2017

On an average rate per rateable valuation the Huon Valley is the second lowest in the State at$1,020 against the State average of $1,410. Rate Revenue per head of Population for the HuonValley is $653 against the State average of $946. The Huon Valley is the 7th lowest in the State inthis category.

6.6.1 Revenue – Rate Increase – 2016/2017

A key decision of the Council during the life of the LTFP is to determine the level of rate increasethat will provide funding levels for capital works and service provision for the municipal area andimprove the Council’s long term financial sustainability.

The Council’s required general rate revenue for 2016/17 is $9,989,154 million based on a 3.95%increase over the 2015/16 rate revenue.

The aim of Council is to limit fluctuations of rate rises as well as maintaining low increases. Themaximum allowable increase has been identified at 4.00% with the 10 year plan applying anincrease of 4% or less for the years 2016/17 onwards.

In addition, it is estimated that in the financial year 2016/2017 the Council will raise revenue of$1,840,955 by way of service charges for the provision of waste management, recycling,stormwater and fire levy.

6.6.2 Developer Contributions

When land is developed for any use it will often contribute to, or cause the need for, new orupgraded infrastructure. As this work is for new assets it is not included in the recurrent budget.The contributions are considered capital and are allocated to the works in that area.

6.6.3 Borrowing Strategy

The borrowing strategy will provide additional capital income and is considered in Section 4 ofthis document in detail.

6.6.4 Other Revenue Raising Options

Council fully explores alternative revenue raising options in the future.

6.7 RATING STRATEGY

6.7.1 Principles and Options

The Council’s rating strategy establishes a framework by which rates and charges will be sharedby the community. In developing a long term financial plan, rates and charges are an importantsource of revenue.

Higher percentages of rates and charges as a proportion of total revenue represent greaterfinancial independence and financial sustainability. The rating system determines how theCouncil will raise money from properties within the municipal area. It does not influence the totalamount of money to be raised, only the share of revenue contributed by each property. The totalmoney to be raised is taken from this document.


6.8 GRANT REVENUE

6.8.1 Principles and Options

Grants are received from both State and Federal Governments for both direct and indirectprojects. The direct grants align with the related expenditure as Council is running the project onbehalf of the State or Federal Government.

6.8.2 Grants Commission

Council receives approximately 15.7% of its revenue from the Federal Government (via theTasmanian Grants Commission). Total revenue received in 2015/16 was $3,427,781.

6.9 FEES AND CHARGES REVENUE

The collection of fees and charges provides a mechanism to, where possible, apply a user payspolicy by recovering the cost of Council services.

As a framework the ensuing years fees and charges include indicative increases in line withLocal Government costs (such as movements in public sector wage rates) to ensure ongoingcost recovery is maintained.

6.10 DISTRIBUTIONS RECEIVED

Council holds equity in TasWater and receives a distribution each year based on its share. TheHuon Valley Council’s share is 2.04%. This income is directly spent on new assets, therefore thelevel of new assets relates directly to the level of income received from this investment. This isbudgeted to be $636,000 in 2016/17. The current indication of future distributions from 2016/2017onwards is likely to hold at the same level as the 2015/2016 without any indexation. Thedistribution for 2015/2016 year is equivalent to Council receiving a rate of return on its$31,586,462 investment in TasWater of 2.01%.

6.11 INTEREST REVENUE ON INVESTMENTS

Interest revenue on investments is estimated to be $220,000 for 2016/2017 based on aninvestment portfolio of $8,000,000. This interest is utilised in the delivery of recurrent services.


OUTCOME

1. To provide the Council with a reasonable degree of consistency and stability in thelevel of the rates burden

STRATEGY

1. That the Council considers the most appropriate rating strategy to provide adequatefunds to:-

a) Achieve a gradually strengthening underlying surplus in the income statement;

b) Achieve a sustainable cash flow; and

c) Fund capital renewal projects

KEY ACTIONS

1. That the Council retains its valuation base.

2. That the Council, in 2016/17, restricts the increase in total revenue for rates andcharges as determined to 4% or less. A consistent rate increase is applied to theLong Term Financial Plan.

3. That Council pursues a policy of applying funds received from Federal AssistanceGrants above that required for operational purposes to fund firstly, asset renewaland then the new asset program.

4. That the Council pursues recurrent grant funding and strategic capital fundingaligned with the Council’s Strategic Plan objectives, including benchmarking ofresults with other councils.

5. Council investigates other revenue raising sources to reduce burden on ratepayers.


SECTION SEVEN: ASSET MANAGEMENT

7.1 INTRODUCTION

Integrating asset management principles with Council’s strategic financial direction isfundamental to achieving the goal of long term financial sustainability.


• Background to Council’s total asset portfolio at 30 June 2015;• Summary of fixed assets;• Key questions to determine service level/investment;• Sustainability index;• Asset condition assessments;• Strategic asset management; and• Future asset management

7.2 BACKGROUND TO THE COUNCIL’S TOTAL ASSET PORTFOLIO AT 30 JUNE 2015

Accounting for an asset requires the recognition of all costs associated with asset ownershipincluding creation/acquisition, operations, maintenance, rehabilitation, renewal, depreciation anddisposal. This “life cycle” approach needs to be recorded at an individual asset level so all thecosts of owning and operating assets are known and understood. For accounting purposesassets are grouped into current and noncurrent assets. Current assets are cash or those assetsthat are considered to be readily convertible to cash. This asset grouping includes cash at bank,investment funds, stock on hand, and debtors. The balance of current assets held by the Councilat 30 June 2015 was $10,327,346.

Non-current assets consist of long term investments, long term debtor accounts exceeding12 months and Council’s fixed assets. Fixed assets consist of land, buildings, plants, furniture,roads, land under roads, drains, playgrounds and other similar infrastructure assets. The totalreplacement value of fixed assets at 30 June 2015 was $328 Million (written down value $263million). The balance of this section will focus on the fixed assets and the management strategiesthat the Council is pursuing.


7.3 SUMMARY OF FIXED ASSETS

As at 30 June 2015, the Council’s fixed assets at replacement costs are as follows:

Fixed Assets Actual30 June 2015 $000

Land 16,578

Buildings 52,140

Stormwater 14,431

Roads (inc land under roads, footpaths, kerb and channel, car parks) 199,477

Bridges 31,107

Land improvements (playground equipment, Street Furnishing, Marinefacilities, sporting facilities, parks, walking tracks)

8,483

Plant & Equipment 5,532

Total 327,748

Extensive asset management work has re-assessed Council’s assets and also identified newassets that needed to be brought to account. The Council budgeted depreciation on theseassets is $6,368,360 for 2016/17. Depreciation charges, useful lives and the rate at which theeconomic benefits are consumed are reassessed following condition assessments and whengeneral valuations are undertaken. Depreciation allowance for plant is included in the internalhire rates included in operating expenses which is $587,100 for 2016/17.

7.4 KEY QUESTIONS TO DETERMINE SERVICE LEVEL/INVESTMENT

The key questions with respect to infrastructure investment are detailed below:

1. How much does it cost ratepayers to retain the current infrastructure portfolio, that is, what isthe long-term average cost of renewal plus maintenance?

2. How much will need to be spent in the short term (next ten years) relative to the renewalexpenditure invested in the recent past?

3. How much more management effort (financial and operational) will be required of theCouncil as its assets age?

4. What assets are at the “at risk” phase (intervention level) of their life cycle and will ultimatelyresult in their being unserviceable and unsafe?

5. What outcomes would the community and the Council likes to achieve with respect to assetupgrades?

6. Are the Council assets supporting the level of service expected by the community?

7. What assets should the council prioritise for rationalisation?


7.5 SUSTAINABILITY INDEX

The sustainability index (capital expenditure renewal / depreciation) should not be less than 1.An index of less than 1 indicates that the capital being consumed in an accounting senseexceeds the capital being replaced into the cost base.

7.6 ASSET CONDITION ASSESSMENT

Monitoring asset condition and performance relates to the ability of the asset to meet targetedlevels of service. Asset condition reflects the physical state of the asset and the functional level ofservice it is capable of providing. Monitoring asset condition and performance throughout theasset life cycle is important in order to identify underperforming assets or those which are aboutto fail – that is, assets at the critical renewal level where if reinvestment is not funded the cost offuture renewal will exponentially increase along with the risk of the asset being below acceptedsafety standards.

The Council has developed its Asset Information Management System (AIM) to position theCouncil to readily monitor asset condition and performance and to:

• identify those assets which are under performing;• predict when asset failure to deliver the required level of service is likely to occur;• ascertain the reasons for performance deficiencies,• determine what corrective action is required and when (maintenance, rehabilitation,

renewal) and• prioritise renewal funding.

The Council has made significant progress in the development of its Asset Management System.Accordingly the management of the capital works program, asset accounting and year-endaccounting processes have been significantly improved.

Priority is on funding the annual renewal of assets based on a predetermined service level linkedto a condition level. No asset in the Council’s condition profile should be allowed to go below theintervention condition as the cost of renewal significantly increases beyond this point and theasset’s functionality, safety and ability to provide its intended service level is compromised.

The Council has collected condition data for all of its major asset categories and has completeddetailed Asset Management Plans for each class of asset. The benefits of knowing the currentcondition and performance (level of service) an asset provides are:

• ability to plan for and manage the delivery of the required level of service;• avoidance of premature asset failure, leaving open the option of cost-effective renewal;• managing risk associated with asset failures;• accurate prediction of future expenditure requirements; and• refinement of maintenance and rehabilitation strategies.

The Council, as asset managers, needs to be able to assess the relative merits ofrehabilitation/renewal/replacement options and identify the optimum long term solution through adecision related to levels of service.

Condition assessment allows the organisation to understand the remaining life of, all assetcategories, acknowledging this understanding drives future renewal expenditure.


Following this the Council needs to strategically determine an affordable level of service tomanage the emerging condition profile. The benefit of that knowledge now is the managementprocess can commence across the entire asset portfolio.

Should the Council increase/decrease this level of investment and consciously improve/decrease the level of service? The answer lies in considering the other asset categories conditionprofiles – what is affordable, what is critical and must be renewed and what service level is theCouncil targeting?

The Council now has this information for all of its asset categories and is now positioned tostrategically consider these issues.

Across the asset base asset renewal cash flow is variable over time as it depends on servicesand service levels to be provided in the future, as well as the age and condition profile of theasset stock.

7.7 STRATEGIC ASSET MANAGEMENT

The Council has adopted its Asset Management Policy. The policy is supported by an AssetManagement Strategy, which details specific actions to be undertaken by Council to improveasset management capability and achieve specific strategic objectives.

Asset Management Plans are subsequent components where long term plans (ten years andbeyond) outline service and funding levels for each asset category.

The Council has reached the point where it has identified and funded its critical renewal – noasset’s condition goes beyond the defined intervention level.

The Council is now in a position to analyse its condition profile and determine and understand thecost of a predetermined service level. Alternatively the Council may allow some assets todegrade in condition, freeing up funds to improve the level of service for other assets.

The next phase of strategic asset management is where the Council will continue to consult withthe community on levels of service to better determine what is acceptable and affordable to thecommunity and council.

The next issue is what services, including their performance levels, are required to meet thecommunity outcomes? Finally what infrastructure or assets are required to support the servicelevels? A review of this nature may result in assets no longer being required to supportcommunity outcomes.

The Council aims to ensure its assets are relevant to the community, as retention of unusedassets places a financial burden on the community.

The Council’s LTFP is presently focused on funding a “service level” that prioritises criticalrenewal and maintains average condition to meet community expectation. The challenge aheadis to understand the community’s expectations and provide service level and funding options toaccommodate this.


7.7.1 Strategic Levels of Service: Asset Management Plans

Asset management plans provide parameters around condition (that ultimately determine levelsof service) to be modeled and costed. The Council can elect, for example, to nominate aminimum condition/level of service, that it will not allow an asset category to exceed, and thencalculate using predictive modeling the investment required to maintain this level of service.

Financial modeling based on predetermined service levels has been undertaken across anumber of the Council’s asset categories. This modeling has been the basis for determiningCouncil’s critical renewal investment levels across each asset category.

Within the roads category modeling has been completed for all roads (distributor, local, collector)including those with asphalt and sprayed seal surfaces.

The minimum level of service or critical renewal level is defined as a renewal intervention level.That is the minimum service level an asset’s condition can deteriorate to prior to renewalintervention. Beyond the intervention level assets functionality, cost to renew and safety standardis below what the Council considers acceptable.

The Asset Management Strategy results in:• Knowing what assets we own (Asset Register);• Understanding the condition and expected lives of our assets;• Knowing what ‘levels of service’ customers want;• Having processes in place to establish priorities and allocate funds;• Knowing the long term funding requirements associated with our assets; and• Having documented Asset Management Plans detailing levels of service.

7.8 FUTURE ASSET MANAGEMENT

The Council has developed asset registers, knowledge and data, built information systems tosupport maintenance renewal, customer service and financial activities and is now in a strongposition to develop strategic responses through its Asset Management Plans to manage “levelsof service” into the future.

The goal of infrastructure asset management is to meet a required level of service in the mostcost effective way through the creation, acquisition, maintenance, operation, renewal anddisposal of assets to provide for present and future customers.

Asset management will remain a major challenge over the life of this LTFP.


OUTCOME

1. The Council’s assets will be fit for purpose to provide the desired level of service tothe community.

STRATEGY

1. Any new capital works (capital expenditure) proposals must include a lifecycle costevaluation exercise that identifies and costs the asset construction, maintenance,operating and depreciation costs ie. Whole of lifecycle costs.

2. That the Council updates asset management plans for all classes of the Council’sassets with a focus on ensuring the assets are fit for purpose and provide thedesired level of service to the community.

KEY ACTIONS

1. That the Council, having established its critical renewal investment levels, updatesits detailed Asset Management Plans for all classes of Council assets incorporatingservice level assessments.

2. That the Council, in updating its Asset Management Plans, determines how servicelevels will be reached including a combination of improved revenue raising, reviewof existing service levels, asset disposal and composition of the asset portfolio.

3. That the Council allocates sufficient funds to the renewal of existing assets and anyoperational surpluses be invested into constructing new assets.


SECTION EIGHT: CAPITAL WORKS PROGRAM (RENEWAL)

8.1 INTRODUCTION

The previous section discusses the long term issues with respect to Asset Management andissues relevant to determine investment levels in capital renewal. The Council has continued tomaintain its investment in renewal at 100% for the entire 10 year financial plan.


• Level and nature of capital works renewal;• Capital Works Renewal program 2016/17 – 2025/2026;• Renewal investment levels;• Renewal capital funding sources.

8.2 LEVEL AND NATURE OF CAPITAL WORKS RENEWAL

It is important that the asset management issues raised in the previous section inform thedecisions taken in determining the capital works renewal program. The Council has made a cleardistinction between capital expenditure on renewing its current assets therefore the annualbudget process will enable the Council to identify individual projects for funding. The capitalworks renewal program funding is based on the Councils depreciation levels for the associatedyear, the 2016/17 Budget provides $5.78 million in expenditure (excluding plant). The Councilcash funds depreciation from its operational budget therefore ensuring a sustainable level ofasset renewal investment.

Two key outcomes from the capital works renewal plan will be to maintain the critical renewalinvestments while maintaining the councils average assets consumption ratio. This will beachieved through maintaining a sustainability index ratio of 1:1.

Source: Huon Valley Council’s Annual Report on the Financial Statements 2014-15

Over the four year period, Council’s average ratio was 118%, which was above the benchmarkindicating that Council maintained its investment in existing assets.

0%

20%

40%

60%

80%

100%

120%

140%

160%

2012 2013 2014 2015

Asset Sustainability Ratio


8.2.1 Asset Renewal Back log

Council identify and cost major asset renewal backlog so that it can be balanced against theongoing maintenance costs and likely increase in renewal costs over time against interest andprinciple repayments on loan borrowings.

8.3 CAPITAL WORKS ASSET REPLACEMENT PROGRAM 2016/17 – 2026/27

The following are the parameters against which the Council’s Asset Management Plans havebeen developed:

• Large one-off projects flagged in subsequent years require accurate costing to beundertaken and their timing and priority finalised;

• Provide for expenditure growth required to level of sustainable renewal to meet thecommunity’s service level requirements (based on current Asset Management Plans) by2026/27;

• Income assumptions to remain in line with depreciation which will be cash funded fromoperations.

• Roads to Recovery income assumed to continue at current level spread across relevantprojects within the Roads Program.

8.4 CAPITAL RENEWAL INVESTMENT LEVELS

The 2016/17 capital works renewal program by expenditure type is detailed below:

Capital Expenditure Type Budgeted - 2016/17$000

Renewal Expenditure 5,781

Plant Renewal 587

8.5 CAPITAL FUNDING SOURCES

Renewal capital will be funded through the Councils operations (cash funding) and based on theten year Asset Renewal Programs established for each class of asset.

External capital funding services include capital grants and other contributions will only be usedon renewal assets when there is a critical renewal investment required above the funds availablethrough operations (Depreciation expense and/or surpluses).

8.6 CONCLUSION

The Council’s Capital Renewal Program will underpin the needs and priorities as determined bythe Council’s Asset Management system. It is the Council’s challenge to maintain AssetManagement Plans that ensure the community’s levels of service are met while funding therequired levels of depreciation that ensures council is sustainable.


OUTCOME

1. That the Council allocates from operations cash funds equivalent to depreciationexpense. This will enable the Council to achieve a renewal index of at least 1:1.

STRATEGY

1. That capital expenditure on asset renewal projects is funded through thedepreciation expense allocation.

KEY ACTIONS

1. That the Council regularly updates the 10 Year Asset Renewal Program to ensurethat Council adequately maintains its existing asset base.

2. Council Cash Funds Depreciation through operations.


SECTION NINE: CAPITAL WORKS PROGRAM (NEW)

9.1 INTRODUCTION

The Council will require new capital works as it grows and develops in addition to maintaining itscurrent asset base. The Council identified that it required a sustainability ratio of 1:1 thereforeonly operational surpluses or external funding will be invested in new capital works.

The Council will therefore require a New Asset Program that identifies required new assets andsets out how it will be funded. This program will in turn set out Council’s investment in newcapital works for the next 10 years allowing it to budget and plan for the future. The detailedplanning will ensure that sustainable indices are met before new assets are invested in.


• Level and nature of New capital works;• New Capital Works program 2016/17 – 2026/27;• New Capital investment levels;• New Capital funding sources.

9.2 LEVEL AND NATURE OF NEW CAPITAL WORKS

The Council has made a clear distinction between capital expenditure on renewing its currentasset and new assets therefore the annual budget process will enable the Council to identifyavailable funding for investment in new assets. The new capital works program funding is basedon the funding available through operational surpluses and external funding therefore the leveland nature of the program will be dependent on these variables.

The 10 year financial plan has allocated the operational surpluses after funding asset renewal tothe new asset program and identified obtainable funding that will be expended over that period.

9.3 10 YEAR NEW ASSET PROGRAM 2016/17 – 2026/27

The two key outcomes from the new capital works plan will be to invest in the critical new assetsthrough available sourced funding and then invest in the desired new assets with the excessfunds available.

The following are the parameters against which the 2016/17 New Capital Works Program hasbeen developed:

• New Capital Works Program has only been developed in detail for 2016/17 with theremaining years allocations to be determined in accordance with the revised StrategicPlan;

• Large one-off projects flagged in subsequent years require accurate costing to beundertaken and their timing and priority finalised;

• Provide for expenditure growth required to fund the new asset investments and meet thecommunity’s service level requirements;


• Income will only be funded from loan borrowings, operational surpluses or external fundingidentified as potentially obtainable. Subsequently, if the funding cannot be obtained theexpenditure will not be incurred until additional funding can be sourced.

9.4 NEW CAPITAL INVESTMENT LEVELS

The 2016/17 new capital works program by expenditure type is detailed below:

Capital Expenditure Type Budgeted - 2016/17

$000

New Expenditure 900

9.5 CAPITAL FUNDING SOURCES

New capital will be funded through available operational surpluses and external funding includinggrants, loans, distributions and contributions. These funding sources have been estimated andused to develop a ten year New Asset Program which will enable a precise cash flow budget tobe developed.

9.6 CONCLUSION

The Council’s New Asset Program will underpin the needs and priorities of Council’s StrategicPlan. It is the Council’s challenge to maintain New Asset Plans that ensure the community’slevels of service are met while funding the required levels of depreciation with only availablesurpluses subsequent to these invested in new assets.

OUTCOME

1. That the Council only allocates loan borrowings, operational surpluses or fundingfrom external sources towards New Capital Works.

STRATEGY

1. To consider all relevant factors in revising the 10 year new asset program, includingwhole of life cycle cost evaluation.

KEY ACTIONS

1. That the Council updates the 10 Year New Asset Program regularly which enablesthe planned provision of new infrastructure.


SECTION TEN: SERVICE PROVISION AND PLANNING

10.1 INTRODUCTION

The Council provides a diverseservices are funded through the operational budget derived from rates, charges and other incomeeach year.


• Operating expenditure/revenue• Benchmarking financial performance and indicator• Growth of council• Service provision and planning

10.2 OPERATING EXPENDITURE/REVENUE

The Council’s budgeted operating costs and revenue for

InfrastructureServices, 20%

Regulatory andDevelopmentServices, 16%

Family Services,

Expenditure by Department


SERVICE PROVISION AND PLANNING

diverse range of services as detailed in the Annual Plan. All suchservices are funded through the operational budget derived from rates, charges and other income

Operating expenditure/revenueBenchmarking financial performance and indicator analysis

Service provision and planning

OPERATING EXPENDITURE/REVENUE

The Council’s budgeted operating costs and revenue for 2016/17 is $21,830

Depreciation, 26%

CorporateServices, 12%

Executive Services,8%

InfrastructureServices, 20%

Family Services,18%

Expenditure by Department2016 - 2017

2026/2027 Page 42 █

as detailed in the Annual Plan. All suchservices are funded through the operational budget derived from rates, charges and other income

830,744.

CorporateServices, 12%

Executive Services,


10.3 GROWTH OF THE COUNCIL

The following table details the population growth in the Huon Valley

2006 2007 2008

PopulationGrowth

14,469 14,650 14,870

Between 2006 and 2015 the Huon Valley Council area population has increased byincrease in the population indicatesalso indicates greater demand on the Council services now and in the future. There will also be agreater demand on the Council for social infrastructure to support a growing community.

10.4 SERVICE PROVISION AND PLANNING

Ultimately, the Council determines the range and level of services it is able to offer thecommunity via its strategic planning process.

This is finalised through the annual budget process with the LTFP providing preliminary guidanbased on the service delivery model from the previous year. One of the key objectives of theCouncil’s LTFP is to maintain existing service levels and maintain a satisfactory operatingposition over the life of the LTFP.

Interest Income, 1%

Other Income, 12%

Other Grants,5%

Council's Estimated Revenue Streams


GROWTH OF THE COUNCIL

details the population growth in the Huon Valley Council municipal area

2008 2009 2010 2011 2012 2013

14,870 15,134 15,361 15,140 15,841 16,158

the Huon Valley Council area population has increased byincrease in the population indicates steady economic health in the municipal area. However, thisalso indicates greater demand on the Council services now and in the future. There will also be agreater demand on the Council for social infrastructure to support a growing community.

PROVISION AND PLANNING

Ultimately, the Council determines the range and level of services it is able to offer thecommunity via its strategic planning process.

This is finalised through the annual budget process with the LTFP providing preliminary guidanbased on the service delivery model from the previous year. One of the key objectives of theCouncil’s LTFP is to maintain existing service levels and maintain a satisfactory operatingposition over the life of the LTFP.

User Charges, 18%

Rate Income, 45%

FederalAssistance

Grants, 16%

Dividend Income, 3%

Council's Estimated Revenue Streams2016 - 2017

2026/2027 Page 43 █

Council municipal area.

2013 2014 2015

16,158 16,273 16,354

the Huon Valley Council area population has increased by 13.03%. Theeconomic health in the municipal area. However, this

also indicates greater demand on the Council services now and in the future. There will also be agreater demand on the Council for social infrastructure to support a growing community.

Ultimately, the Council determines the range and level of services it is able to offer the

This is finalised through the annual budget process with the LTFP providing preliminary guidancebased on the service delivery model from the previous year. One of the key objectives of theCouncil’s LTFP is to maintain existing service levels and maintain a satisfactory operating

Rate Income, 45%

Council's Estimated Revenue Streams


10.5 CONCLUSION

Managing growth and the range and level of services provided will remain an ongoing challenge.

OUTCOME

1. That the Council generates sufficient funds from operations to continue to providethe existing level of services to our community.

STRATEGY

1. That the Council determine how desired service levels will be reached including acombination of improved revenue raising, rationalisation and review of existingservice levels.

KEY ACTIONS

1. That the Council utilises its Strategic Plan to determine the range of service to beprovided to the community through the annual budget process based on ananalysis of organisational and financial capability.


SECTION ELEVEN: LONG TERM FINANCIAL PLAN

11.1 INTRODUCTION

There are a number of dynamic variables that may influence the outcomes expressed in thisLTFP. They include:

• Rating levels and supplementary rate income;• Government grant revenue (both recurrent and capital);• Asset revaluations (major impact on fixed asset value and depreciation);• Asset sales;• Mix of funding between capital works/special projects (new initiatives); and• Level of growth factor applied to expenditure items / rate of expenditure/activity level.


• Modeling methodology;• Financial assumptions; and• Conclusion

11.2 MODELING METHODOLOGY

This section details the approach to financial modeling used in the preparation of the LTFP andprovides background about the major financial assumptions that were applied.

The financial model has been prepared at the lowest accounting level within the Council’sgeneral ledger system being operational unit level. At this level, certain accounts were adjustedon weighted average where future movements were anticipated. It is not always possible tomultiply the previous year’s base by a percentage to achieve a correct forecast.

The LTFP intends to establish a framework for the Council to benchmark its performance. Wherefurther efficiencies can be achieved, funds will be dedicated to asset renewal, maintenance orimproved service provision.


11.3 FINANCIAL ASSUMPTIONS

The following information explains the major financial assumptions applicable to the financialoption considered by Council prior to community input. Appendix B details these financialassumptions with the explanation supporting their calculation.

10.3.1 Labour and On-Costs

The current Enterprise agreement confirms increases until 30 June 2020, with superannuationat 12.5%.

10.3.2 Depreciation

Depreciation estimates are based on the projected capital spending contained within eachassumption. Depreciation estimates are influenced by future asset revaluations anddepreciation charges are assessed following condition assessments. On average council assetsare 28.40% through their useful life (replacement cost being 100% and WDV being the71.60%).

10.3.3 Materials and Contracts

Materials and Contractors have been budgeted to increase by the weighted average of indices.

10.3.4 Borrowing Costs

At present the council does not have any borrowings nor does the budget indicate a need toborrow, however if required in the future they will be managed as per the requirements ofSection 4 above.

10.3.5 Rate Revenue

The 2016/17 Budget is based on a total increase of 3.95% for rates collected. Rate increasesfor years 2016/17 – 2026/27 are budgeted to be 4% or less.

10.3.6 Recurrent Grant Funding

Federal Assistance Grants have been budgeted to be received but with no indexation increaseas advised by the State Grants Commission, this will be reviewed on a yearly basis as this planis reviewed.

10.3.7 Fees and Charges

The 2016/17 Budget is based on a total increase of 3.0% for fees and charges collected. Feeincreases for years 2016/17 – 2026/27 are budgeted to be 3% or less, or the recovery of theactual cost to the programme.

10.3.8 Statutory Fees and Fines

The Council has no control over the statutory fees prescribed by the State Government. It isestimated that they will generate minimal income only.

10.3.9 Interest on Investments

Interest on investments has been estimated based on an investment base of $8,000,000 andinterest rates of 2.75%. This will decrease over the long term as reserves are expended.


10.3.10 Capital Grants

Capital grant revenue has been included in the new asset program, with revenue from futureyears estimated to fund specific future capital works. Capital grants have been forecastconservatively. Funds raised above or below the forecast amount will directly impact on thelevel of new capital expenditure achievable.

10.3.11 Capital Expenditure

Depreciation expense has been allocated to the renewal asset program while operationalsurpluses have been allocated to the new asset program. Other capital expenditure will notcome from operational money with external funding being the main source.

11.4 CONCLUSION

The current Financial Management Strategy and Long Term Financial Plan was adopted, byCouncil at its Ordinary meeting on 9 December 2015. The LTFP provides a financial frameworkfor the Council, enabling an assessment of the Council resources and assisting the Council toplan and fund operational expenditure while maintaining its asset base and new assetinvestments. The Financial statements are detailed in Appendix B.

OUTCOME

1. That the Council ensures the provision of a reasonable degree of consistency andstability in the level of the rates burden.

STRATEGY

1. That the Council ensures compliance with the Long Term Financial Plan whendeveloping future budgets.

KEY ACTIONS

1. That the Council reviews and updates the Long Term Financial Plan on an annual(ongoing) basis.


APPENDIX A: GLOSSARY OF TERMS - DEFINITIONS

Adjusted operatingsurplus/deficit

Operating Surplus/Deficit less revenue from capital (non-recurrent)grants, developer contributions (assets contributed), assetrevaluation, sale of assets plus expenditure from assetrevaluation, WDV of assets sold.

Adjusted total operatingexpenses

Total operating expenses per the Income Statement – net of assetrevaluation and WDV of assets sold.

Capital grants(non-recurrent)

Capital or non-recurrent grants as disclosed in the financialstatements.

Current assets Current assets from the Balance Sheet.

Current liabilities Current liabilities from the Balance Sheet.

Debt redemption Debt principal repayments.

Debt servicing costs Total borrowing costs or interest expenses as per the IncomeStatement or disclosed in the notes to the financial statements.

Fees and chargesrevenue

Total fees and charges as per the Income Statement or asdisclosed in the notes of the financial statements.

Grant income andreimbursements

Total grant revenue as per the Income Statement or as disclosedin the notes of the financial statements.

Interest earnings Total interest received as per the Income Statement or asdisclosed in the notes of the financial statements.

No. of Rateable Properties Number of rateable properties in the municipal area.

Non-current assets Total non-current assets from the Balance Sheet.

Non-current Liabilities Total non-current liabilities from the Balance Sheet.

Proceeds from sale ofnon-current assets

Total proceeds from asset sales as per the Income statements oras disclosed in the notes to the financial statements.

Rate Revenue Total rate revenue as per the Income Statement or as disclosed inthe notes to the financial statements.

Rates outstanding at endof year

Rate debtor amount as disclosed as receivable in the financialstatements.

Total assets Total assets from the Balance Sheet.

Total depreciation Total depreciation expense as per the Income Statement or asdisclosed in the notes to the financial statements.

Total debt Total interest bearing liabilities (current and non-current) from thebalance sheet.

Total indebtedness Total liabilities (current and non-current) from the balance sheet.

Total infrastructure assets Total infrastructure assets from the Balance Sheet or as disclosedin the note to the financial statements (written-down value).

Total net realisable assets Total assets less total infrastructure assets.

Total operating expenses Total operating expenses as per the Income Statement.

Total revenue Total revenue from the Income Statement.Written-down value ofassets sold

Written-down value of assets sold as per the Income Statement oras disclosed in the notes to the financial statements.


APPENDIX B: FINANCIAL STATEMENTS

The following four budgeted standard statements form a special purpose financial report prepared specifically to meet the requirements of theLocal Government Act 1993, relating to standard statements.

10 YEAR LONG TERM FINANCIAL PLAN

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

2017/2018 2018/2019 2019/2020 2020/2021 2021/2022 2022/2023 2023/2024 2024/2025 2025/2026 2026/2027

GENERAL INCOME 22,605,953 23,381,282 24,191,725 25,038,953 25,924,719 26,850,861 27,819,307 28,832,082 29,891,311 30,999,221

OPERATIONAL EXPENDITURE (15,092,133) (15,566,909) (16,064,777) (16,586,928) (17,134,612) (17,709,150) (18,311,928) (18,944,408) (19,608,129) (20,304,712)

ASSET RENEWAL (7,513,820) (7,814,373) (8,126,948) (8,452,026) (8,790,107) (9,141,711) (9,507,379) (9,887,675) (10,283,182) (10,694,509)

RESERVES ALLOCATION - - - - - - - - - -OPERATIONALSURPLUS/(SHORTFALL) - - - - - - - - - -

NEW ASSET PROGRAM INCOME 676,000 689,507 692,888 686,222 676,000 676,000 676,000 676,000 676,000 676,001

GENERAL RATE ALLOCATION 238,263 250,657 263,691 277,403 291,828 307,003 322,967 339,761 357,429 376,015

NEW ASSET EXPENDITURE (900,756) (923,275) (946,357) (963,625) (967,828) (983,002) (998,967) (1,015,761) (1,033,428) (1,052,016)

ACCUMULATEDSURPLUS/(SHORTFALL) 13,507 16,888 10,222 - - - - - - -


10 YEAR LONG TERM BALANCE SHEET


2017/2018 2018/2019 2019/2020 2020/2021 2021/2022 2022/2023 2023/2024 2024/2025 2025/2026 2026/2027

ASSETS

CURRENT ASSETS

CASH AND CASH EQUIVALENTS 8,039,262 8,079,458 8,119,856 8,160,455 8,201,257 8,242,263 8,283,475 8,324,892 8,366,517 8,408,349

INVESTMENTS 1,616,040 1,624,120 1,632,241 1,640,402 1,648,604 1,656,847 1,665,131 1,673,457 1,681,824 1,690,233

RECEIVABLES 1,182,630 1,188,543 1,194,486 1,200,458 1,206,461 1,212,493 1,218,556 1,224,648 1,230,772 1,236,925

INVENTORIES 74,730 75,103 75,479 75,856 76,236 76,617 77,000 77,385 77,772 78,161

OTHER ASSETS 2,705 2,718 2,732 2,745 2,759 2,773 2,787 2,801 2,815 2,829

TOTAL CURRENT ASSETS 10,915,366 10,969,943 11,024,793 11,079,917 11,135,317 11,190,993 11,246,948 11,303,183 11,359,699 11,416,497

NON-CURRENT ASSETSLAND, BUILDINGS, INFRASTRUCTUREASSETS,

PLANT, EQUIPMENT AND FITTINGS 220,385,248 221,858,036 223,354,454 224,868,691 226,387,682 227,922,398 229,473,630 231,042,209 232,629,008 243,582,189

INVESTMENT SOUTHERN WATER 32,124,124 32,124,124 32,124,124 32,124,124 32,124,124 32,124,124 32,124,124 32,124,124 32,124,124 32,124,124

CAPITAL WORKS IN PROGRESS 549,512 550,062 550,612 551,163 551,714 552,265 552,818 553,371 553,924 554,478

TOTAL NON-CURRENT ASSETS 253,058,885 254,532,222 256,029,190 257,543,978 259,063,520 260,598,787 262,150,572 263,719,704 265,307,056 276,260,791

TOTAL ASSETS 263,974,251 265,502,165 267,053,983 268,623,895 270,198,836 271,789,780 273,397,520 275,022,886 276,666,755 287,677,288

LIABILITIES

CURRENT LIABILITIES

TRADE AND OTHER PAYABLES 1,014,454 1,019,526 1,024,624 1,029,747 1,034,896 1,040,070 1,045,271 1,050,497 1,055,750 1,061,028

TRUST FUNDS AND DEPOSITS 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000

PROVISIONS 2,095,806 2,179,639 2,266,824 2,334,829 2,404,874 2,477,020 2,551,331 2,627,871 2,706,707 2,787,908

TOTAL CURRENT LIABILITIES 3,210,261 3,299,165 3,391,448 3,464,576 3,539,770 3,617,091 3,696,602 3,778,368 3,862,456 3,948,936

NON-CURRENT LIABILITIES

PROVISIONS 302,425 314,522 327,103 336,916 347,024 357,434 368,157 379,202 390,578 402,295

TOTAL NON-CURRENT LIABILITIES 302,425 314,522 327,103 336,916 347,024 357,434 368,157 379,202 390,578 402,295

TOTAL LIABILITIES 3,512,686 3,613,687 3,718,551 3,801,492 3,886,793 3,974,525 4,064,759 4,157,570 4,253,034 4,351,232

NET ASSETS 260,461,566 261,888,478 263,335,432 264,822,402 266,312,043 267,815,255 269,332,761 270,865,317 272,413,720 283,326,056

EQUITY

ACCUMULATED SURPLUS 132,118,189 128,411,366 124,519,236 120,453,559 116,168,445 111,665,914 106,937,446 101,974,189 96,766,947 100,653,412

RESERVES 128,343,377 133,477,112 138,816,196 144,368,844 150,143,598 156,149,342 162,395,316 168,891,128 175,646,773 182,672,644

TOTAL EQUITY 260,461,565 261,888,477 263,335,432 264,822,403 266,312,043 267,815,255 269,332,761 270,865,317 272,413,720 283,326,056


10 YEAR LONG TERM CASH FLOW


2017/2018 2018/2019 2019/2020 2020/2021 2021/2022 2022/2023 2023/2024 2024/2025 2025/2026 2026/2027

CASH FLOWS FROM OPERATIONS

RATES 12,189,207 12,670,681 13,171,173 13,691,434 14,232,246 14,794,419 15,378,799 15,986,261 16,617,719 17,274,119

USER CHARGES (INCLUSIVE OF GST) 5,779,337 5,952,717 6,131,298 6,315,237 6,504,694 6,699,835 6,900,830 7,107,855 7,321,091 7,540,723

OTHER REVENUE (INCLUSIVE OF GST) 3,809,315 3,923,594 4,041,302 4,162,541 4,287,417 4,416,040 4,548,521 4,684,976 4,825,526 4,970,291

INTEREST RECEIVED 254,854 254,854 254,854 254,854 254,854 254,854 254,854 254,854 254,854 254,854

OPERATING GRANT REVENUE 459,931 459,931 459,931 459,931 459,931 459,931 459,931 459,931 459,931 459,931

INVESTMENT REVENUE FROM WATER CORPORATION 636,000 636,000 636,000 636,000 636,000 636,000 636,000 636,000 636,000 636,000

PAYMENTS TO EMPLOYEES (9,411,653) (9,788,120) (10,179,644) (10,485,034) (10,799,585) (11,123,572) (11,457,279) (11,800,998) (12,155,028) (12,519,679)

PAYMENTS TO SUPPLIERS (INCLUSIVE OF GST) (6,561,793) (6,761,927) (6,968,166) (7,180,695) (7,399,706) (7,625,397) (7,857,972) (8,097,640) (8,344,618) (8,599,129)

PAYMENT OTHER (INCLUSIVE OF GST) (1,786,502) (1,840,991) (1,897,141) (1,955,004) (2,014,631) (2,076,077) (2,139,398) (2,204,649) (2,271,891) (2,341,184)

NET CASH FROM OPERATING ACTIVITIES 5,368,695 5,506,739 5,649,606 5,899,264 6,161,219 6,436,032 6,724,285 7,026,590 7,343,583 7,675,927

CASH FLOWS FROM INVESTING ACTIVITIES

PAYMENTS FOR PROPERTY, PLANT & EQUIPMENT (8,744,756) (8,895,321) (9,037,987) (9,287,443) (9,549,195) (9,823,804) (10,111,852) (10,413,951) (10,730,737) (11,062,872)

PROCEEDS FROM SALE OF PLANT & MACHINERY - - - - - - - - - -

CASH RECEIPTS & PAYMENTS FOR DEPOSITS - - - - - - - - - -

NET CASH USED IN INVESTING ACTIVITIES (8,744,756) (8,895,321) (9,037,987) (9,287,443) (9,549,195) (9,823,804) (10,111,852) (10,413,951) (10,730,737) (11,062,872)

CASH FLOWS FROM FINANCING ACTIVITIES

CAPITAL GRANT REVENUE 3,428,778 3,428,778 3,428,778 3,428,778 3,428,778 3,428,778 3,428,778 3,428,778 3,428,778 3,428,778

NET CASH USED IN FINANCING ACTIVITIES 3,428,778 3,428,778 3,428,778 3,428,778 3,428,778 3,428,778 3,428,778 3,428,778 3,428,778 3,428,778

NET INCREASE / (DECREASE) IN CASH HELD 52,716 40,196 40,398 40,599 40,803 41,006 41,211 41,417 41,624 41,832CASH AND CASH EQUIVALENTS AT THE BEGINNING OFTHE FINANCIAL YEAR 7,986,545 8,039,262 8,079,458 8,119,855 8,160,455 8,201,258 8,242,264 8,283,475 8,324,892 8,366,516

CASH AND CASH EQUIVALENTS AT THE END OF THEFINANCIAL YEAR 8,039,262 8,079,458 8,119,855 8,160,455 8,201,258 8,242,264 8,283,475 8,324,892 8,366,516 8,408,349

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